How much should a business borrow? — Answers

2 min read

The needStart here

+ small bufferNot the max

AffordableTest the payment

How to work it out

Start from the purpose: the exact cost of the equipment, the size of the cash gap, the value of the order you are funding. Add a sensible buffer for overruns — often 10–15% — but resist borrowing the largest sum on offer. More debt means larger repayments and more interest, without making the business any safer. Model different amounts with the affordability calculator.

What strengthens the decision

Check the repayment fits your cash flow in a normal month and a slow one — a forecast shows this quickly. Confirm the return beats the cost with the return-on-borrowing calculator. For a fluctuating need, a revolving facility sized to the peak may serve better than a large fixed loan, because you only pay for what you draw.

What it means for you

Credicorp lends to your company, not to you personally, and takes no personal guarantee. See business loans or apply online.

Frequently asked questions

Is it safer to borrow more than I need?

No. A larger loan means higher repayments and more interest for no benefit. Borrow to the real need plus a small buffer, and keep a facility in reserve for genuine surprises instead of over-borrowing up front.

How do I know the repayment is affordable?

Run it against your cash-flow forecast in both a good and a lean month. If the payment still leaves comfortable headroom in the lean month, it is affordable. If it only works in a good month, borrow less.