The question every file has to answer is simple: does this deal hold together. Not, is the borrower nice. Not, are the numbers within a range. Holds together — under stress, with the bank statements we actually see, with the cash flow the business actually runs. That's the standard.
What we look for first.
Before anything else, we look at fit. Is the use of funds something we can actually structure? Is the business healthy enough to service the debt we'd offer? Is the industry one we know how to underwrite? Forty percent of deals get answered in the first call — not because we're picky, but because we know early what we can and can't do well.
The five things we check, in order.
I. Debt service coverage. Every deal has to clear a 1.25× DSCR on conservative numbers — and we model it three ways: trailing 12 months, trailing 6 annualized, and a stress case at 80% of revenue. If any version of those breaks, we don't fund. If they all hold, we move.
II. Time in business. Two years minimum, five-plus preferred. We sometimes go to one year for strong files in industries we know, but the curve below two is steep — and we'd rather say no than structure a deal that can't survive a slow quarter.
III. Owner credit and outside debt. We pull credit ourselves (soft pull, no impact). We look at FICO, but we look harder at the file underneath it — tradelines, utilization, recent inquiries, and especially any outside business debt. Stacking is the number-one reason good businesses end up insolvent.
IV. Industry and use of funds. We fund 40+ industries. The structure changes by vertical: construction draws differently than restaurants; medical practices model differently than retail. The use of funds has to match the structure — long-term capital for long-term assets, short-term capital for short-term needs. We won't fund a five-year term loan for working capital, even if you'd qualify.
V. Documentation cleanliness. Bank statements, tax returns, and any financials you provide have to line up. When they don't, we ask. The conversation that follows usually decides the deal — not because we're trying to catch you, but because the explanation tells us whether the business is run cleanly or held together with tape.
Why we structure to fit.
A deal that's right-sized survives. A deal that's oversized — even by 20% — often doesn't. We size to what the business can comfortably repay on its current cash flow, not to the maximum we could approve. If you ask for $500K and the file supports $350K, we'll tell you why, and we'll tell you what we'd need to see to get to $500K. That conversation costs us deals. It also keeps the deals we do close from becoming the ones we have to chase.
What we won't do.
- We won't refinance debt the business can't afford. If you're under water, we'd be moving the problem, not solving it.
- We won't quote a rate before reading your file. Anyone who does is guessing or lying. We'll give you a range; we'll commit to a number when we know the file.
- We won't fund a deal the seller doesn't believe in. Acquisition financing where the seller is signaling distress is a deal we walk away from.
- We won't promise overnight turnaround. Real underwriting takes time. Most decisions land in 24–48 hours; complex deals take a week. We'd rather tell you the truth about timing than miss it.
— Powerhouse Funding, internal memo