How much can my business borrow?

As much as its cash after tax supports at the lender’s minimum cover, within the value of any security and the lender’s own maximums. Divide yearly cash available by the minimum cover, take off existing repayments, and the remainder is the most the company can add in yearly repayments. The loan those repayments pay off over the term is the limit.

Some lenders of short-term unsecured loans and merchant cash advances look at monthly turnover or card takings as a starting point. Turnover does not show whether the business can afford the repayments, so a lender tests cash after costs and tax against all the company’s repayments as well. Work out your debt service cover before you rely on a turnover-based figure.

They divide the cash the business generates in a year by a year’s repayments of capital and interest on all its finance, the new loan included. One way to measure the cash is profit before interest, tax, depreciation and amortisation less tax paid. Lenders differ in what else they deduct, such as directors’ drawings above salary or spending needed to keep trading.

Security can raise the amount and lengthen the term a lender offers, because it reduces what the lender stands to lose. It does not change affordability: the business still has to meet the lender’s cover test. A lender lending against an asset limits the loan to a share of that asset’s value. Secured or unsecured.

Yes, for the same yearly repayment. In the example, £84,000 a year of repayments at an assumed 9% clears £337,214 over five years and £435,078 over seven. The longer loan costs more interest in total, and a lender will not lend for longer than the life of the asset or the purpose the money is for.

A lender reads the company's bank statements and works out whether its cash covers every loan repayment with room to spare. It then checks the trading history, the Companies House record, the credit files of the company and its directors, and what the money is for. The full answer.

A business loan is a sum your business borrows and repays with interest over a fixed term, in regular instalments. The lender prices it on the risk it reads in your accounts, your bank statements and any security you offer. Compare offers on the total you will pay in pounds, counting every fee. The full answer.

Refinancing replaces existing business debt with a new loan, at a lower rate, over a longer term or as one payment in place of several. A longer term cuts the monthly cost but can raise the total you repay, and early repayment charges on the old debt add to the bill. When the old debt is cleared, get its personal guarantees and charges formally released. The full answer.

A secured loan gives the lender a charge over an asset, such as property, equipment or everything the company owns, and that security can support a larger loan over a longer term. An unsecured loan has no charge over a named asset, and a lender can still ask a director for a personal guarantee. The full answer.