There is no fixed figure for how much a limited company can borrow. Two businesses with the same turnover can receive very different offers, because finance providers set the amount by looking at the whole business, not one number on the accounts.
What follows explains the main factors that shape the amount and why it varies so much between companies, products and providers.
Why there is no single answer
Each finance provider has its own appetite for risk, its own criteria and its own way of assessing an application. The type of finance matters too, because different products are sized in different ways:
- a business loan is generally sized around what the business can afford to repay from its income
- invoice finance is linked to the value and quality of eligible unpaid invoices, so the facility can move up and down with the sales ledger
- asset finance is usually tied to the cost and type of the asset being acquired
That is why one provider may offer a different amount from another for the same business, and why the same company may be able to raise more through one product than another.
Affordability, profitability and cash flow
Affordability is usually the starting point. The provider wants to see that the business can meet the repayments comfortably alongside its existing commitments, without putting pressure on day-to-day operations.
Three things feed into that view:
- Profitability. A record of consistent profits gives a provider more confidence than a single strong year. Losses do not always rule out funding, but they usually need explaining.
- Cash flow. Profit and cash are not the same. A profitable company with slow-paying customers or heavy stock requirements may have less cash available for repayments than its accounts suggest.
- Stability of income. Regular, predictable income from a spread of customers tends to support a higher amount than income that is lumpy or dependent on one or two clients.
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Trading history and existing debt
Trading history. A longer track record gives a provider more evidence to assess. Newer companies can still access some types of finance, but the amount may be more modest until the business has a longer record of trading and filed accounts.
Existing debt. Current borrowing reduces the room available for new repayments. Providers will look at loans, overdrafts, asset finance agreements, credit cards and any arrangements with HMRC. The more of the monthly cash flow already committed, the less is usually available for new borrowing.
A clean credit history for the company and its directors also helps. Missed payments or unpaid court judgments can reduce the amount offered or narrow the options.
Security and guarantees
Security can change the picture. A provider may be willing to lend more where the borrowing is secured on property, equipment, vehicles or the company's debtor book, because it has something to fall back on if repayments are not made.
Unsecured lending relies more heavily on affordability and credit profile, and directors are often asked to give personal guarantees. A guarantee does not replace affordability. Providers still need to see that the business itself can repay.
The purpose of the funding
What the money is for affects how much a provider is comfortable lending. A request backed by a clear plan, such as a confirmed contract, a supplier quote for equipment or a cash flow forecast showing the timing gap, is easier to assess than a general request for extra funds.
A clear purpose also helps match the request to the right product. Sometimes the right answer is a combination, for example asset finance for equipment alongside a smaller loan for working capital. A commercial finance intermediary such as Emirex Finance can help you understand which structures may fit your circumstances, though the amount offered is always the provider's decision.
Understanding the financial information business lenders review can help you see your business the way a provider will.
Key points
- There is no standard amount. It depends on the provider, the product and your circumstances.
- Affordability, cash flow and existing commitments usually carry the most weight.
- Security, trading history and credit profile can widen or narrow the options.
- A clear purpose and supporting evidence make the request easier to assess.
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This guide is general information, not financial, legal or tax advice. Finance is subject to status, eligibility and approval by the relevant finance provider. Emirex Finance works with UK limited companies only and is not authorised or regulated by the FCA.