How much can my limited company actually borrow?

How much your company can borrow depends mainly on four things: monthly turnover, how long it has been trading, what it already repays, and what the new repayment would do to your cash flow. Funders work backwards from the repayment the business can carry, not forwards from the amount you want. Our funding partner looks at requests from £50k to £500k+ for established limited companies.

The four numbers a funder looks at

1. Monthly turnover. The bigger and steadier the takings, the bigger the facility a funder will consider. Our funding partner's programmes are aimed at limited companies turning over about £60k+ a month.
2. Time trading. Twelve months of history is the usual starting point for those programmes. Below that there is less evidence to lend against.
3. Existing finance. Each loan or advance already running takes a slice of your cash. Our funding partner looks for two or fewer running.
4. Credit history. CCJs or defaults in the last 12 months usually stop an application. See do CCJs stop business finance.

Working backwards from the repayment

Here is the logic in pounds. A £100,000 loan at 18% APR over 24 months costs £4,992.41 a month. A £50,000 cash advance at a 1.35 factor over 6 months, paid daily, takes 126 payments of £535.71.

Ask yourself one question for each: in your worst normal month, after wages, stock, rent and VAT, is that payment still comfortable? If the answer is "only in a good month", the amount is too big or the term too short.

Sterling's take: the number that gets you into trouble is never the amount. It is the repayment.

Why the product changes the answer

• Merchant cash advance. Sized off card or sales takings. Fast, short, expensive per year.
• Business loan. Sized off profit and affordability over a longer term. Cheaper, slower, more paperwork.
• Revolving credit facility. A limit you draw and repay. Sized off turnover and how the account runs.
• Invoice finance. Sized off your unpaid invoices, so it grows with your sales ledger.
• Asset finance. Sized off the value of the equipment or vehicle.

The same company can get very different figures from each. That is normal, not a sign that one funder has got it wrong.

Smaller companies

If your company turns over less than £60k a month, you can still ask. Our funding partner has a route for limited companies turning over £12k+ a month with 4+ months of trading. Below that, your bank or a business credit card is usually the cheaper place to start.

What to do next

Run your figures through how much can I borrow for a sense check. Then read the working capital guide to match the amount to the right product, and check the repayment in the loan repayment calculator before you ask anyone for an offer.