Capital velocity is a measure of system activity, not system success. A high velocity indicates frequent deployment and repayment cycles. A low velocity may simply mean capital is being held in cash value during a capitalization phase. Context matters: a new system in its first few years will naturally have lower velocity as cash value accumulates. The metric becomes more meaningful as the system matures.
Key Takeaways
- Velocity reflects activity level, not a measure of success or failure
- New systems naturally have lower velocity during the capitalization phase
- Context matters: velocity should be viewed alongside LTV and spread
- Velocity trends over time reveal changes in system usage patterns
Where the Capital Velocity tool is available, Utilization is average Loan Balance divided by average Cash Value. The displayed percentage uses the original ratio with up to one decimal and no trailing zeros. An unavailable basis is —; a known zero Loan Balance is 0%.