CrediArc executive briefing
The Complete SMB Cash-Flow Underwriting Guide
A practical framework for reconstructing repayment capacity, normalizing cash flow, testing debt service, and documenting an explainable SMB lending decision.
What this page covers
SMB cash-flow underwriting works best when the analysis begins with the proposed facility and its repayment source—not with a generic score. A term loan, revolving line, invoice-finance facility, and equipment loan create different payment patterns and require different evidence.
This guide organizes that evidence into a repeatable decision sequence. It is designed to support professional judgment; it is not a lending recommendation or a substitute for a lender's policy, legal review, or regulatory obligations.
1. Define the repayment thesis
State the requested amount, use of funds, term, payment frequency, and primary source of repayment. Identify a credible secondary source and the events that could weaken either source.
Match analysis periods to payment frequency
Separate operating repayment from refinancing assumptions
Record conditions required before closing
2. Reconstruct normalized cash generation
Reconcile bank activity, financial statements, tax information, and management explanations. Adjustments should be conservative, sourced, and reversible by an approver.
Remove transfers and financing inflows from revenue
Identify owner compensation and related-party payments
Separate recurring performance from one-time events
Explain every add-back and exclusion
3. Test debt-service capacity
Compare normalized cash available for debt service with existing and proposed obligations. Show both the lender's definition and the inputs used; a coverage ratio without its bridge is difficult to review.
Base case using normalized recent performance
Downside case for revenue, margin, or collection stress
Peak working-capital need
Sensitivity to rate and amortization changes
4. Connect structure to observed risk
Facility size, amortization, collateral controls, guarantees, covenants, and reporting should address the risks identified in the evidence. Conditions should have a named owner and an observable completion test.
5. Create a monitoring contract
Define what will be monitored, how often, and what each threshold triggers. A useful monitoring plan distinguishes an information request from a limit freeze, formal review, or escalation.
Cash-flow underwriting review checklist
Facility and repayment sources defined
Bank and financial data reconciled
Adjustments sourced and approved
Existing debt schedule verified
Base and downside coverage calculated
Structure tied to identified risks
Exceptions and mitigants documented
Post-close triggers assigned