How much can my business borrow?

“How much can we borrow?” sounds like a simple question, but the answer depends on which door you walk through. Unsecured lenders look at the business’s cash flow and ask how much it can comfortably repay. Property-backed lenders look at the equity in a property and ask how much they can safely lend against it. The same business can get two very different answers.

This guide explains how each route sets its limit, what pushes the number up or down, and how to estimate your own range before you apply.

Two ways lenders set the amount

	Unsecured	Property-backed
Main question	Can the business afford the repayments?	Is there enough equity to secure the loan?
Based on	Turnover, bank statements, existing debts	Property value, existing loans, property type
Typical range	$5,000 to $500,000	$20,000 to $5,000,000
Biggest limit	Cash flow	Equity

How unsecured limits are worked out

Unsecured lenders start with your bank statements. They look at:

1. Average monthly deposits, and how much they swing.
2. Existing repayments to other lenders.
3. Regular large outgoings like wages, rent and suppliers.
4. Account conduct, including dishonours and overdrawn days.
5. Time trading and credit history.

From that, they work out how large a repayment the business can carry and how big a loan that repayment supports over the term they offer. A shorter term means a smaller loan for the same repayment.

What lifts it: steady, growing deposits; few existing debts; a clean account; a long trading history; a clear purpose.

What lowers it: seasonal or falling turnover; several existing short-term loans; dishonours; recent credit issues; undisclosed ATO debt.

How property-backed limits are worked out

Property-backed lenders start with the property:

1. Value, from a valuation or desktop assessment.
2. What’s owing on any existing mortgage.
3. Equity: value minus what’s owing.
4. A buffer, which depends on the property type, location, the loan’s ranking (first or second) and its term.

The loan can be a share of the equity after the buffer. Standard houses in capital cities usually support more than rural land, specialised buildings or vacant blocks. First mortgages usually support more than second mortgages or caveat loans.

Lenders still look at the business and the people, but the property sets the ceiling.

A worked example

A Hobart brewery with $1.6 million annual turnover and one existing equipment loan wants to expand.

Unsecured: steady deposits, but a seasonal dip in winter and the existing equipment loan limit the repayment it can carry. An unsecured lender indicates a range in the low six figures.

Property-backed: the owners have a home worth about $1.1 million with $400,000 owing. With a buffer, a second mortgage could support a substantially larger amount than the unsecured option.

The brewery chooses a mix: an unsecured loan for new tanks needed this month, and a second mortgage for a larger taproom fit-out later in the year.

Estimating your own range

Unsecured: look at your quietest three months. After wages, rent, stock, tax, existing loans and your own drawings, what’s left each month? A new loan’s repayment needs to fit comfortably inside that, with room to spare.

Property-backed: take a conservative estimate of the property’s value, subtract what’s owing, and assume only part of the remaining equity can be borrowed. If you need close to the whole equity, expect the lender to ask for more security or lend less.

Our funding speed finder asks about turnover and property and gives an indication of which route fits your amount.

Should you borrow the maximum?

Usually not. The maximum is what a lender is willing to lend, not what the business should borrow. Borrow what the purpose needs, plus a sensible buffer for costs you might have missed. Every extra dollar borrowed costs money and adds repayments, and a business with room to spare handles surprises far better than one that’s fully stretched.

Ways to increase what you can borrow

• Clean up bank statements over a few months: no dishonours, all income banked.
• Lodge outstanding BAS and get ATO debts onto a plan.
• Consolidate small debts into one.
• Offer property security if you’re comfortable doing so.
• Show the purpose earns money, with contracts, orders or quotes.

Why the purpose changes the number

Lenders don’t just ask how much; they ask what for. A loan that buys something that earns money, such as equipment for a signed contract or stock for a confirmed order, can support a larger amount than a loan to cover a general shortfall, because the purpose itself helps repay it. A quote, invoice or contract that shows exactly where the money goes and how it comes back makes a lender more comfortable at the higher end of what they’d consider.

The reverse is also true. If the purpose is vague, or the money is going to cover past losses, lenders tend to be more cautious and lend less, even when the turnover or equity looks strong.

Time trading and the amount

How long the business has traded affects unsecured limits more than most owners expect. A business with three years of steady statements gives a lender a clear view of good and bad months. A business with six months of history gives only a glimpse, so lenders size more cautiously. If your business is young but you need a larger amount, property security is usually the bridge between what you need and what your history supports.

Two businesses, same turnover, different limits

Two Adelaide businesses each turn over about $900,000 a year. One has steady monthly deposits, no other loans and a clean account. The other has big seasonal swings, two short-term loans with weekly repayments and several dishonours in the last three months. On paper they look similar. In practice, the first can borrow far more unsecured than the second, because its repayments are easier to predict and its income isn’t already committed to other lenders. The second business might get a similar amount only with property security, or by consolidating its existing loans first.

Ask for a range, not a single number

When you first enquire, it helps to give a range: the minimum that would do the job and the amount that would be ideal. It lets a real person tell you quickly which end is realistic and which route gets you there fastest.

Find out your realistic range

Tell us what you need and what you have. Start your enquiry and a real person will tell you what’s realistic for your business. Asking won’t trigger a credit check, and we won’t hand your details to a list of lenders. Please complete the form accurately, especially turnover, debts and property, so the range we give you is one you can rely on.