Choose one cash measure and one period
For Atlas headroom calculations, cash available is cash after operating costs, tax and owner drawings, but before debt payments. Use the same twelve-month period for cash and debt commitments. If your forecast already deducts those commitments, add them back once before using its cash figure.
Sales, profit and bank balance answer different questions. Uncollected sales provide no cash today; a bank balance may include money reserved for other payments. Document your cash measure. A lender may use a different definition when assessing an application.
Reconcile the cash input before calculating coverage
Atlas uses cash after operating costs, tax and owner drawings but before debt payments. Use the same period for the cash figure and debt commitments. The following hypothetical reconciliation shows one way to prepare the input.
| Annual cash item | Amount |
|---|---|
| Expected cash receipts | $600,000 |
| Less operating cash payments | $350,000 |
| Less tax cash payments | $40,000 |
| Less owner drawings | $30,000 |
| Cash before debt payments | $180,000 |
Swipe or scroll the table sideways to see every column.
Coverage = cash before debt payments ÷ debt payments for the period. If the forecast already deducts the debt payments, add those payments back once to derive the before-debt input. Do not substitute sales or accounting profit without reconciling the cash movements.
Worked example: the same debt payments under stress
Assume annual existing debt payments of $60,000 and proposed payments of $45,000. Compare them with $180,000 cash before debt, then reduce positive available cash by 20%.
| Measure | Base scenario | 20% less available cash |
|---|---|---|
| Cash before debt | $180,000 | $144,000 |
| Existing plus proposed debt payments | $105,000 | $105,000 |
| Coverage | 1.71× | 1.37× |
| Cash remaining after debt payments | $75,000 | $39,000 |
Swipe or scroll the table sideways to see every column.
The ratios are rounded: $180,000 ÷ $105,000 = 1.714… and $144,000 ÷ $105,000 = 1.371…. These results describe the entered cash scenario. They do not establish approval or show when cash arrives.
Keep three debt figures separate
Future payments can include principal, interest and fees. Adding them does not produce a current payout figure. For a refinance comparison, obtain an actual payout quote and record switching costs separately. Avoid treating the current principal balance as an extra payment alongside the full remaining schedule.
| Figure | What it describes |
|---|---|
| Current principal | The amount of principal outstanding now |
| Future cash commitments | Remaining regular payments and additional balloons |
| Lender payout quote | The amount required to settle on a specified date |
Swipe or scroll the table sideways to see every column.
Use coverage to examine a scenario
Coverage divides available cash by debt payments for the same period. A ratio of one means those entered amounts are equal; it leaves no surplus in that measure. The tool applies no universal lender threshold. With zero debt payments, coverage is not applicable.
Test reduced cash against unchanged payments. The Atlas stress setting reduces positive cash by your percentage; for negative cash, it increases the deficit. Connect your assumption to slower collections, higher costs or another specific business exposure.
Check the month a balloon falls due
Annual coverage can hide a difficult payment month. A $1,100 regular instalment plus an additional $10,000 balloon requires $11,100 that month. Record the balloon once and check available cash at that date. Asset sale proceeds and future refinancing should remain separate assumptions until their amounts and availability are established.
Move from annual headroom to the maturity calendar
For the same case, list the dates and amounts that make up the $105,000 annual commitment. Check that required fees and any additional balloon due in the period are included in that total. Adding an omitted balloon changes coverage; adding a balloon already counted would double-count it.
Enter the debt schedule in the maturity calendar and inspect the months with the largest payments. Then compare those dates with the cash forecast. Atlas’s calculation conventions are planning methods; a provider may define cash or coverage differently when assessing a proposal.
What to prepare
- Use matching forecast periods for cash and debt payments.
- Include required interest, principal, fees and balloons falling within the period.
- Record maturity dates and avoid double-counting final instalments.
- Check monthly timing alongside the annual comparison.
- Obtain payout quotes before assessing a replacement facility.
Common questions
Does positive headroom mean a loan will be approved?
No. It means the selected cash amount exceeds the payments entered. A provider assesses its own measures, evidence and lending conditions.
Should principal repayments count as debt service?
Yes, this cash-based comparison includes required principal, interest and fees. Keep debt payments out of the cash-available input so they are deducted only once.
Can lower monthly payments still cost more?
Yes. A longer replacement term can reduce each payment while increasing the total paid. Compare the complete remaining schedule and switching costs.
General information only. Product terms and availability vary. Check the actual proposal and obtain advice appropriate to your circumstances.