Too Much Debt? How NLCG Underwrites Your Future, Not Just Your Debt-to-Equity Ratio

Too Much Debt? How NLCG Underwrites Your Future, Not Just Your Debt-to-Equity Ratio

The Debt-to-Equity (D/E) Ratio is a standard financial metric that determines how leveraged a business is. For traditional banks, a high D/E ratio is often an immediate "Bad Fit" exclusion, regardless of the underlying opportunity.

The Flaw in the Bank's D/E Obsession

A high D/E ratio can be a byproduct of rapid growth or strategic investment. NLCG recognizes this, focusing on the quality of the debt.

• NLCG's Focus Shift: We acknowledge the ratio but quickly shift the focus to the quality of the debt. Debt backed by a high-value, performing asset (like a Dozer or Skid Steer) is vastly safer than unsecured working capital debt.
• Collateral Mitigation: Internal NLCG Analysis views the tangible, self-collateralized nature of Equipment Financing as the primary mitigation factor for a high D/E ratio.

The Solution: Focusing on Debt Service Coverage

Instead of penalizing the overall ratio, NLCG Financial Specialists prioritize the Debt Service Coverage Ratio (DSCR) and the stability of cash flow.

• DSCR: This ratio proves the business's ability to cover its monthly debt obligations. If the business has strong, predictable revenue, it can justify a higher D/E ratio.
• SBA Perspective: While the SBA provides guidance on financial ratio analysis, NLCG's specialized approach allows us to give higher compensating weight to asset value and consistent deposits.

Concerned about high debt?

We underwrite your future revenue. APPLY HERE for financing that looks past the debt-to-equity ratio today.

Ready to Secure Your Future Growth?

If your growth has created a high debt burden, CALL NOW: 1 (858) 345-6338 to discuss how NLCG can structure collateralized financing to improve your business profile.