{"id":208642,"date":"2025-11-10T07:00:13","date_gmt":"2025-11-10T15:00:13","guid":{"rendered":"https:\/\/www.nationalfunding.com\/blog\/?p=208642"},"modified":"2025-10-17T17:02:37","modified_gmt":"2025-10-18T00:02:37","slug":"the-debt-to-income-ratio-for-loans-and-financing","status":"publish","type":"post","link":"https:\/\/www.nationalfunding.com\/blog\/the-debt-to-income-ratio-for-loans-and-financing\/","title":{"rendered":"The Debt-to-Income Ratio for Loans and Financing\u00a0"},"content":{"rendered":"

The Debt-to-Income (DTI) ratio measures how much of a borrower\u2019s gross monthly income remains after paying down debt. Lenders use this ratio to gauge whether the borrower has enough disposable income to take on new debt obligations and still maintain their lifestyle. The ratio measures a borrower’s total required monthly debt payments on consumer credit divided by their gross income from all sources.<\/span>\u00a0<\/span><\/p>\n

While DTI is primarily a consumer lending metric, lenders will use it to evaluate a small business owner\u2019s global cash flow, which includes both business and personal items. This gives lenders a complete financial picture to evaluate the borrower\u2019s risk level and determine if a personal guarantee can offset the risk in case the borrower\u2019s business struggles.<\/span>\u00a0<\/span><\/p>\n

This guide to the debt-to-income ratio will share what it is, how to calculate it, how lenders use it as part of your small business loan application, and tips you can use to improve.<\/span>\u00a0<\/span><\/p>\n

What the Debt-to-Income Ratio Is<\/span>\u00a0<\/span><\/h2>\n

The debt-to-income ratio is the percentage of your monthly income before taxes that you\u2019re required to pay toward existing debt. Your income includes all sources of income from your business and from other sources like stocks, dividends, or other jobs. Total debt for the DTI ratio is your consumer debt like mortgage and credit cards, not business debt.<\/span>\u00a0<\/span><\/p>\n

Calculating the Debt-to-Income Ratio<\/span>\u00a0<\/span><\/h3>\n

The debt-to-income ratio can be calculated with this formula:<\/span>\u00a0<\/span><\/p>\n