Debt-to-Income (DTI) ratio measures your company’s ability to afford additional debt. This is calculated by dividing your monthly debt payments by your monthly gross income. This number is expressed as a percentage and indicates how effectively you manage your company’s debts and spend money on a monthly basis. The lower the percentage, the easier it should be for your business to receive financing.
This percentage is one aspect of your financial health. Generally, a DTI ratio of 35% or lower is considered a good debt-to-income ratio. Many lenders will finance (up to) 43%, but if your DTI is higher than this, it may be more difficult to get approved for a loan and will require extra documentation such as a credit report or proof of income.
HOW TO CALCULATE YOUR DTI RATIO
Calculating your DTI ratio is pretty simple. Add your monthly debt payments and divide them by your monthly income (before deductions). The formula looks like this:
Debt-to -Ratio = (Total Monthly Recurring Debt Payments) / (Total Gross Monthly Income)
Certain bills such as monthly subscription plans for your business are typically not considered recurring debt because you have the option to terminate these expenses.
American Finasco can help restructure your debt. Private Mortgage Financing Partners can refinance your low loan to value commercial real estate and give you cash out to pay off or pay down other debt. Both options will help decrease your debt-to-income ratio. American Finasco has several options to reduce, consolidate or manage your commercial debt and we often work in conjunction with PMF Partners to provide a joint solution. We provide strategies and take the pressure off business owners who are having a hard time managing their debt. The first step when dealing with creditors is a phone call to American Finasco. We provide our clients effective solutions for business debt relief. Contact us today to get your business on the right track! Visit Contact Us and complete our Online Form for a free consultation or call (800) 299-2909. We look forward to speaking with you.