How much can my business borrow?

Why isn’t there one number for every business?

Because a lender is really answering two separate questions, and the smaller answer wins.

The first question is “If this goes wrong, what’s my fallback?” That’s the security side: property, mostly, or the strength of the business itself when there’s no property involved. The second is “Can this business make the repayments without strain?” That’s the cash flow side. A café with a paid-off investment unit might have heaps of security but thin monthly margins. A busy wholesaler might have strong turnover but nothing to put up as security. Each gets a different number, for different reasons.

So when an owner asks Mr “how much can I borrow?”, the honest reply is another question: what are you working with?

How is a property-secured loan sized?

With property security, the starting point is equity: what the property is worth, less what’s already owed against it. Business loans secured by property run from $20,000 to $5,000,000, using a first mortgage, a second mortgage behind an existing home loan, or a caveat.

A lender won’t lend against every last dollar of equity. It keeps a cushion, because valuations move and selling a property costs time and money. How big that cushion is depends on the property type, its location, whether it’s residential or commercial, and the loan’s position on the title.

Then the lender asks the second question anyway: how will this be repaid? For a longer loan, that’s usually business cash flow. For a short-term or caveat loan, it might be a specific event — a property sale, a refinance, a big customer payment or a tax refund. The clearer the exit, the more comfortable the lender.

An illustrative example. A Gold Coast joinery business owns a factory unit worth around $900k with $300k owing. On paper there’s $600k of equity. A lender might be comfortable lending a portion of that — not all of it — and will still want to see that the workshop’s cash flow can carry the repayments. The final number lands where both tests agree.

How is an unsecured loan sized?

Without property, the business itself is the security, so lenders lean hard on the evidence of trading. Unsecured, cash-flow and line-of-credit options for trading businesses typically run from $5,000 to $500,000, sized on turnover and bank statements.

What they’re reading:

• Monthly turnover — how much comes in, on average, across recent months.
• Consistency — steady deposits are worth more than one big month and three quiet ones.
• Account conduct — dishonours, overdrawn days and lots of other lenders’ repayments all shrink the number.
• Existing debts — other loans already taking money out each week reduce what’s left to service a new one.
• Time in business — a longer track record usually supports a larger facility.

Directors are commonly asked to sign a personal guarantee on unsecured business lending. It’s worth reading whether you’ll need to sign a personal guarantee before you get to that point.

What does “affordable” actually mean to a lender?

This is where a lot of owners get surprised. A lender doesn’t only ask whether you can make the repayment in a good month. It asks whether you can make it in an ordinary month, after wages, rent, suppliers, tax and your existing debts.

What the lender checks	What helps	What hurts
Surplus cash after costs	Healthy margins, steady sales	Thin margins, lumpy income
Existing commitments	Few other debts	Several short-term loans already running
Tax position	Lodged BAS, ATO plan in place	Unlodged statements, no plan
Purpose of the loan	Clear, specific, earns or saves money	Vague, or covering losses with no fix

If your repayments would eat most of your monthly surplus, expect a smaller offer or a longer term. That’s not the lender being difficult — it’s the lender stopping a loan from becoming the next problem.

Should I borrow the maximum I can get?

Usually not. Mr’s rule of thumb: borrow what the job needs, plus a sensible buffer, and no more.

Every extra dollar borrowed costs money and adds repayment pressure. Some owners chase the biggest possible number “just in case” and end up servicing cash they never used. If your needs are lumpy, a line of credit or a term loan might suit better than a big lump sum — you draw what you need and pay for what you use.

Questions worth answering before you settle on a figure:

1. What exactly is the money for, and what does that cost, line by line?
2. When does the money come back — from sales, a contract, a refund or a sale?
3. What happens if that’s late by a month or two?
4. Would a smaller first facility, increased later, suit the business better?

What can I do to increase how much I can borrow?

Some levers are quick, some take months:

• Bring property into the picture. Even a second mortgage behind an existing home loan can lift the amount considerably. Secured or unsecured is often the biggest single decision.
• Tidy your bank account. A few clean months without dishonours or overdrawn days help an unsecured application.
• Get your ATO lodgements up to date. Lenders can often work with a tax debt; they struggle with missing paperwork.
• Consolidate small debts. Several daily or weekly repayments drag down your capacity.
• Be specific about purpose. A costed plan beats “general working capital” every time.

Not sure where you stand? Mr’s loan-readiness interview takes about two minutes and tells you which of these matter most for you.

What do owners usually get wrong about the number?

Three things come up again and again when Mr reviews enquiries.

Using annual turnover as the yardstick. An owner turning over $1.2m a year might expect to borrow a big slice of that unsecured. But lenders size unsecured lending on what’s left after the business pays its way, and on how steady the deposits are, not on the headline sales figure. A high-turnover, thin-margin business can support less than a smaller one with healthy margins.

Forgetting existing commitments. Equipment finance, a car loan in the company’s name, a couple of short-term facilities with daily repayments — they all come off your capacity before a new loan is considered. List every one honestly on the enquiry form, because the lender will find them in your bank statements anyway.

Counting equity twice. If your home already secures your mortgage and a business overdraft, the equity left for a new loan is smaller than the gap between value and home loan balance. Bring statements for every facility secured over the property.

Does the purpose change how much I can borrow?

Yes, more than most people expect. A loan that buys something productive — equipment that earns, stock that’s already sold, a business with a long profit history — supports a larger amount because the purpose itself helps repay it. A loan to cover past losses, with no change in how the business runs, supports less, because nothing about it improves the cash flow that has to repay it.

Lenders also match the amount to the purpose’s cost. Asking for $300k to buy a $210k machine invites questions about the other $90k. If part of the request is working capital for the first months after a purchase, say so plainly and show the sums. Clear, itemised requests are approved faster and closer to the amount asked for than round numbers with no explanation.

So, how much could your business borrow?

The quickest way to a real number is to let someone look at your real situation. Tell Mr what you need in about 60 seconds — the amount, what it’s for, any property and your ATO position. There’s no credit check to enquire, your details stay with one specialist rather than being passed around a list of lenders, and a real person calls you back. Answer the form accurately and the first call can talk real figures rather than guesses. See if you qualify.