How much can I borrow against my business revenue?

Three sizing methods are in common use, and a lender usually applies the one their product is built around, then sanity-check against the others. The smallest answer wins.

Method one: a multiple of deposits

Common in deposit-based underwriting. The lender takes average monthly deposits over a lookback period — commonly three to twelve months — adjusts for anything that is not genuine revenue, and applies a multiple.

The adjustments matter more than owners expect. Transfers between your own accounts, loan advances, owner contributions and refunds are stripped out. Illustrative only — $92,000 of deposits in a month of which $31,000 was an internal transfer and $12,000 was a loan advance leaves $49,000 of revenue for sizing purposes.

The multiple applied is lender policy. It varies by product, by industry, by time in business and by the number of existing positions, and most funders do not publish it. Anyone quoting you a universal figure is describing their own book, not the market.

Method two: debt service coverage

This is the constraint most likely to bind, and the one you can compute yourself.

Illustrative only — the business generates $96,000 a year of cash available for debt service, calculated as net income plus depreciation plus interest. Existing annual debt service is $22,000. Suppose the lender requires coverage of 1.25.

Maximum total debt service is $96,000 ÷ 1.25 = $76,800 a year. Less the existing $22,000, that leaves $54,800 a year, or $4,566.67 a month, for the new obligation.

What that payment supports depends entirely on rate and term. At a fixed 10% nominal rate: about $215,000 over 60 months, or about $141,500 over 36 months. Same cash flow, same coverage requirement, very different loan.

Notice what that means in practice. If the answer you get is smaller than you wanted, the levers are a longer term, a lower rate, less existing debt service, or more cash flow — and only one of those is available on the afternoon you apply.

Method three: a borrowing base

On secured facilities, size is a formula against pledged assets: eligible receivables and inventory at stated advance rates. Revenue is relevant only insofar as it produces receivables. A business with $3,000,000 of revenue collected in cash at the point of sale has almost no receivables to lend against, and a business with the same revenue on 45-day terms has a substantial base. See advance rate and eligible receivable.

Change one fact and the answer collapses. If the same business collected at the point of sale rather than on terms, the receivable component would be close to zero, and the same revenue would support a small fraction of that.

What moves the answer

Existing debt service, including daily and weekly debits visible in the bank statements whether or not you listed them. Time in business. Deposit consistency and count, not just the total. Negative days and returned items. Industry. Customer concentration. Personal credit of the guarantors. Collateral. Whether the use of funds matches the term requested.

Running all three on one business

The tests disagree, and the disagreement is the useful part.

Take the coverage example above — $96,000 of cash available for debt service, $22,000 of existing debt service, a 1.25 requirement — and set it beside a deposit-based sizing on the same business. Suppose deposits average $49,000 a month after adjustments. A product sizing at a multiple of one month's adjusted revenue indicates something around $49,000. Coverage says the business can carry a payment of $4,566.67, which over 60 months at a 10% nominal rate supports about $215,000.

Those are not contradictory answers to one question. They are answers to two: how much can be repaid out of a few months of receipts, and how much can be serviced out of a year of cash flow. A business can pass one comfortably and fail the other, and the product on the table decides which test you are taking.

Where the two diverge sharply — a large deposit-based offer against thin coverage — the large number is not good news. It is a sizing built for a repayment horizon much shorter than the use you had in mind.

Do the arithmetic before the application

Compute your own cash available for debt service, list every existing obligation honestly, and calculate what payment a coverage of 1.25 would support. Then work backwards to a principal amount at a term that fits the use of funds.

You will arrive at a range. When a broker quotes a number well above it, the difference is usually explained by a shorter term, a higher cost, or a coverage standard the product does not apply — and it is worth finding out which before signing rather than after. Coverage requirements, lookback periods and advance rates all vary by institution and product, and are among the terms least often published.

When the answer is smaller than you wanted

Four levers, and they are not equally available on the afternoon you apply.

There is a fifth, and it is the one most often overlooked: split the request. A smaller facility now and a second after two quarters of demonstrated performance frequently produces more total capital than one oversized application that gets declined.