What the bank is adding up
Global cash flow analysis is a lender's way of treating one owner and everything that owner controls as a single borrower. It exists because a personal guarantee makes you the backstop for every loan.
A personal guarantee is a promise that you will repay a business loan from your own assets if the company cannot. The Federal Reserve's 2026 Small Business Credit Survey of 6,525 employer firms found that 59 percent of firms carrying debt had given one, and 51 percent had pledged business assets. If you are in that group, the bank does not see three separate businesses.
The formula is short. For each business, take net income, add back depreciation and amortization, add back interest, and subtract distributions to owners. The accounting and consulting firm Wipfli, in its guide to calculating global cash flow, gives that as the standard business cash flow line. Do it for every entity, add the owner's personal income after a haircut of around 40 percent, and divide by every payment of principal and interest across the businesses and the household.
Debt service is the total of principal and interest due on a loan over a period, usually a year.
Distributions are money taken out of a business by its owners: draws, dividends, and payments made on the owner's behalf. Lenders subtract them because that cash has left the company and cannot service its debt.
Commerce Bank's 2026 guidance puts the typical minimum coverage at 1.2, with unsecured loans closer to 1.5 and SBA loans around 1.1. The single-entity version of the ratio is covered in DSCR for business owners.
A three-company example
Suppose an owner has three entities. Company A is a ten-year-old HVAC service business that makes money. Company B is a second location opened eighteen months ago that does not yet. Company C is the LLC that owns the shop building and rents it to A. From last year's returns, the bank builds this.
| Company A | Company B | Company C | Personal | |
|---|---|---|---|---|
| Net income | $312,600 | −$88,300 | $22,400 | |
| Depreciation and amortization | $41,200 | $17,500 | $38,000 | |
| Interest | $28,700 | $12,900 | $61,300 | |
| Distributions | −$260,000 | $0 | $0 | |
| Cash flow | $122,500 | −$57,900 | $121,700 | $156,000 |
| Debt service | $96,400 | $54,800 | $117,600 | $48,200 |
| Coverage | 1.27 | negative | 1.03 |
The personal column is the $260,000 in distributions the owner took from A, less the 40 percent haircut, so $156,000. Personal debt service is the home mortgage and two vehicles. Add the columns: global cash available is $342,300, global debt service is $317,000, and global coverage is 1.08.
Now look at what the owner sees. Before distributions, Company A generates $382,500 of cash against $96,400 of payments, a coverage of almost 4.0. But $140,000 of the distributions went into Company B to cover its losses and its loan, and the rest paid the owner's taxes and household. The bank subtracts all of it. A drops to 1.27 on its own, and once B's shortfall and C's thin margin are added, the whole picture is 1.08, under the line for nearly every conventional lender.
The $96,000 of rent A pays C is an expense in one and income in the other, so with both entities in the analysis it washes out. It only distorts the picture when the property LLC is left out, which happens when it is not the borrower. How parent and property entities fit together on the books is in holding company accounting in QuickBooks.
Why distributions matter more than you think
Owners tend to think of distributions as their own money, which is true, and as unrelated to the loan, which is not. The bank treats every dollar that leaves a company as a dollar that can no longer pay that company's debt, and it does not ask why you took it.
Tax distributions on pass-through income, often taken in one lump in April, catch people out. So does money moved to prop up a sister entity, like the $140,000 above, which the owner calls an investment and the analysis calls A getting weaker while B gets no stronger, because a capital contribution is not cash flow. And so do personal expenses run through the company, which the bookkeeper posts as distributions at year end.
The common advice is to keep each business in its own lane and let the bank judge each loan on its own merits. We would not rely on that. Once you have signed a personal guarantee the lane markings are gone, and the bank's credit policy will usually require a global view for any owner with more than one entity.
What the bank asks for, and why it takes six weeks
The bank will want two or three years of tax returns for each entity, your personal return with every K-1, year-to-date statements for each company, a debt schedule per entity listing every loan with its balance and payment, and a personal financial statement, which for an SBA loan is Form 413.
The time goes into the books. A typical owner with three files has a bookkeeper closing each one about six weeks after month end, so the year-to-date statements are stale the day they are sent. The debt schedules have to be rebuilt from loan statements. And the intercompany balances do not agree, because A shows it owes C $14,300 and C shows $9,800, and someone has to find the difference before the analyst does. The loan covenants and lender reporting you sign up to after closing are a promise to do this again every year, on a deadline.
Running your own global number every month
You need one line per entity, updated monthly, with four figures from each P&L (net income, depreciation, interest, distributions) and one from each loan schedule (twelve months of principal and interest), plus your personal income after the haircut and your personal payments. The point of doing it monthly is that the fix only works before year end. If the global number is 1.08 in September, every $100,000 of distributions left in the companies before December adds about 0.13 to it, after the personal side is adjusted for the haircut. In April, the year is closed.
Navigator Pro, the $499 plan on navigatorhq.ai, does the entity side of this. It reads each QuickBooks Online file read-only, cancels the rent and management fees between your own companies, and shows coverage per entity and across all of them against the loan terms you enter, refreshed daily. It does not see your personal return, so the household side still has to be added by hand, and it does not know your bank's particular haircut or add-back policy.
What the method cannot do is tell you whether you will be approved. Collateral, the age of the business, the bank's appetite that quarter and the analyst's view of your add-backs all move the decision, and the haircut itself varies by lender. We do not know your bank's number; the ranges above are the best guide we have.
Preparing an entity that will be looked at alone
Sometimes one company is the borrower. The bank then starts with that entity's own coverage before widening out, and if Company C is refinancing its mortgage, C's 1.03 is the first number on the page. Document the intercompany rent at a market rate with a signed lease. Take owner draws from the company that can afford them rather than the one applying. And paper any loans between your companies with a note and a repayment schedule, because an undocumented balance owed to a sister company gets treated as a distribution or a doubtful asset. From 1 October 2026, SBA lenders will also have to use historical rather than projected cash flow under SOP 50 10 8.1, which will make last year's distributions harder to explain away.
Questions owners ask
What is global cash flow analysis?
Global cash flow analysis is the way a lender combines every business an owner controls with the owner's personal finances into one calculation. It adds each company's net income, depreciation and interest, subtracts distributions, adds personal income after a haircut, and divides the total by all principal and interest payments across the businesses and the household.
Do banks count my personal income?
Yes, after a haircut. Lenders typically count around 60 percent of personal income and treat the rest as spent on living expenses and taxes. Distributions from your businesses show up here as income, which is why they are subtracted from the business side first. Personal debt payments, including your mortgage and vehicles, are added to total debt service.
Why does my strong company look weak to the bank?
Usually because of distributions. A company generating $382,500 of cash before draws can show $122,500 after them, and the bank uses the second figure. If those draws funded a sister entity or paid your taxes, the money is gone from the company either way. Undocumented rent or loans between your own entities can also be discounted by the analyst.
What documents does a global cash flow analysis need?
Two to three years of tax returns for each entity, the owner's personal return with all K-1s, year-to-date statements for every company, a debt schedule per entity listing each loan's balance and payment, and a personal financial statement (Form 413 for SBA loans). Most of the delay comes from unclosed books and intercompany balances that do not agree.
Related
For the single-entity version, start with DSCR for business owners, with the formula and what banks require. What happens after closing, including the compliance certificate and the annual package, is in loan covenants and the reporting package your lender expects. If you borrow through the SBA, the 1 October rule change is in SBA DSCR requirements under SOP 50 10 8.1.
If you would rather see coverage per entity and across all of them before your bank does, the trial connects in about fifteen minutes and needs no card: navigatorhq.ai.
Published . Last updated . Reviewed by a CFO on the Navigator team.