Board Topic: operational cash flow
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operational cash flow

Posted by: cautious Apr 26 2004, 02:19 AM
Me and my wife own a commercial building we have $80,000 equity built up and our loan balance is $75,000.
we wanted to pull $25,000 out to spruce up the place and hold cash for our next venture.
I was told by a banker I did not show enough operational cash flow to pull the money out.
now I have good income and my wife runs the business there with ok income, last year we had to buy some equiptment so we got to write off a lot we still showed a profit and have never shown a lost.
my question is with good credit, that much equity why am I having such a hard time getting the loan.
P.S. I would be droping the interest rate 2 points

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Posted by: loanuniverse Apr 26 2004, 06:45 AM
Cautious:


Take a look at this page about cash flow for a view as to how the bank is probably calculating your "debt service coverage". Chances are they are using a variation of traditional cash flow.

Regarding at the problem that you are facing. Well banks are not collateral lenders. They are primarily interested in the source of repayment being there. Do your own calculations, and see if there is enough cushion at the end.

If the expenses that the business had during the last year are extraordinary, you can argue that these expenses should not be taken into consideration for the projections and mitigate the low operational cash flow.

Posted by: cautious May 2 2004, 04:09 AM
QUOTE (loanuniverse @ Apr 26 2004, 06:45 AM)
Cautious:


Take a look at http://www.loanuniverse.com/tradcf.html for a view as to how the bank is probably calculating your "debt service coverage". Chances are they are using a variation of traditional cash flow.

Regarding at the problem that you are facing. Well banks are not collateral lenders. They are primarily interested in the source of repayment being there. Do your own calculations, and see if there is enough cushion at the end.

If the expenses that the business had during the last year are extraordinary, you can argue that these expenses should not be taken into consideration for the projections and mitigate the low operational cash flow.

Thanks for the info. and I am going to another bank but do I stand a better chance getting a loan going sba

Posted by: loanuniverse May 2 2004, 11:09 AM
..but do I stand a better chance getting a loan going sba?

A loan with an SBA guarantee is a much stronger credit than one without it. You might not even have to pledge the property for that loan, which would be a plus. On the other hand, there might be other fees involved.
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