Letters FCF hanging on a rope with clothes pins to read Free Cash Flow
Jordan Schneir
By: jordan_shneir
Read in 10 minutes

4 Steps to Calculate Free Cash Flow in Your Business

1 0

When businesses look to expand their business, they often turn to lenders to secure the necessary funds. During the loan application, small business owners will be required to provide a variety of information including financial statements and a comprehensive businesses plan. The main purpose of the documentation is to forecast the free cash flow of the business to ensure the owner will be able to comfortably pay back the debt. So the more organized your financial statements, the easier it is for any lender to understand your free cash flow, and therefore grant you a loan.

Unfortunately, most of the time small business owners don’t dedicate much time to prepare their financial statements. Though calculating free cash flow may seem a bit difficult at first, its measurement is relatively easy to obtain, and every business owner should know how to do it. In this article you will learn the following:

  • What is free cash flow
  • 4 steps to calculate free cash flow
  • Options to get to cash for your business
  • How Camino Financial can help you fund your working capital needs


What Is Free Cash Flow?

Assume for a moment that you have a business checking account, and that account is the only place where you transact funds for your business. If you looked at the account on the 1st of January in one year, and then look at it again a year later, the change in balance is your free cash flow. While this oversimplifies the actual measurement, it provides a good guide to understand how free cash flow works.

Free cash flow (FCF) looks at how much cash your business generates from sales, once you subtract out any outgoing payments for expenses (excluding taxes and interest).  Lenders often look at free cash flow because if a business runs out of cash, they cannot pay their bills.


4 Steps To Calculate Free Cash Flow

Though it may appear difficult at first, free cash flow is actually fairly easy to calculate. If you’ve worked with an accountant, or have done your own accounting before, you know you have to take the following steps to calculate your free cash flow.

Step 1: Calculate your net income or net profit (sales less all expenses)

Step 2: Add paid taxes

Step 3: Add paid interest expenses

Step 4: Add in any non-cash expenses (e.g. amortization & depreciation – you can find this in your tax returns or ask your accountant)

Net income means all of the revenues a small business makes on their services or products, minus any expenses on labor, materials, office supplies, or anything else related to the business. Next, take the previous figure and add any taxes paid out (or benefits received) as well as interest payments on any existing loans. The fourth step normally only applies if an accountant has prepared your financial statements previously and the business has non-cash expenses like depreciation on their profit and loss statements.  Because depreciation isn’t a direct cash expense, those items are added back in. This calculation of free cash flow is also known as EBITDA – Earnings Before Interest, Taxes, Depreciation, and Amortization.


Options To Getting Cash For Your Business

Obtaining cash for your business can be a key ingredient in helping you expand or work through unexpected events that come up. Regardless of your case, there are many options available to you. Depending on why the cash is needed, there are several options for obtaining capital, which we’ll divide into two major categories:

Short-term Revolving Lines

  1. Lines of Credit
  2. Credit Cards

Long-term Installment Loans

  1. Secured Installment Loans
  2. Unsecured Working Capital Loans

If the capital needs are short-term and limited, business credit cards and lines of credit provide a more flexible option than installment loans. These particular options allow borrowers to generally pay interest on the balances they have outstanding, allowing them to reduce interest payments as they reduce their balances. Generally, these types of credit are easier to apply for and require less information. However, because these products are more flexible and easier to come by, they usually involve higher interest rates.

Installment loans are more suitable for long-term investments and are paid back within 2 and 7 years. With secured installment loans you can get much better interest rates than you might receive from lines of credit. But the trade-offs are that they normally require more information than lines of credit, and do not always offer as much flexibility in the product.  “Secured” means that you will need to pledge collateral that guarantees you can return the money. At Camino Financial we offer unsecured working capital loans, which do not require you to pledge collateral for the loan. In this case, your personal assets can only be seized through a bankruptcy court. 

Read this article if you need to know more about the differences between secured and unsecured loans.


How Can Camino Financial  Help you Fund Your Working Capital Needs?

With a fast and easy online process

One of the great things about working with Camino Financial is our online process is extremely easy to follow with 3 easy steps:

  1. Submit an online application to receive pre-approved terms

Click HERE and complete a mobile-friendly loan application (it should take you between five and ten minutes). No documentation is required and submitting the application will not impact your credit score.

  1. Review the loan terms and authorize the download of your bank activity

Within one business day, you’ll receive a text with the pre-approved terms of your loan and you’ll be contacted by your assigned business loan specialist. After reviewing the terms, take one minute to authorize Camino Financial to download the last six months of bank account activity to verify your business income. Rest assure this step of the process is totally secure. Depending on your credit profile and loan terms, your business loan specialist may request additional documentation to verify your income.

  1. Sign the loan contract and get funded

The credit department will take between 1 to 8 business days to review your loan application. Upon receiving final approval, sign the mobile-friendly loan contract you’ll receive via email. You’re done! You will receive the funds directly to your bank account within two business days.

To sum up, you can get a  business loan within 1 to 10 business days with less than a single hour invested of your time.

With loan products that adapt to your needs

We offer businesses terms loans that range between $5,000 to $400,000. Our business loans are paid down over 24 to 60 months through fixed monthly payments. Our monthly interest rates vary from 1.0% to 2.5%.

With tools that allow you to be in control of how much you want to pay

If you want to evaluate the terms of a potential loan before submitting a formal application, feel free to try our online loan calculator.  It will allow you to measure the monthly payments at different loan terms. Simply input:

  • The amount you want to request
  • The number of monthly installments you want for your credit; between 24 and 60
  • The monthly interest rate

After entering these three figures, click “Calculate”. All the information you need will show up on the screen. You can reset this information as many times as you want until the result completely fits the needs of your business.


As you can see, working with Camino Financial allows you to obtain the benefits of a personalized solution with a lender that cares about getting you an affordable rate on the right sized loan for your business. We know that applying for a business loan can be a scary process.  However, we work hard to make this as easy and transparent as possible. We strive to bring you the best financing solutions to help you achieve incredible success. But don’t take our word for it! We invite you to read our reviews on Facebook and our clients’ Success Stories.

Do you qualify for a
small business loan?