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. In order to adequately support a company's operation, cash must be at the right place, at the right time and in the right amount.

A company must be able to meet all its debt payments, not just its loan payments, as they come due. All SBA loans require that the borrower be able to reasonably demonstrate the ability to repay the intended obligation from the business operation. The lender will consider the cash flow from the business, the timing of the repayment, and the probability of successful repayment of the loan. Payment history on existing credit relationships (personal and commercial) is considered an indicator of future payment performance. Lenders will also want to know about your contingent sources of repayment.

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, and covering the first annual period after the loan is received. When the projections are for a new business or an expanding business with anticipated revenues and expenses exceeding past performance by a significant amount (20 percent plus), a critical factor in loan approval is having the lender understand all the assumptions on how these revenues will be generated.