Monthly Reconciliation and Debt to Income Ratio (D.I.R.) Monitoring for Small Business

A small business’s debt to income ratio is most easily explained as the ratio of a borrower's total of debt as a percentage of their total gross income. This ratio, more commonly expressed as D.I.R or simply “debt ratio”, measures how much you can borrow based on your expenses in relation to your total monthly income. Lenders’ experience shows that you may borrow from 33% to 40% of your monthly income, on average. To find your small business’s DIR, simply divide the total of monthly debt payments to gross monthly income. Typically, the lower your ratio, the better handle you have on debt.

 Whether you're preparing to apply for small business credit or financing or simply need to know where your small business stands financially, regularly monitoring your debt ratio is an important step to understanding your debt and financial position. It’s a good idea to recalculate your debt-to-income ratio at least once a year, or before any important turning points in the small business. Please contact us for more information about debt ot income ratio and small business credit.