How much can your business borrow?

Money may make the world go around but coming to grips with how much cash you can loan can be tricky

How much can your business borrow?

Money isn’t just funny in a rich man’s world. As a small-business owner there are numerous reasons how an influx of capital can boost your business. Perhaps your business is growing and needs cashflow flexibility. Or maybe you want to invest in some new equipment to deliver a more efficient service. Whatever the case, a loan will help you achieve your goals.

A business loan gives you cash in the bank. This money can then be spent on whatever expansion or investment plans you have in order to operate freely and run a more efficient business.

However, if you’re considering a business loan then you‘re probably also wondering how much your business can borrow. The answer is that it depends on a few different factors.

For starters, the amount a lender is willing to loan your business depends on your credit score, credit history, income, outgoings and whether or not the lender thinks you’ll be able to make repayments. How these four factors look will largely determine whether a lender will loan you money at all.

Also, don’t be alarmed if the lender wants to look at your annual statements and profit and loss account for extra security.

So how much can you loan? SMEs can borrow between £10,000 and £500,000 from most lenders. Remember how we just said how one of the big factors that determine if a lender will give you a loan is if they trust that you’ll repay the loan? Essentially, the more trust they have in your ability to repay the money the bigger chance you have of borrowing the higher amount.

If you’re leading a startup wishing to borrow a large amount of money, say £100,000 or £500,000, you will have a better chance of a lender accepting you if you borrow the amount over a long period and if you have a detailed account forecast. You will need a forecast that at least covers the next three years.

Larger enterprises may wish to borrow even more. Loan amounts of £1m or more are generally set against assets with larger enterprises. This provides the lender with a satisfactory amount of security. SMEs with assets can also loan more. The common theme here is that a business with security is a safer opportunity for lenders.

So, to summarise: if you run a SME wishing to borrow between £10,000 and £500,000, rest assured you’re well catered for by the market. The same goes for startups. Larger enterprises have it even better. Whatever description fits you, you will want to choose a lender who understands your business.

Be careful though, all lenders aren’t the same. Some take a genuine interest in their clients and how their business works. Others don’t. With this interest, comes a better opportunity for you to borrow money at a good rate. That’s why we recommend independent lenders as your port of call above high street banks.

Not only are their products of a high quality but the service is often better and you will generally have access to better rates.

This article comes courtesy of Nationwide Corporate Finance, the business finance experts


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