Understanding Affordability, Cash Flow, and Smart Borrowing for UK SMEs
When you’re running a business, accessing finance at the right time can unlock growth, ease pressure, or smooth out cash flow gaps. But one of the biggest questions we hear at Fenbridge Finance is:
“How much should I borrow — and how do I know what I can afford?”
It’s a smart question to ask.
Whether you’re applying for an unsecured loan, asset finance, or invoice funding, knowing what your business can realistically repay each month is key. Borrowing too much can strain your operations. Borrowing too little might leave you stuck in place. Here’s how to get the balance right.
What Lenders Look For
Before offering a loan, lenders assess your business’s ability to repay. The most common factors they check are:
- Monthly cash flow: Do you bring in enough revenue to cover the loan repayments plus your regular expenses?
- Debt Service Coverage Ratio (DSCR): This tells lenders how comfortably you can cover your debt repayments. A DSCR of 1.25 means you earn 25% more than your repayment costs.
- Trading history: How long have you been trading, and are your financials stable or growing?
- Existing debts: Will this loan tip your business into being over-leveraged?
This is why we always start with a soft look at your affordability — no obligations, no credit impact.
Common Mistakes to Avoid
We’ve seen it all. Here are a few patterns that can hurt a business:
- Borrowing too much too soon: A big loan might feel like security, but if the repayments are too high, it can actually slow your growth by draining cash needed elsewhere.
- Borrowing too little: On the flip side, underestimating how much capital you need can force you to seek additional funding too soon — sometimes at less favourable rates.
- Not planning for repayment dips: What happens if you hit a quiet trading month? Always build in a buffer when assessing affordability.
How to Work Out What You Can Afford
Here’s a simple rule of thumb:
💡 Try to keep total monthly debt repayments under 20–25% of your net monthly profit (after core business expenses).
You should also ask:
- How predictable is my revenue each month?
- Are my clients consistent payers, or do I deal with late invoices?
- Will this loan be used to generate more income — or is it just plugging a gap?
At Fenbridge, we can help model different scenarios — completely free — to find the right balance.
How Fenbridge Can Help
We specialise in tailored business finance, not one-size-fits-all solutions. Here’s what we offer:
- ✅ Soft checks only (no impact on your credit score)
- ✅ Access to over 50 lenders across the UK
- ✅ Honest advice on what fits your business — not just what earns us commission
- ✅ Clear breakdowns of monthly repayment estimates
- ✅ No upfront fees
Whether you’re growing, pivoting, or just need breathing space, we’re here to help you borrow smart — not just borrow more.
Final Thoughts
Understanding what you can afford to borrow isn’t just about what a lender will approve — it’s about what your business can handle comfortably.
If you’d like to explore options or run the numbers together, feel free to get in touch. It’s completely free and there’s no obligation.
📧 info@fenbridgefinance.co.uk
📞 0330 043 0681