How much can my business actually borrow?

How much your business can borrow comes down to one question: what payment can your bank account carry without strain? Funders size an offer from your monthly deposits, how long you've traded, the debt you already pay and your credit. Work out the payment first, and the amount follows.

What sets the ceiling

• Monthly deposits. The money coming into the business account is what a short-term funder will be repaid from, so it anchors the size of the offer.
• Time trading. A longer track record lets a funder see how your sales behave through slow months.
• Existing payments. Any advance or loan already debiting your account uses up part of the same deposits.
• Credit and ownership. Personal credit matters because the owner may be asked to sign a personal guarantee.
• The product. A 6-month advance has to be repaid fast, so the amount is smaller than a 24-month loan could support on the same payment.

The worked number

Say your business deposits $80,000 a month, across 21 business days.

A cash advance. $50,000 at a 1.35 factor over 6 months, paid daily, is $67,500 back in 126 payments of $535.71. That is $11,250 a month, about 14% of your deposits. The equivalent APR is about 126%.

A term loan. $100,000 at 18% APR over 24 months is $4,992.41 a month, about 6% of deposits. You'd repay $119,817.84, so $19,817.84 in interest.

The loan gives you twice the money for under half the monthly payment, which is why term matters as much as amount. The catch is that loans ask more of you on paperwork, credit and time trading.

Turning deposits into a safe payment

Deposits are not profit. If your margin after costs is 15%, an advance taking 14% of every dollar in leaves almost nothing. Before you look at any offer:

1. Take your average monthly deposits over the last three to six months, ignoring one-off transfers or loan proceeds.
2. Subtract your regular costs: payroll, rent, stock, existing payments.
3. What is left is the most a new payment could take. Leave a cushion for a slow month.
4. Put that payment into the how much can I borrow calculator to see what it supports at different terms and prices.

Sterling's take: the right amount is the one you can repay in your worst month, not your best.

Where Ask Sterling's partner fits

Our funding partner's programs suit businesses trading 12 months or more, with about $80K+ a month in deposits, a personal credit score of 600 or higher, two or fewer advances or loans running, and an owner holding 51% or more, looking for $50K to $500K+. Smaller businesses (about $15K+ a month, 4+ months trading) can still ask, as there is a route for them. Nobody can promise an amount until a funder has looked at the file.

What to do next

• Pull your last six months of business bank statements and find the average deposit.
• List every payment already leaving the account.
• Use the loan payment calculator to compare a longer term loan against a short advance at the same monthly payment.
• Get your documents ready so the conversation is about price, not paperwork.