How much can my business borrow?
Our cash flow panel runs from £1,000 to £500,000, and farm facilities secured on land go considerably further. What you are actually offered is sized against turnover and trading history, and as a rough guide across the panel, more than a quarter of annual turnover invites questions.
Revenue, not profit
Lenders size against revenue. A business turning over £400,000 and making very little can often borrow more than one turning over £90,000 very profitably, which strikes people as backwards until you remember the lender is being repaid out of cash flow rather than out of profit.
Asking for less is sometimes the fix
If you were declined on the amount rather than on the business, the answer may simply be a smaller facility. Nobody at a bank will tell you that, because the decision came out of a model rather than a conversation.
How affordability is worked out
Turnover sets the ceiling. Affordability decides where under it you land. A lender takes what comes into the account, subtracts what already goes out, including payments to other lenders, and asks whether the new payment fits in what is left with room to spare. A busy business with heavy existing commitments can be offered less than a smaller one with none.
Seasonal trade needs care here. A lender looking at a quiet quarter can see less room than really exists across the year, which is a reason to offer twelve months of statements rather than six if your year is uneven.
An illustration
Take a company turning over £240,000 a year. A quarter of that is £60,000, roughly where questions begin. If it already pays £3,000 a month to other lenders, a new lender works from what is left after that payment, not from the £240,000, and may settle on a figure well below the ceiling.
These are illustrative numbers, not an offer, and no lender works to exactly this sum.
Where security changes the answer
Where there is security, such as equipment, property or a debtor book, the amount is tied to the value of that security rather than to turnover alone. That is why invoice finance can grow with sales, and why farm facilities secured on land can be much larger than anything unsecured. Security also tends to mean a longer process, because whatever is pledged has to be valued and the paperwork checked.
Common questions
Can I borrow more if I offer security?
Usually, yes. Security changes what the lender stands to lose, so the amount can be set against the value of what is pledged rather than against turnover alone. It also changes what you stand to lose, which is the trade worth weighing.
Does profit matter at all?
It matters, just less than people expect. A lender reads profit as a sign the business is sustainable, and a loss-making company faces harder questions. But repayments come out of cash flow, so the amount is sized on money in rather than on the bottom line. Profit counts for more on larger facilities, where a person rather than a model reads the accounts.
Can I increase the amount later?
Often. Many lenders will look at a top-up once you have made a run of payments on time. A top-up is a fresh credit decision, so it is assessed on how the business looks then, not on how it looked when you first borrowed.
Will asking for too much get me declined?
It can. Some lenders will come back with a lower amount instead, and others simply decline, with the search left on your file either way. Ask for what you need with a sensible margin, not the most you think a lender might stretch to.
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