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How much can my business borrow?
Lenders size a loan from your earnings: the payment has to fit inside what the business earns, with a cushion. This works out the largest loan that fits.
- Monthly payment on that loan
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- Room for new payments, per year
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- At 1.15x (SBA, most loans)
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- At 1.25x
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An estimate from earnings only. Lenders also look at collateral, credit history, time in business, and for some loans, a down payment. Revenue-based lenders size offers from monthly revenue instead.
How the math works
Divide your EBITDA by the coverage the lender wants. That's the most the business can pay on all its debts in a year. Subtract what you already pay, and the rest is room for a new loan's payments. The loan size is whatever those payments repay at the rate and term you expect.
Example: $400,000 of EBITDA at 1.25x coverage leaves $320,000 a year for debt payments. Existing payments of $48,000 a year leave $272,000, or $22,667 a month. At 10.5% over 10 years, that repays about $1.68 million.
Ways to borrow more
- A longer term. The same payment repays a larger loan over 10 years than over 5.
- Support your add-backs. One-time costs a lender accepts raise EBITDA dollar for dollar.
- Refinance expensive debt. Short-term, high-rate debt uses up coverage fast.
- Show recent growth. Some lenders give credit for a strong current year.
See your real number, from your books.
Nori calculates adjusted EBITDA from your QuickBooks or Xero books, lists your debts from the balance sheet, shows the largest loan at 1.25x, and builds the package lenders ask for.
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