“I know I need funding, but I don’t know how much I can realistically borrow or repay. How do I calculate this without putting my business at risk?”
Solution (Accounting Service):
An accountant calculates your true debt capacity using three key metrics before you approach any lender.
The three affordability checks:
| Metric | Formula | Healthy Range | What It Tells You |
|---|---|---|---|
| Debt Service Coverage Ratio (DSCR) | Net operating income ÷ Total debt payments | Above 1.25 | Can you cover loan payments from profits? |
| Loan-to-Value (LTV) | Loan amount ÷ Asset value | Below 80% | How much collateral is at risk? |
| Fixed Charge Coverage Ratio (FCCR) | EBITDA ÷ (Interest + Lease + Principal payments) | Above 1.2 | Can you cover all fixed obligations? |
Example calculation:
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Your business makes £100,000 net operating income per year.
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A loan with £80,000 annual repayments = DSCR of 1.25 (acceptable).
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A loan with £90,000 annual repayments = DSCR of 1.11 (too risky).
Client solution: Your accountant prepares a loan affordability model before you apply. We stress-test the loan against a 20% drop in revenue and a 3% rise in interest rates. You receive a maximum safe loan amount and a monthly payment you can actually sustain. Typical fee: £400–£1,000.
Client solution: Your accountant requests full loan documents and calculates the true APR using a standardised formula. We present a side-by-side comparison of up to five offers, ranked from cheapest to most expensive. We also flag any hidden penalties before you sign. Typical fee: £300–£700 per comparison.
- Ideal for small businesses or startups
- Monthly/Quarterly strategy sessions
- Comprehensive consulting services
- Designed for established businesses
- Full range of consulting services
- Priority email and phone support
How does a business loan affect my taxes and financial statements?
Client solution: Your accountant sets up the loan in your accounting software (Xero, QuickBooks, or Sage) with the correct amortisation schedule. We also prepare a loan covenant tracking sheet so you never accidentally breach lender requirements (e.g., maintaining a minimum current ratio). Typical fee: £200–£500 for setup + monthly compliance.
Thinking about a business loan? Don’t sign anything before you know the true cost. Book a loan assessment with our accountancy team. We’ll calculate your affordable borrowing limit, compare offers honestly, and set up the loan correctly on your books.
