Your business needs a business loan to grow but you are not sure how much your business can get. Here is a simple way to estimate your potential loan amount.

1. How Much Can You Get In
A Business Loan?
By Business Money Today
www.businessmoneytoday.com

2. It Takes Money To Make Money
► You know your business needs capital to
grow.
► You even know how much you need.
► But, do you know how much you can
actually get?
www.businessmoneytoday.com

3. What Lenders Look For First
► When seeking a small business loan; banks
always start with your cash flow.
► Cash flow is you will use to payback the
loan.
► And, banks and other lenders want to be
paid back.
► Before collateral, character, or those other
Cs, they look at cash flow first!
www.businessmoneytoday.com

4. Business Loan Underwriting
► In analyzing a business’s cash flow, a
lender wants to see true cash flow:
 Take your business’s net income (after all expenses – operating
and other).
 Add back any non-cash items like depreciation or non-reoccurring
items like one-time charges – any item that does not effect the cash
flow from daily operations of the business.
► It is this figure (this cash flow number) used
to determine your ability to service the
requested business loan.
www.businessmoneytoday.com

5. Side Note:
Know that lenders will use past
business results for these calculations
– it is assumed that if your business
could have serviced the loan in the
past then there is a strong likelihood
that your business could do the same
going forward

6. Finding Your Business Loan Amount
You request a business loan of $100,000 for five years - your monthly
loan payment would be $2,125.
If your business has cash flow enough to cover this payment (as
calculated above) then your business has a chance of getting approved
for that loan.
If you understand your lender’s approval process, then you can work this
process backwards to calculate a loan amount (the unknown) based on
your cash flow (something you do know and can calculate).
Simply calculate your business’s true cash flow as shown above by
adding back non-cash items to your net income.
Then, take that cash flow figure, working backwards, and determine the
maximum loan amount your business will qualify for based on that figure.
www.businessmoneytoday.com

7. Ways To Calculate Loan Amount
1) Use a spreadsheet program like MS Excel. You use the payment
function to calculate a fictitious loan using any loan amount and your
desired interest rate and loan term. Then, using the program’s goal
seeking function, you can estimate the loan amount based on your
cash flow figure (leaving the rate and term unchanged).
2) Use a financial calculator and input your desired rate and term and then
use your cash flow figure as the reoccurring payments. Then simply
let it (the calculator) calculate the Present Value (PV) of those
payments.
This PV is your estimated loan amount.
3) Trail and Error. Use an online loan calculator (like this
business loan calculator) and keep changing the loan amount until the
resulting payment matches your cash flow figure. Increase the loan
amount for larger cash flow numbers or lower the loan amount for
smaller cash flow numbers.
www.businessmoneytoday.com

8. Examples:
Let’s assume an interest rate of 10% and a loan term
of three years or 36 months.
1) If your cash flow is $2,000 per month, then your maximum
loan amount would be $62,000.
2) If your cash flow is $5,000 per month, then your maximum
loan amount would be $155,000.
3) If your cash flow is $10,000 per month, then your maximum
loan amount would be $310,000.
www.businessmoneytoday.com

9. Conclusion:
► While this back of the envelope calculation can
help you find out how much you can qualify for, it
does not guarantee your approval.
► But, by knowing how lenders use cash flow to
determine who qualifies, then you can know about
how much you can get before starting the process
– saving you time and embarrassment.
► If you can qualify for the business loan amount
you want, great. If not, then you have to either
increase your cash flow or find other ways.
www.businessmoneytoday.com