You want a bank loan.
You need to know what banks look for.
You need to understand criteria.
You need actionable metrics.
Bank loan criteria. Lender evaluation. Actionable metrics. Your preparation.
This guide shows you how.
Criteria translation. Metric mapping. Calculator outputs. Your readiness.
Read this. Understand criteria. Prepare metrics.
Key Takeaways
- Liquidity is critical—banks want current ratio above 1.5 and positive working capital
- Payment capacity matters—DSCR above 1.25 shows you can service debt, higher is better
- Leverage must be reasonable—debt-to-equity ratio should be appropriate for your industry
- Profitability shows sustainability—positive and improving profit margins are essential
- Cash flow must be predictable—forecasted positive cash flow demonstrates ability to repay
Table of Contents
Why Criteria Matter
Criteria determine approval.
What happens without meeting criteria:
- Loan applications are rejected
- Time is wasted
- Opportunities are lost
- Business growth is constrained
What happens with meeting criteria:
- Loan applications are approved
- Time is used efficiently
- Opportunities are captured
- Business growth is enabled
The reality: Criteria enable funding.
Liquidity Criteria
Understand liquidity requirements:
Current Ratio Requirements
What banks want:
- Current ratio above 1.5
- Preferably 2.0 or higher
- Stable or improving trend
- Industry-appropriate levels
Calculate it:
- Use our Current Ratio Calculator
- See where you stand
- Identify improvement needs
Why it matters: Current ratio shows short-term stability.
Working Capital Requirements
What banks want:
- Positive working capital
- Adequate cash cushion
- Stable or improving trend
- Sufficient for operations
Calculate it:
- Use our Working Capital Calculator
- See your position
- Identify improvement needs
Why it matters: Working capital shows operational cash.
Pro tip: Understand liquidity criteria. Current ratio, working capital. Use our calculators to assess. See our financial foundation checklist for comprehensive preparation.
Payment Capacity Criteria
Understand payment capacity requirements:
DSCR Requirements
What banks want:
- DSCR above 1.25 minimum
- Preferably 1.5 or higher
- Stable or improving trend
- Consistent payment ability
Calculate it:
- Use our Debt Service Coverage Ratio Calculator
- See your payment capacity
- Identify improvement needs
Why it matters: DSCR shows ability to service debt.
Interest Coverage
What banks want:
- Ability to cover interest payments
- Comfortable coverage margin
- Stable operations
- Predictable income
Why it matters: Interest coverage shows payment ability.
Pro tip: Understand payment capacity. DSCR, interest coverage. Use our DSCR Calculator to assess.
Leverage Criteria
Understand leverage requirements:
Debt-to-Equity Requirements
What banks want:
- Reasonable debt-to-equity for industry
- Not excessive leverage
- Stable or improving trend
- Manageable debt burden
Calculate it:
- Use our Debt-to-Equity Ratio Calculator
- See your leverage position
- Compare to industry standards
Why it matters: Debt-to-equity shows financial risk.
Total Debt Service
What banks want:
- Manageable total debt service
- Reasonable debt burden
- Ability to service all debt
- Room for additional debt
Why it matters: Total debt service shows capacity.
Pro tip: Understand leverage criteria. Debt-to-equity, total debt service. Use our Debt-to-Equity Ratio Calculator to assess.
Profitability Criteria
Understand profitability requirements:
Profit Margin Requirements
What banks want:
- Positive profit margins
- Improving trends preferred
- Industry-appropriate margins
- Sustainable profitability
Calculate it:
- Use our Profit Margin Calculator
- See your profitability
- Identify improvement needs
Why it matters: Profit margins show sustainability.
Profitability Trends
What banks want:
- Improving margins over time
- Consistent profitability
- Positive trajectory
- Stable operations
Why it matters: Trends show sustainability.
Pro tip: Understand profitability criteria. Profit margins, profitability trends. Use our Profit Margin Calculator to assess.
Cash Flow Criteria
Understand cash flow requirements:
Cash Flow Forecast Requirements
What banks want:
- Positive projected cash flow
- Predictable cash patterns
- Adequate for debt service
- Realistic projections
Calculate it:
- Use our Cash Flow Forecast Calculator
- Project future cash positions
- Show repayment ability
Why it matters: Cash flow shows repayment ability.
Cash Runway Requirements
What banks want:
- Adequate cash runway
- Sufficient reserves
- Ability to weather downturns
- Strong cash position
Calculate it:
- Use our Cash Runway Calculator
- See time available
- Show financial stability
Why it matters: Cash runway shows stability.
Pro tip: Understand cash flow criteria. Forecast, runway. Use our calculators to assess. See our cash flow safety net guide for planning.
Your Next Steps
Understand criteria. Calculate metrics. Prepare for loan.
This Week:
- Review this guide
- Understand all bank criteria
- Calculate your current metrics
- Identify gaps
This Month:
- Work on improving weak metrics
- Strengthen financial foundation
- Prepare loan application
- Document all metrics
Going Forward:
- Monitor metrics regularly
- Maintain strong foundation
- Stay loan-ready
- Build relationships with lenders
Need help? Check out our Current Ratio Calculator for liquidity, our Working Capital Calculator for cash position, our Debt Service Coverage Ratio Calculator for payment capacity, our Debt-to-Equity Ratio Calculator for leverage, our Profit Margin Calculator for profitability, our Cash Flow Forecast Calculator for cash flow, and our financial foundation checklist for comprehensive preparation.
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Sources & Additional Information
This guide provides general information about bank loan criteria. Your specific situation may require different considerations.
For current ratio calculation, see our Current Ratio Calculator.
For working capital calculation, see our Working Capital Calculator.
For DSCR calculation, see our Debt Service Coverage Ratio Calculator.
For debt-to-equity calculation, see our Debt-to-Equity Ratio Calculator.
For profit margin calculation, see our Profit Margin Calculator.
For cash flow forecasting, see our Cash Flow Forecast Calculator.
Consult with professionals for advice specific to your situation.
