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Debt-to-income DTI
Also called DTI ratio, personal DTI.
A guarantor's monthly personal debt payments divided by monthly personal income, a consumer metric that enters business files through the personal guaranty.
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What it means
Business lending is underwritten on cash flow and collateral, not DTI. The ratio shows up anyway in three places: when the owner's personal credit carries a thin-file business, when an SBA lender builds a global cash flow analysis, and when the financing is technically consumer credit dressed as a business product.
The payments come from the credit report rather than from what the applicant reports. Mortgage or rent, auto notes, minimum card payments, student loans, and court-ordered obligations all count. Guaranties on other entities are contingent liabilities and a conservative analyst will include some portion of them.
Income means documented income: W-2 wages, verified distributions, and outside income supported by returns. A spouse's income helps only if the spouse is signing.
Where this one catches people
Owners assume company revenue counts as their income. It does not. What counts is what the business actually paid out to them and what the tax returns show, which for an owner who leaves money in the business to fund growth is often a small number. The same discipline that makes the company look strong makes the guarantor look weak.
Where you will meet this term
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Debt-to-income — common questions
What does debt-to-income mean?
A guarantor's monthly personal debt payments divided by monthly personal income, a consumer metric that enters business files through the personal guaranty.
Where does debt-to-income catch people out?
Owners assume company revenue counts as their income. It does not. What counts is what the business actually paid out to them and what the tax returns show, which for an owner who leaves money in the business to fund growth is often a small number. The same discipline that makes the company look strong makes the guarantor look weak.
Is debt-to-income the same as an interest rate?
Debt-to-income is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does debt-to-income apply to?
Term Loan, SBA Loan, Equipment Financing.
Is there a worked example of debt-to-income?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside debt-to-income?
Debt service coverage ratio, FICO score, Global cash flow analysis, Personal financial statement, Personal guarantee.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.