What underwriting actually checks for.
Credit score and revenue are the entry door, not the deciding question. They tell us whether a borrower meets minimum thresholds, not whether the deal works. The questions that decide a deal are different, and we ask them in this order.
The first question is whether the cash flow supports the loan. Not whether the business is profitable on paper, not whether the revenue line is growing — whether, after taxes, owner draws, and existing debt service, the business throws off enough to cover the proposed payment with room to spare. The technical name is debt service coverage ratio. The plain version is "if the next twelve months look like the last twelve, can you make the payment without choking the business." If the answer is no, no amount of strong collateral or owner credit fixes it.
The second is what the capital is for. A loan that funds an acquisition with documented post-close cash flow is a different deal from a loan that pays off existing high-cost debt is a different deal from a loan that funds inventory ahead of a single concentrated customer order. Same dollar amount, three completely different risk profiles. We'd rather underwrite a thoughtful $2M acquisition than a $400K refinance with no clear path forward.
The third is the structure of the deal itself. Term length, amortization schedule, prepayment terms, collateral package, personal guarantee, and what we call covenant fit — how the operating reality of the business interacts with the standard covenants in our paper. A business with seasonal cash flow doesn't fit a fixed monthly amortization the same way as a business with predictable receivables. Structure makes the difference.
The fourth is concentration. One customer who is 60% of revenue. One supplier with no alternative. One key employee whose departure ends the business. Concentration is not disqualifying, but it changes how we structure the deal — reserve requirements, additional reporting, sometimes a covenant that flags it.
The fifth and last is the borrower. Track record under current ownership, credit history, outside obligations, the relationship between what they say the business is and what the file shows. We don't underwrite credit scores; we underwrite whether the operator has done what they say they're going to do, before. The score is the floor, not the answer.
What this is not.
This is not a checklist of disqualifiers. We fund deals that fail one of these tests when the rest is strong, and we structure the weakness into the deal. We've also passed on deals where every test was clean but the use of funds wasn't defensible. Underwriting is judgment about a real situation, not a rubric. That's why we read your file before we price it.
— Expansion Funding