What is a business debt schedule, and why does a lender want one?

Why lenders require a debt schedule

Debt service coverage ratio is the ratio of cash flow available for debt service to total annual debt payments. The numerator comes from tax returns. The denominator comes almost entirely from the debt schedule. Without it, a lender cannot size the loan.

It also exposes structure that financial statements hide. Three merchant cash advances with daily remittances and a nine-month payoff look small on a balance sheet and can be fatal to monthly cash flow. A maturity column shows balloon payments coming due inside the new loan term. A collateral column shows which assets are already pledged and whether a lien subordination will be needed.

The schedule is cross-checked against the business credit report and the tax return interest expense. Debt that appears on the credit report but not on the schedule is treated as an omission, and it is the fastest way to lose credibility with an underwriter.

What it tells a lender about the business or borrower

How to complete it

1. 1

   Gather current statements

   Pull the most recent statement for every loan, line of credit, equipment lease, SBA loan, credit card carrying a balance, and cash advance.

2. 2

   Enter one row per obligation

   Creditor name, original amount, current balance, interest rate, monthly payment, maturity date, and collateral. Do not consolidate several loans onto one line.

3. 3

   Include the items borrowers usually skip

   Capital leases, equipment financing, shareholder loans, tax payment plans, and any merchant cash advance. Note the remittance frequency where it is not monthly.

4. 4

   Date it as of a specific day

   Balances change. Use the same as-of date as the interim financial statements in your package.

5. 5

   Reconcile to the balance sheet

   Total current balances should tie to notes payable plus current maturities on your most recent balance sheet. Explain any difference in the notes field.

Mistakes that send a file back

• Leaving off merchant cash advances or short-term online loans, which appear on the credit report anyway.
• Reporting a credit limit instead of the outstanding balance on a line of credit.
• Stating an annual payment in the monthly payment column, which understates debt service by a factor of twelve.
• Omitting the maturity date, which hides an imminent balloon.
• Using stale balances from a year-end statement when the package includes current interim financials.

Who needs one

Every operating business applying for credit. It is required on SBA files, standard on conventional term loans and lines of credit, and routinely requested annually as a loan covenant after closing.

A true startup with no obligations still submits the form marked "no business debt" rather than omitting it, so the lender knows the question was answered.