Borrowing decision checklist

How to use this checklist

Borrowing is a tool, not a default. Before you apply for anything, work through the five checks below and write a one-line answer to each. If you cannot answer one clearly, that is the part to resolve first. None of this is advice on your specific accounts — it is a structure for thinking it through, ideally alongside your accountant.

1. Is the purpose clear and time-bound?

Good borrowing pays for something specific that earns or saves money inside the life of the finance — stock for a known peak, equipment that lifts output, bridging an invoice you will be paid. Vague purposes ("more cash") are a warning sign. Write down exactly what the money is for and when the benefit lands. See what you can use a business loan for.

2. Can the company afford the repayments?

Add the new repayment to your existing commitments and check it fits comfortably inside your monthly cash position, not just on a good month. Use the affordability calculator and read how to calculate affordability. If it only works on your best month, it does not work.

3. Do you know the total cost?

Compare offers on the total repayable amount and all fees, not the headline rate alone — see fees explained. Run competing offers through the true cost of borrowing calculator so you are comparing like for like.

4. Is the product the right shape?

A one-off, known cost suits a term loan; a recurring or unpredictable need suits a credit facility. Matching the product to the need is half the decision. See how to compare finance options.

5. Does the timing line up?

Borrow so that repayments fall when the business is generating cash, not in your quietest month. For seasonal trades especially, timing the draw and the repayment to your trading rhythm matters as much as the rate. The loan readiness checklist covers what to have ready once you decide to apply.