Bob FraserCFO & Macro Strategist | Data-Driven Investing Expert | Speaker & Author

Can debt be serviced, paving the way to positive outcomes? Bob Fraser

Name: Can debt be serviced, paving the way to positive outcomes? Bob Fraser
Uploaded: 2023-12-16T15:00:36+00:00
Duration: 25 s
Channel: Bob Fraser
Description: In this brief segment, Bob Fraser highlights a core challenge in property and commercial finance: managing debt through cash flow. He asks whether debt…

16 Dec 2023 · 0 min

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In this brief segment, Bob Fraser highlights a core challenge in property and commercial finance: managing debt through cash flow. He asks whether debt can be serviced directly from the property's cash flow and whether the operation can become cash‑flow‑positive. Fraser also explains that most lenders impose a debt‑service covenant requiring a coverage ratio—typically around 1.25—meaning the property's cash flow must exceed debt service by 25% to satisfy the lender.

One of the biggest issues of cash flow is the debt. Can the debt be serviced? Can that debt be paid right out of cash flow? And still you want to know, can it get to cash flow positive? And you want to understand too, a lot of the lenders have a debt service covenant where you have to have a certain coverage ratio. And it's usually somewhere around 1.25, meaning that the property has to have enough cash flow to cover the 125% of the debt service.