A growing business is a business that is usually consuming cash flow. Rapid expansion means investments in development costs, marketing, inventory, and accounts receivable, the time between your investment and receiving the money from your customer can stretch out for months.

Large construction projects can take forever! Additionally, we want to match the cash flow from operations against the long life of our assets used in the business.  

Obviously, internal funding will always be preferable to external funding. External funding lowers profitability, increases liquidity risk, and may expose you to rising rates and increasing interest costs.  

You as the manager, as well as lenders and investors, will want to assess your solvency; solvency is the ability of your business to service your financial obligations. Your financial forecast will go a long way in determining the correct amount of debt needed.

Titanium HQ helps you prepare a forecast to plan your cash flows and financing needs 

First, start with your cash forecast. The standard rule of thumb is that your business should have three to six months of operating expenses in the bank as a buffer against unforeseen circumstances. This amount can be reduced if your business has direct costs that have instant or quick cash collection. Plan the cash flows from your operating income and compare them against the cash balances on hand.  

Lenders and savvy managers are going to look at your financial ratios to see whether your business is adequately capitalized and can service your debt. The three ratios most widely used for financial analysis are:


Debt Service Ratio  – Total Debt over EBITDA.  EBITDA is  Earnings Before Interest Taxes Depreciation and Amortization and is a measure to translate Accounting Net Income to cash flow.  This ratio measures how well the cash flow of your business can service the debt in your business.      

Debt to Asset Ratio – Total Debt over Total Assets. This ratio measures the Assets as they relate to debt. It is a good indicator of what assets are available as security against loans.  

Debt to Equity Ratio  – Total Debt over Total Equity. This ratio measures how much of your assets are financed by debt versus equity; i.e. how much of the balance sheet has been financed by the owner vs by lenders.  


Rapid growth can mean a cash crisis. A great forecast can predict cash flows and the right debt to finance growth. We can help you understand debt and how to read your debt ratios. 


Let’s talk about your debt level and how we can use debt to fund your growth.  

Check out our article How to Apply for a Loan.