Whatever a loan enables should improve your business and increase your profits.
A loan might help you increase productivity, lower your costs, or grow your sales. If it doesn't do one of those things, then debt likely isn't the answer — at least not right now.
For example, if you're thinking of using a loan to bail yourself out of a difficult situation, that's a red flag. As is not having a clear sense of how a loan will enable your business to succeed
Do you have a simple and persuasive explanation for how a loan will improve your business?
Yes. Congratulations! This is an all-important step in getting ready to apply for a loan.
No. We recommend you don't apply for a loan right now and instead work on your business plan and determine how a loan fits into that plan.
Find out if a business loan will actually help you grow — before you apply.
Two veterinary technicians came to us wanting to buy a piece of specialized equipment that would make them the only specialized rehab provider in their region. We walked through the DSCR together — as well as plans “B” and “C” for if the business took longer to ramp up than expected. The numbers showed that they would be able to afford the business expenses and the monthly loan payments. We made the loan, and helped them realize this opportunity to grow.
The industry standard measure of this is your debt-service coverage ratio (DSCR). You can calculate your DSCR by dividing your cash flow (the net profit, plus any interest, depreciation, or amortization expenses) by your debt payments.
Don’t worry if you don’t have exact figures. Play around with the DSCR calculator at right to get a rough idea of how large a loan you can afford.
Cash flow
Total debt payments
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Your DSCR can tell you how much debt your business can afford.
Let’s say you need a $15,000 automatic pasta machine to really take your lasagna business to the next level. A quick DSCR calculation, however, shows you can only afford a $10,000 loan.
In this case, presuming you have no way to cover the $5,000 shortfall, taking out a loan that only covers 2/3rds of the project cost is likely a bad idea.
Banks and credit unions will typically look at previous performance to see if that history will let you service the debt you’re considering taking on. They often require a DSCR of 1.25 or greater.
At Craft3, we’re here to connect you with capital—but more importantly, we’re here to help you make smart, informed decisions for your business. That means we’ll never encourage you to take on debt that isn’t aligned with your goals or financial reality.
How will this loan help my business grow or operate more effectively?
Will it increase revenue, reduce costs, or unlock a new opportunity?
Can I realistically repay this loan based on my current and projected cash flow?
You should only borrow what you can afford to repay—without putting your business at risk. A responsible lender (like Craft3) will work with you to think through these questions. We want to help you explore whether financing is truly the right next step, or whether there are other ways to move forward until the timing is better.
Remember: the right loan, at the right time, for the right reason can be a powerful tool. But it’s just one piece of a long-term business strategy. We’re here to help you figure out when it makes sense—and when it doesn’t.
Get the resources you need to feel confident and prepared as you grow your business and explore financing options. Each download is designed to make complex concepts simpler and help you move forward with clarity.
Complete E-Book! Everything you need to know to apply for a business loan — business plans, financial statements, lender conversations, and documents. Free from Craft3.
If you’re interested in starting or expanding a business, you’ll likely encounter lots of terms and acronyms.
A printable one-pager summarizing the key sections every strong business plan should include.
A quick-reference guide covering the essentials of income statements, balance sheets, and cash flow projections.
A printable worksheet to help you decide if financing is the right move for your business goals.
A practical worksheet featuring common lender questions, insights into what they’re really listening for, and space to organize your key talking points.
A printable guide to help you see your loan application from a lender’s perspective and prepare more strategically.
A checklist of the financial and business documents lenders typically require when applying for a loan.
A reflective worksheet to help you assess your business's current position and plan ahead for success.
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Relevant stories, news, and insights from Craft3Content matched to where you are in your journeyNo spam — unsubscribe at any timeCraft3 is a nonprofit community lender focused on building a thriving, just, and empowered Pacific Northwest. We support entrepreneurs — especially those who have been denied access to opportunity — by offering responsible capital and tools to support you on your business journey.
Learn More About Craft3Community Development Financial Institution
Oregon & Washington
Nonprofit lender
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