Day: May 6, 2015

By Parag Nevatia Most of us have heard of the phrase cash flow. While some know the meaning, others don’t, but they use it all the time because it sounds great. For those who don’t, let’s look into what it means. There are basically two instances when this term comes up. First is when the business is on-going or existing, it’s referred to as historical cash flow and second, when it is a start-up or a new business, then lenders rely on, what’s referred to as, projected cash flow. Cash flow simply is the ability to pay back a loan adequately or with a reasonable buffer. When this is not thought out completely by the client or their certified public accountnt, that’s when lenders decline loans because the business doesn’t demonstrate that cash flow or the ability to pay back the loan. Now, CPAs know how to calculate and show a net profit at the bottom of a company’s financials or tax returns and know its significance or impact. My former colleagues from the banking cmmunity may agree that most of the times this is one of the major reasons why we decline loans. As a former banker and SBA loan officer, I used to go through each line item on tax returns and ask the client or the CPA many questions and hoped to get a reasonably explainable...