By Stephen Pape

Use this free online calculator to find out if you qualify for a business loan before you visit your local banker.

As with any calculator, inputting the correct data (in the correct format) is very important. For example, the section on existing debt asks for your monthly payments rather than total owed. If you accidently input how much you owe on the new truck rather than the monthly payment you will likely get a far less satisfactory response. After carefully inputting the data, simply click calculate at the bottom left corner and see the results. Your score must be at least 1.25 in order to qualify for a loan.

For example, let's say I would like to borrow $95,000 for a new machine and pay for it over 5 years. My income is $120,000 and I expect to borrow funds at 9% APR. My existing debt payments are $1,500 a month for mortgage, $1,500 for a truck and car, $1,400 a month for other loans, and $1,000 for my business line of credit. My typical credit card payment is $700. Leaving the unused boxes at $0, the calculator reports that I am just below the level to qualify at 1.24. Therefore, using the calculator, I can input different variables to see how much to cut back or possibly extend the length of the loan to get within an acceptable debt service ratio. For example, reducing the credit card payments or any other monthly payment by only $100 would take me from not qualifying to qualifying.

While we previously might have been nervous about going to see a banker, after inputting all the variables using this one free calculator, we know whether to go get financing now or to wait and take care of some of the identified issues first. Once we know we are demonstrating the correct debt service ratio on paper, we can walk into the bank (or approach our in-laws) with confidence.

What's your take? Email us at: newsletter@jadelearning.com.

 

Stephen Pape is the General Manager and state air conditioning, refrigeration, and master electrical contracting licensee for Pape Air Conditioning Service in DeSoto, Texas. He is active in Air Conditioning Contractors of America (ACCA) and is a past Director for the Texas State and North Texas Regional ACCA Chapters. He also has served as the Texas ACCA Legislative Chairman and North Texas Chapter President. Stephen is a 2007 MBA Graduate of Texas A&M in Commerce, Texas. He is the author of the JADE Learning course, 'How to Manage an HVAC Contracting Business.'