How much should you borrow for your business? A simple method

“How much should I ask for?” It’s one of the trickiest questions for a first-time borrower. Ask for too much and the repayments pinch. Ask for too little and the project stalls halfway. This lesson gives you a simple, repeatable method that lands on the right number.

Why does the amount matter so much?

The amount drives almost everything else:

• the repayment you’ll make every week or month
• the total cost over the life of the loan
• the type of loan that fits (and whether security is needed)
• how comfortable the lender feels

A well-reasoned amount also makes a strong impression. It shows you’ve done your homework.

The five-step method

Step 1: Get real quotes

Start from actual prices, not a feeling. Two or three quotes for the main item give you a realistic figure and something to show a lender.

Step 2: Add the hidden extras

This is where first-timers most often come up short. Think about:

• delivery, installation or fit-out
• electrical, plumbing or building work to make it usable
• training, software or accessories
• permits or licences, if needed
• a settling-in period — the first few weeks while the new thing ramps up

Step 3: Subtract what you’ll put in

If you’re contributing savings, take that off. Putting some of your own money in reduces the loan and shows commitment. Just keep an emergency buffer in the business.

Step 4: Add a sensible buffer

A modest buffer for genuine unknowns is reasonable. A huge “just in case” isn’t. If you want a standing safety net, a separate line of credit might suit better than an oversized loan.

Step 5: Test the repayment

Use the method in can you afford the repayments: find your slowest month’s surplus and check the repayment still fits with room to spare. If it doesn’t, adjust.

An illustrative example

A small florist wants a refrigerated display and a delivery van fit-out ahead of the busy season. (Figures are illustrative.)

Item	Amount
Refrigerated display (average of 3 quotes)	$14,500
Delivery and installation	$1,200
Electrical work for a dedicated circuit	$900
Van shelving and cooling fit-out	$9,800
Signage for the van	$1,100
Subtotal	$27,500
Less: owner’s contribution	−$5,000
Plus: buffer for unknowns	$2,000
Amount to borrow	$24,500

The owner then tests repayments over two and three years against her slowest month (usually straight after winter). The three-year term fits comfortably; the two-year term would be tight in that month. She goes with a request of about $24,500 over three years. Sensible, explainable, and comfortable.

Want a hand sense-checking your number? Talk it through with a real person. There’s no credit check to ask.

What if the number is bigger than you expected?

If the total comes out higher than your cash flow can comfortably handle, you have choices:

1. Stage it. Do the essential part now and the rest later.
2. Buy second-hand or refurbished where quality allows.
3. Lengthen the term to reduce repayments (the total cost usually rises).
4. Use property security if you have it, which can support larger amounts from $20,000 to $5,000,000.
5. Increase your contribution, if it won’t leave you short.

Each has trade-offs, and what a loan costs explains how term and amount affect the total.

Common mistakes with the amount

• Rounding up by thousands “because the lender will offer less anyway”. Ask for what you need.
• Forgetting GST on quotes, if you’re not registered to claim it back, or forgetting the timing of claiming it back if you are.
• Ignoring the settling-in period. New equipment rarely earns its keep from day one.
• Borrowing for two unrelated things in one loan without a clear plan for each.
• Leaving no buffer at all, so one surprise invoice sends you back for more.

For a bigger purchase, our guide to your first big equipment purchase goes further, including the tax angle.

Quick check: can you explain your number?

Try saying it in two sentences:

“I need $24,500 to buy and install a refrigerated display and fit out our delivery van. I’m putting in $5,000 of my own, and the repayments fit comfortably even in our slowest month.”

If you can do that, you’re ready to ask.

Myths about loan size

“Lenders always cut the amount, so ask for more.” A well-reasoned request is far more convincing than an inflated one. If a lender offers less, it’s usually because of affordability or policy, not because of haggling.

“Borrowing the maximum gives me flexibility.” It also gives you bigger repayments and a bigger total cost. Flexibility is better provided by a small line of credit or a cash buffer.

“I should borrow as little as possible, whatever happens.” Too little can be worse than too much if it leaves the job half done. The aim is enough, not least.

Ready to see what your number looks like in real life?

A clear amount makes for a clear conversation. The next step is finding out how that amount could be structured for your business.

Our enquiry takes about 60 seconds, with no credit check involved. We keep your details with one person rather than sending them to a list of lenders. That person reviews your amount and purpose, suggests the loan type and term that fit, and explains everything plainly. Please enter the amount and purpose as accurately as you can; it’s the single most useful thing you can do for your first call.

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