Business borrowing power calculator
Room for new repayments each year
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An estimate to help you plan, not an offer or approval. Lenders set their own policies, costs and limits.
Quick answer
This business borrowing power calculator starts from your net profit before tax plus add-backs, divides it by the debt service cover a lender wants (1.1× to 2.5×), subtracts the repayments you already make, and shows the yearly room left for new repayments. It then turns that room into an indicative loan size using your chosen term and the total cost per dollar from a real quote. No interest rate is built in.
Key points
- Borrowing power here comes from cash earnings divided by the cover a lender requires
- Every dollar of existing repayments reduces the room for new ones dollar for dollar
- The cost per $1 borrowed must match the term you test, or the loan size will be overstated
- Banks lean hardest on this test; secured and non-bank lenders may look past one weak year
Ask three lenders how much your business can borrow and you may get three different answers. Underneath, though, most of them run a version of the same test: how much cash does the business earn, how many times over must that cash cover the repayments, and what’s already committed to other debt? This calculator runs that test on your own figures so you walk into the conversation knowing your ceiling.
The six inputs, one by one
Annual net profit before tax. The bottom line from your latest full-year profit and loss, before income tax. Sole traders and partnerships use the business profit, not personal taxable income after deductions.
Add-backs. Costs your accountant can show won’t repeat or aren’t cash: depreciation, interest on loans that the new money will clear, a one-off legal bill or a relocation. These get added to profit because they won’t compete with the new repayments. Our glossary entry on add-backs has more on what lenders accept.
Existing annual loan repayments. Twelve months of principal and interest on every business loan, equipment finance contract and vehicle loan the business will keep. If the new loan is going to pay one of them out, leave that one out.
Cover the lender wants. A slider from 1.1× to 2.5×. It’s the multiple by which cash earnings must exceed total repayments. A higher setting means a more cautious lender.
Term to test (years). How long the new loan would run.
Total cost of finance per $1 borrowed. Taken from a real quote: the total interest and fees over the whole term, divided by the amount borrowed. Typing 0.20 means $20 of cost for every $100 borrowed. This is how the calculator stays free of assumed rates.
What the four results mean
- Room for new repayments each year (the headline). Cash earnings divided by the cover you chose, minus existing repayments. It never shows less than $0.
- Indicative loan size. That yearly room multiplied by the term, then divided by one plus the cost per $1. In plain terms: the total you could repay over the term, with the finance cost stripped out.
- Current cover. Cash earnings divided by today’s repayments, so you can see how comfortable your existing debt is. With no existing loans, it says so.
- Cash available for debt. Profit plus add-backs. This is the pool every lender is looking at.
The note underneath makes a fair point: banks rely heavily on this type of servicing test, while non-bank and property-backed lenders can sometimes look past a thin year when there’s security or a clear reason for the dip.
A worked example: a plumbing business planning a fleet upgrade
A plumbing company’s last financial year showed:
- Net profit before tax: $140,000
- Add-backs: $25,000 ($18,000 depreciation and a $7,000 one-off legal bill)
- Existing repayments: $36,000 a year on two utes and a drain camera
Cash available for debt is $165,000, and current cover on existing loans is 4.58×.
| Scenario | Cover | Room each year | Term | Cost per $1 (from quote) | Indicative loan |
|---|---|---|---|---|---|
| Cautious lender | 1.5× | $74,000 | 3 years | 0.18 | $188,136 |
| Cautious lender, longer term | 1.5× | $74,000 | 5 years | 0.32 | $280,303 |
| More flexible lender | 1.25× | $96,000 | 3 years | 0.18 | $244,068 |
Two lessons jump out. First, moving from a 1.5× lender to a 1.25× lender adds about $56,000 of capacity on the same three-year quote. Second, stretching to five years lifts the indicative loan, but only because the owner raised the cost per $1 to reflect the longer term. Had they left it at 0.18, the calculator would have shown $313,559, which no quote would support.
Four ways owners accidentally overstate their borrowing power
- Counting add-backs a lender won’t accept. Wages paid to a family member who genuinely works in the business are a real cost. Lenders will question any add-back that looks like ordinary running expenses.
- Forgetting a facility. A business credit card, an overdraft limit or a merchant cash advance still takes cash each month. Leave one out and the room figure is too high.
- Mismatching the term and the cost. As the example shows, the cost per $1 rises with the term. Ask for quotes at the term you’re testing.
- Using a record year. If last year included a one-off contract, lenders may average two years. Run the calculator on the weaker year too.
The flip side also happens. Owners who pay themselves generously through the business, or who expensed a big piece of equipment last year, often have more capacity than the raw profit suggests. A good accountant’s add-back schedule is worth its weight here.
Unsure which lenders would use a 1.25× test rather than 1.5×? Send us the profit and debt figures and a specialist can tell you; asking doesn’t trigger a credit check.
How this links to DSCR, repayments and security
This calculator works backwards from cover to a loan size. If you already have a loan amount and repayment in mind and just want to know whether it passes, the debt service coverage ratio calculator runs the check the other way. To turn a loan size into monthly repayments from a quote, use the business loan repayment calculator.
Profit-based capacity isn’t the only door. When trading figures fall short, lenders that secure the loan against property weigh the equity more heavily than the cover. The property equity calculator shows what a home or commercial premises could support, and our guide to secured business loans explains how that changes the assessment. For smaller amounts sized on turnover rather than profit, see the unsecured business loan calculator.
What the calculator can’t see
It doesn’t know your industry, your credit history, how long you’ve traded or whether your tax lodgements are up to date, all of which lenders weigh. It doesn’t model personal debts of directors who will guarantee the loan. And the RBA’s October 2025 Bulletin observed that some lenders have been easing serviceability benchmarks at the margin, so real-world policies move. Treat the result as your own planning ceiling, then let a lender’s assessment confirm it. If a bank’s offer came in under your number, the guide to a bank offer that comes in under your request is a good next read.
When your number is ready, put it to work
You now have something most applicants don’t: a clear idea of what your profit can carry. The next step is matching it to a lender whose cover test, term and security appetite suit your business.
Our enquiry form takes roughly a minute. Sending it won’t put an enquiry on your credit file, so asking is free of consequences. We don’t hand your file around to dozens of lenders; a specialist reads it, works out which lenders would view your figures favourably, and calls you directly. Enter the same profit, add-backs and existing repayments you used above, as precisely as possible, so the first suggestion lands close to the mark.
Frequently asked questions
What profit figure should I use?
Use net profit before tax from your most recent full-year financial statements, the same figure your accountant prepares for the tax return. If the current year is tracking very differently, run the calculator twice: once with last year's accounts and once with year-to-date figures annualised.
What can I count as an add-back?
Depreciation and amortisation, interest on loans that the new facility will pay out, and genuine one-off costs such as a legal dispute or a relocation. Lenders accept add-backs they can see in your accounts and that won't recur. Ask your accountant to list them before you apply.
What cover ratio do lenders want?
There's no single number. Many banks look for earnings to cover repayments by a comfortable margin, while some non-bank and secured lenders accept tighter cover if there's property or a strong track record. Testing 1.25× and 1.5× gives a sensible range.
Why does a longer term give a bigger loan?
Because the same yearly repayment runs for more years. But a longer term also costs more in total, so increase the cost per $1 figure when you lengthen the term. Leaving it unchanged will make longer terms look better than they are.
My figures say I can borrow more than the bank offered. Why?
Banks add their own buffers, look at personal debts and living costs for guarantors, and may cap lending by security or industry. This calculator is a profit-based ceiling, not a lender's full assessment.