How healthy are your financials?
These are the numbers a lender looks at first, and they are worth knowing before someone else works them out for you. Each comes back with a plain-English read.
Eight ratios cover liquidity, margin, leverage and how fast you collect and sell. Healthy ranges differ a lot by industry, so the pattern across all eight says more than any single number.
The math
How this works
What financial ratios do banks look at for a small business loan?
Most reviews open with liquidity: the current ratio and the quick ratio, which compare what you can turn into cash soon with what you owe inside a year. Profitability comes next, through gross margin on the work itself and net profit margin after everything is paid. Then how much debt you carry and how easily you cover it: debt to total assets, and times interest earned, which is operating profit divided by the interest you pay. Working-capital speed is last, read through days to collect from customers and inventory turns. No single figure settles anything, because the pattern across them is what gets read.
What is a good current ratio for a small business?
The current ratio is current assets divided by the bills due within a year, and this page shows 1.2 to 2.0 as a target range. Below roughly 1.2, one slow month can leave you short on obligations that are already due. Well above 2.0 can mean cash or inventory is sitting idle rather than at work. The quick ratio takes inventory out of the top and aims for 1.0 or more, because stock can be slow to turn into money. These ranges differ a lot by industry, so treat them as a starting point rather than a grade.
How do you calculate days to collect from customers?
Divide your receivables by your sales, then multiply by 365. The answer is the average number of days between sending an invoice and having the money in the bank. Compare it with the terms printed on your invoices: 45 days of collection on net-30 terms means customers run about two weeks late on average. Inventory turns work the same way in reverse, dividing cost of goods sold by inventory to show how many times a year your stock clears. Both tell you how long your cash is tied up before it comes back.
Questions people ask
Where do I find these numbers?
The first six fields come from your balance sheet: cash, receivables, inventory, fixed assets, bills due within a year, and long-term debt. The last five come from your income statement for the last 12 months: sales, cost of goods sold, operating expenses, interest, and income taxes. Any accounting software prints both, and your bookkeeper or accountant can pull them for you.
What if my business carries no inventory?
Enter zero. Service businesses often have none, and the quick ratio will then come out the same as the current ratio. Inventory turns per year will not mean anything in that case, so ignore that line.
Do these ratios decide whether I get a loan?
No. They are often the first things a lender looks at, but each institution underwrites to its own standards and also weighs cash flow, operating history, collateral, and your industry. Use the results to see where you stand and which questions to be ready for.
Should I enter a year or a month of figures?
Use the last 12 months for sales, costs, interest, and taxes so seasonal swings even out. Balance-sheet fields are a snapshot, so use the balances as of today. Mixing one month of sales with today's balances throws off days to collect and inventory turns.
Tools that pair with this one
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This is an estimate to help you think, not financial, tax or legal advice. Finli is not a bank and does not lend. Your own numbers, and your banker, beat any calculator.