How does a lender check affordability on my

2 min read

Cash flowVs repayments

DSCRA common measure

HeadroomNot knife-edge

Existing debtCounted in

What affordability really means

The lender's central question is whether your business generates enough spare cash, after its normal costs and existing commitments, to meet the new repayments comfortably. They read this from your bank data and accounts, looking for consistent surplus rather than a one-off good month.

The ratios lenders use

A common tool is the debt service coverage ratio (DSCR) — cash available to service debt divided by the debt repayments. A ratio comfortably above one shows headroom; close to one signals strain. Lenders also look at interest cover and gearing. The DSCR guide and affordability guide explain the maths, and the DSCR tool lets you test it.

Passing the check

To pass comfortably, keep existing debt manageable, show steady surplus in the account, and borrow an amount that leaves real headroom — the offer-sizing answer covers this. Run your figures through the affordability calculator before you apply, so you know you clear the bar the lender will set.

Frequently asked questions

What DSCR do lenders want to see?

It varies, but many look for a debt service coverage ratio comfortably above one — often around 1.25 or higher — so there is a cushion above the bare minimum. The exact threshold depends on the lender and the risk.

Can I fail affordability even if I am profitable?

Yes — profit on paper differs from cash available to service debt. Heavy existing commitments, slow-paying customers or tied-up cash can mean a profitable company still lacks the free cash flow the repayments need.