ValueStream Commentary on LendingFront

Cash Flow is King

  • Karl
  • By Karl Antle, ValueStream Labs   |   November 05, 2015

If you’ve ever run a small business (those things that provide 50% of all US jobs), you know that managing your cash flow correctly is critical to building a sustainable business. You manage your payables and receivables, negotiate terms to extend payments, and obsess over making sure your payroll clears every two weeks. 

Given how important cash flow is to small businesses, it’s bewildering that most banks and lenders don’t actually look at this when evaluating credit worthiness for a loan. Instead they ask for things like tax returns, accounting books, physical assets, and personal guarantees from the business owner. Considering the amount of time the owner of a small business spends thinking about cash flow compared with how much time she thinks about her taxes, accounting, and personal finance…shouldn’t the cash flow be the focus of the lender?

Focusing on cash flow seems like a no-brainer for lenders, but analyzing thousands of payments and...

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