The ability (or capacity) to repay the funds you receive from a lender must be justified in your loan package. Banks want to see two sources of repayment—cash flow from the business as well as a secondary source such as collateral. The lender reviews the past financial statements of a business to analyze its cash flow.

Generally, banks feel most comfortable dealing with a business that has been in existence for a number of years because it has a financial track record. If the business has consistently made a profit and that profit can cover the payment of additional debt, it is likely that the loan will be approved. If however, the business is a start-up or has been operating marginally and now has a new opportunity to grow, it is necessary to prepare a thorough loan package with a detailed explanation addressing how the business will be able to repay the loan.