For SBA lenders
Short answer
Lenders must analyze deferred revenue to understand the future cash flow obligations and ensure sufficient working capital is available to fulfill services or products already paid for.
Deferred revenue represents cash received for goods or services yet to be delivered. The lender must assess the historical patterns of deferred revenue, the cost of fulfilling these obligations, and the impact on future cash flow. It's crucial to confirm that adequate working capital, separate from the loan, exists to cover these future expenses, so the business can sustain operations while earning out the deferred revenue.
A borrower is acquiring a software-as-a-service (SaaS) business with $100,000 in deferred revenue from annual subscriptions. The lender analyzes the historical cost of fulfilling these subscriptions and requires a portion of the borrower's working capital to be set aside to cover the immediate operational costs associated with earning this revenue.
Insider move
Lenders worry that significant deferred revenue can create a liquidity trap if the cost to fulfill those obligations exceeds available working capital, leading to a cash flow crisis. Proper underwriting must account for this liability and ensure adequate reserves.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
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