The question lenders actually answer

Owners ask how much can I get. Lenders ask a different question: how large a payment can this business carry in a bad month? Every sizing formula is a version of that. Understand the math and you can estimate your ceiling before any application, and more importantly, you can see which lever to pull to raise it.

The two sizing methods

Revenue multiples

Faster lenders size from deposits: commonly somewhere between 50 and 150 percent of average monthly revenue for short-term facilities, and roughly 10 to 30 percent of annual revenue for term loans. A business depositing 80,000 a month might see short-term offers in the 40,000 to 120,000 range from this method alone.

Debt service coverage

Banks and SBA lenders work from cash flow. They compute your annual cash available for debt payments and require it to exceed the proposed payments by a cushion, typically a debt service coverage ratio of 1.15 to 1.35. If your business clears 90,000 a year after expenses and the lender wants 1.25 coverage, it will approve payments up to about 72,000 a year, and the loan size follows from the term and rate. This is why longer terms unlock larger amounts: the same annual payment capacity stretches over more years.

What moves the number up or down

  • Revenue consistency. Lenders size to your weaker months. Two businesses with the same annual revenue get different ceilings if one swings 40 percent season to season.
  • Existing debt. Every current payment subtracts directly from capacity. Paying off a small expensive facility before applying can raise your ceiling by more than its balance.
  • Time in business. Under two years caps both the lender pool and the multiples they will apply.
  • Credit. Score tiers change the rate, and the rate changes how much loan a given payment supports. See what credit score you need.
  • Collateral. Secured requests can exceed cash-flow math because the asset backstops the lender.
  • Industry. Volatile sectors get conservative multiples; steady ones get the benefit of the doubt.

Rough examples by revenue level

  • 250,000 annual revenue: term loans commonly in the 25,000 to 75,000 range; lines of credit 15,000 to 50,000.
  • 1 million annual revenue: term loans roughly 100,000 to 300,000; lines 50,000 to 200,000; SBA amounts higher with strong financials.
  • 5 million annual revenue: bank and SBA facilities from 500,000 into the millions, driven almost entirely by margins and coverage rather than revenue itself.

Treat these as orientation, not quotes. Margins, debt load, and documentation move every range substantially in both directions.

Borrow what the plan needs, not what the ceiling allows

Qualifying for a number is not a reason to take it. Interest on unused capital is pure cost, and a maxed facility leaves nothing for the surprise that arrives mid-project. Size the request from a specific plan, and pressure-test the payment against your slowest recent quarter, a 13-week cash forecast makes that test concrete. The full preparation sequence is in our step-by-step loan guide.

A worked example

Suppose a distributor runs 1.2 million in annual revenue with 130,000 of true annual cash flow after expenses, and currently pays 30,000 a year on an equipment note. A bank requiring 1.25 coverage will allow total annual debt payments of about 104,000. Subtract the existing 30,000 and the business can support roughly 74,000 a year in new payments. On a five-year term at prevailing rates, that supports a loan in the neighborhood of 300,000; on a ten-year SBA structure, meaningfully more. Now the levers are visible: retire the equipment note and the ceiling jumps; take a longer term and it jumps again; let margins slip and it falls. Run this same arithmetic on your own numbers before any lender does.

Frequently asked questions

How much can I borrow with six months in business?

Expect modest numbers: starter facilities and revenue-based options sized well below the multiples above, or equipment financing where the asset does the qualifying. The ceilings rise sharply at the one- and two-year marks.

Does asking for less improve approval odds?

Often, yes. A request comfortably inside your coverage math approves faster and prices better than one at the edge. Some lenders also counter high requests with smaller approvals, which is a signal worth heeding.

Can I combine facilities to borrow more?

Yes, and stacking a term loan for a project with a line for operating rhythm is healthy. Stacking multiple short-term products on the same revenue is not; every lender after the first sees the prior payments and sizes you down.