How Much Could My Client Borrow?
Borrowing capacity depends on what supports the facility: cash flow, invoices, assets, property or a combination.
There is no single borrowing calculation
Two lenders can review the same business and reach different conclusions because they are assessing different sources of repayment, security and risk. The useful starting point is not a headline multiple. It is understanding which part of the business can support the borrowing.
Four common lenses
| Assessment lens | What drives capacity |
|---|---|
| Cash flow | Sustainable profit or EBITDA, free cash flow, debt service, existing commitments and resilience under downside assumptions. |
| Receivables | Eligible unpaid invoices, customer quality, concentration, dilution, contractual terms and collectability. |
| Assets | Asset type, age, value, useful life, ownership and likely resale market. |
| Property | Market value, income, loan-to-value, interest cover, development costs and the proposed exit. |
A simple receivables example
A B2B company has an eligible debtor book of £800,000. If a facility made up to 85% available before reserves and deductions, the gross availability would be £680,000. The usable figure could be lower after concentration limits, disputed debts, overdue invoices, existing borrowing and fees are considered.
This is why a percentage of the debtor ledger should not be presented as guaranteed cash availability.
A simple cash-flow example
A business producing £750,000 of maintainable EBITDA may appear able to support meaningful borrowing. However, the lender will also examine tax, capital expenditure, working-capital movements, existing repayments and the amount of cash left after debt service. A multiple of EBITDA is only the beginning of the analysis.
Questions to test before quoting a number
- What is the reliable repayment source?
- Which earnings adjustments are genuinely maintainable?
- What existing facilities and security already exist?
- How seasonal is the business?
- What happens if growth is slower, margins fall or customers pay later?
- Is the borrowing requirement temporary, revolving or permanent?
Shadowfax view
Funding calculators and comparison tools
Use the figures as an initial indication, then discuss the client's circumstances before relying on a particular funding route.
Funding Calculators
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Compare quoted borrowing costs on a more consistent basis, including flat-rate or factor-rate facilities.
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This guide is for general information only. Funding availability and terms depend on the circumstances of the applicant, the facility and the lender's assessment. Shadowfax Funding Solutions Limited is authorised and regulated by the Financial Conduct Authority under Firm Reference Number 937211 and is a member of the NACFB under membership number 28659.