Borrowing capacity by turnover calculator

What this calculator does

This tool estimates the size of facility your trading could realistically support. Rather than asking how much you'd like, it asks how much your business actually generates and works back to a sensible borrowing figure. You enter your monthly turnover, your net profit margin and a target debt service coverage ratio (DSCR), and it returns an indicative loan amount that your cash flow could comfortably carry.

It mirrors, in plain pounds, the test a lender applies: not "will they lend it" but "can the business service it". It's built for UK limited companies sizing a business loan or credit facility before they apply, where affordability rests on the company's trading rather than on any director personally.

How to use it

Three inputs, all taken from real trading:

1. Monthly turnover — your average monthly sales, net of VAT. If your trade is seasonal, use a typical month rather than your best.
2. Net profit margin — net profit as a percentage of turnover, from your management accounts. This converts turnover into the cash actually available to service debt.
3. Target DSCR — the cushion between your spare cash and the repayment. 1.25 is a common, prudent default; higher is safer, lower is riskier.

The result is an indicative facility size. Treat it as the upper sensible bound, then borrow what you actually need rather than the maximum the figure allows.

How to read the result

The headline number is an indicative supportable facility — roughly the borrowing your current trading could service while keeping the safety margin you chose. It's a ceiling for sober planning, not a quote and not a target to fill.

The DSCR is the lever that moves it most. At a DSCR of 1.25, every £1 of repayment is backed by £1.25 of available cash — a 25% buffer for a quiet month or a late payer. Choosing a higher DSCR shrinks the indicative facility but makes the borrowing more resilient; a lower one flatters the number but removes your room for error. Sensible borrowers size to a comfortable DSCR and leave headroom rather than stretching to the figure a thin ratio would permit.

The formula in plain English

The chain is:

Monthly net profit = monthly turnover × net margin %

Affordable monthly repayment = monthly net profit ÷ target DSCR

That affordable repayment is then translated into a facility size over a typical term and rate. So a business with £60,000 monthly turnover at a 10% net margin generates £6,000 of monthly profit; at a 1.25 DSCR it could prudently service about £4,800 a month of repayments, which over a one-year term points to a facility in the low-to-mid five figures. The principle is that turnover alone tells a lender nothing — it's the profit on that turnover, kept comfortably ahead of the repayment, that supports borrowing.

Worked example

A trade-supplies company turns over £80,000 a month at a net margin of 8%, and wants to keep a DSCR of 1.25.

Monthly net profit = £80,000 × 8% = £6,400. Affordable repayment = £6,400 ÷ 1.25 = £5,120 a month. Over a 12-month term that supports an indicative facility of roughly £55,000–£60,000 before interest. Notice how sensitive this is to margin: at a 4% margin the same turnover would halve the supportable figure. Turnover is the headline; margin is what does the work. These figures are illustrative, not a Credicorp offer.

Limitations to keep in mind

This is a sizing sketch, not an underwriting decision. A real assessment looks at your filed accounts, bank statements, existing commitments, sector and trading history — not three numbers. The indicative figure assumes your stated margin is reliable and your turnover recurring; a one-off bumper month or an optimistic margin will overstate it.

It also sizes what you could service, not what you should borrow. Pair it with the affordability calculator to test the repayment against your actual monthly cash, and the true cost of borrowing calculator to understand the price. This is general information to aid planning, not financial advice, and any facility depends on assessment.