Forms of Short-term Financing/Earnings Requirements
Financial obligations are paid with cash, not profits. When cash outflow exceeds cash inflow for an extended period of time, a business cannot continue to operate. As a result, cash management is extremely important. A company must be able to meet all its debt payments, not just its loan payments as they come due. Applicants are generally required to provide a report on when their income will become cash and when their expenses must be paid. This report is usually in the form of a cash flow projection, broken down on a monthly basis, covering the first annual period after the loan is received.