Noncurrent Liability

What does it mean

A balance sheet lists all of the items owned by the business (Assets) as well as the debts that it owes (Liabilities).  The listing of Liabilities is split between Current Liabilities and Noncurrent Liabilities.  The difference between the two depends on the timing of when the debt is required to be paid.  Liabilities that are not required to be paid within the next 12 months are grouped into the Noncurrent Liabilities section.  Examples of common Noncurrent Liabilities would be installment loans.

Why does it matter

Noncurrent Liabilities factor heavily into a borrower’s Debt Service Coverage Ratio (DSCR) calculation.  Much of the payments contained in the DSCR come from a company’s Noncurrent Liabilities.  Additionally, the loans in the Noncurrent Liabilities will likely factor into your collateral analysis as they likely have a corresponding lien that you need to be aware of.

Other Relevant Terms

• Capital
• Current Assets
• Current Liabilities
• Noncurrent Assets
• Noncurrent Liabilities
• Equity
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