"How much can we borrow?" is usually the first question business owners ask us, and the honest answer is: it depends. But it doesn't depend on guesswork. Lenders work it out in a fairly consistent way, and once you know how, you can estimate your own range and see what would move it.
It comes down to three things:
- Your revenue, which sets the ceiling for most unsecured finance.
- Your cash flow, which decides whether you can afford the repayments.
- Your security, usually property, which can lift the amount well beyond what revenue alone supports.
Here's how each one works, with some illustrative examples at the end.
1. Revenue: how unsecured lenders size a loan
Without property security, a lender's main protection is your business's ability to keep trading and repay. So most unsecured lenders tie the maximum loan to your revenue, usually your average monthly revenue over the last six to twelve months, as shown in your bank statements.
Some lenders publish their rule of thumb:
- ScotPac publishes a line of credit of up to $500,000 or 200% of monthly sales.
- BiiGGA publishes merchant cash advance limits of up to three times monthly turnover.
- Tractor Ventures, which funds SMEs, software companies, ecommerce brands and VC-backed startups, publishes a guide of one to three times monthly revenue.
Those guides range from about one to three times monthly revenue. Many lenders don't publish a figure, and where you land within a range depends on the rest of your situation: how long you've traded, how steady your revenue is, your existing debts and your credit history.
What counts as revenue? Lenders look at the money actually coming into your business account from trading. Transfers between your own accounts, loan drawdowns, capital injections and one-off asset sales are usually taken out. If a big share of your sales goes through a separate account or payment platform, make sure the lender sees those statements too.
2. Cash flow: can the business afford the repayments?
Revenue sets the ceiling. Cash flow decides whether you can reach it. This is called serviceability: after your normal costs, does the business have enough left over to meet the repayments on the new loan and any existing debts, with room to spare?
The usual measure is the debt service coverage ratio (DSCR):
DSCR = cash available to repay debt ÷ total debt repayments
If your business generates $15,000 a month after its operating costs, and your loan repayments would total $10,000 a month, your DSCR is 1.5. You generate $1.50 for every $1 of repayments.
Lenders want this comfortably above 1, so you can still pay if a month is slow. The exact level varies by lender and by type of finance.
Two things often surprise business owners:
- Short terms mean big repayments. Many unsecured loans run for 12 to 36 months, often with weekly or even daily repayments. Borrowing $100,000 over 12 months needs much more cash each month than the same amount over three years, so the term can limit the amount as much as revenue does.
- Existing debts count. Repayments on other business loans, equipment finance, cash advances and ATO payment plans all come out of the same cash flow. Two or three short-term loans stacked together can leave no room for a new one, even with strong revenue.
You can try different amounts and terms in our business loan repayment calculator to see what the repayments would look like.
3. Security: how property changes the amount
If you or the business own property, a lender can lend against its value. That changes the calculation: the amount is set mainly by the property's value and the lender's maximum loan-to-value ratio (LVR), less any existing mortgage.
Some published examples:
- Bank of Sydney publishes up to 80% LVR on its Residentially Secured Business Loan, over up to 30 years.
- Private Mortgages Australia publishes short-term commercial loans of $250,000 to $5 million on first or second mortgages at up to 75% LVR.
- RELI Capital publishes $250,000 to $5 million on first mortgages at up to 65% LVR, interest only over 3 to 18 months.
Banks and other longer-term lenders still assess serviceability, but a longer term means lower repayments, so the same cash flow supports a bigger loan. Short-term private lenders focus more on the property and on how you'll repay at the end of the term, such as by refinancing or selling an asset.
Our guides to business loans secured by property and secured vs unsecured business loans go into more detail.
Illustrative examples
These are illustrative examples, based on the kind of situations we regularly see. They're not quotes: what a lender offers depends on its own assessment.
- A café trading for 2 years, with steady sales of $45,000 a month and no property. A realistic starting range is around $45,000 to $90,000 unsecured, if the repayments fit its cash flow.
- A software business with $100,000 a month of recurring revenue and no property. Around $100,000 to $300,000 unsecured, from a lender that sizes funding on revenue.
- A wholesaler trading for 6 years, with $180,000 a month in revenue. The director's home is worth $1.2 million, with a $450,000 mortgage. Around $180,000 to $360,000 unsecured, or up to about $510,000 secured by the home at 80% LVR.
The wholesaler's secured figure works like this: 80% of $1.2 million is $960,000, and less the $450,000 already owing, that leaves about $510,000 of borrowing capacity against the home. The business would still need to show it can make the repayments.
In practice, a business like the wholesaler might combine finance: a property-secured loan for a large one-off cost, and an unsecured line of credit or invoice finance for working capital. Matching each need to the right facility often gets you more, on better terms, than one large loan.
Other things that move the number
- Time trading. Many unsecured lenders want at least six to twelve months of trading. More history usually means higher limits.
- What the money is for. Equipment and vehicle finance is sized mainly on the asset being bought, so it sits largely outside your unsecured limit. Trade and invoice finance are sized on your orders and invoices.
- Credit history. Lenders check your credit file after you apply. Defaults or recent missed payments can lower the amount or narrow your options.
- ATO debt. Tax debt on a payment plan you're keeping up with is often workable. Unmanaged ATO debt is a red flag for most lenders.
- Your industry. Some lenders limit lending to industries they see as higher risk, which can narrow the field and the amount.
How to borrow more
If the amount you need is above what your revenue supports today, there are ways to close the gap:
- Clean up your bank statements. Overdrawn days, dishonoured payments and gambling transactions weigh on an application. A few clean months before you apply help.
- Get ATO debt onto a payment plan, and keep it up to date.
- Reduce expensive short-term debt. Clearing or consolidating a costly cash advance can free up cash flow for a larger, cheaper facility.
- Choose a longer term. Lower repayments improve your DSCR.
- Offer security. Property can lift the amount well beyond a revenue-based limit.
- Get your financials up to date. Recent financial statements and BAS help lenders see the full picture, especially for larger amounts.
Get a quick read on your options
For a quick, general starting point, our free Business Loan Finder shows which lenders' published criteria your business appears to meet, based on your loan amount, time trading, revenue and security.
How Splendid can help
Splendid is a business finance broker specialising in non-bank and private lenders, and working with banks where they suit. You deal with an experienced broker, backed by our proprietary AI lender matching. It starts with your bank statements, not a generic form, to work out your free cash flow and how much your business can comfortably repay. It then tests your business against the lenders that offer the finance you need, using their published and unpublished criteria. We structure the deal, get quotes from the best-fit lenders for you to compare, and we're paid by the lender, so there's no cost to you.
See our guides to business loans and large business loans, or tell us what you need and a broker will call you to work out how much you could borrow.