Business Borrowing Capacity Calculator Australia (2026)

Business borrowing capacity is governed by Debt Service Coverage Ratio (DSCR) — the bank's measure of whether your EBITDA can comfortably cover proposed debt service. This calculator applies typical Australian SME lender DSCR requirements alongside security position to give you a realistic borrowing ceiling.

How banks size SME facilities

The standard formula:

Max debt service = EBITDA ÷ Required DSCR

Then back-solve the maximum loan amount given the rate and term:

Max loan = (Max debt service − new annual principal) ÷ rate × annuity factor

Typical DSCR requirements:

• 1.30× for stable, asset-backed businesses with predictable cash flow
• 1.50× for mid-sized SMEs
• 1.75×+ for hospitality, retail, construction, or volatile-sector businesses

The DSCR sits on top of, not instead of, security and underwriting tests. A business with DSCR 2.0× but no acceptable security still won't get approved at most banks. A business with DSCR 1.10× and a $10m commercial property might still get approved, but at a higher rate or with covenants.

What goes into the EBITDA calculation

Banks usually want adjusted EBITDA — the underlying earnings power of the business with one-offs stripped out. Common adjustments:

• Add back: one-off legal/litigation costs, insurance windfalls, restructure costs, owner's discretionary spending (where applicable)
• Strip out: one-off gains, large COVID-era subsidies, asset sale proceeds, related-party rent above market

Lenders typically use 3-year averages or the trailing 12 months, depending on the volatility of your earnings. Get your accountant to prepare a "lender pack" with normalised EBITDA before approaching banks.

Security and LVR

The security side of business lending is more nuanced than residential:

Commercial property — typical LVR 60–75% depending on property class, tenant quality, and location. Industrial often higher LVR than retail. Vacancy risk is priced in.

Residential property (used as security for business lending) — typical LVR 70–80%, similar to standard home loan. Cleaner, more liquid security, often the preferred option for SMEs without commercial real estate.

Other assets — equipment, debtors, stock — backed via specific asset finance products rather than general security.

Unsecured / cash flow — capped at 1.5–3× monthly EBITDA at premium rates from cash-flow lenders (Prospa, OnDeck, Moula). Useful for short-term working capital, expensive for longer-term needs.

When the calculator is binding vs not

The DSCR-based capacity ceiling is one of three constraints:

1. DSCR ceiling — what the calculator computes
2. Security ceiling — based on LVR against the value of acceptable security
3. Lender appetite — sector concentration, account history, governance signals

For most SMEs, the binding constraint is DSCR or security, whichever is tighter. A "$2m DSCR ceiling but $1.4m security ceiling" means the actual maximum is $1.4m. The calculator surfaces both for visibility.

Improving business borrowing capacity

In rough order of impact and time horizon:

• Resolve outstanding ATO debt — fastest single move; ATO arrears block most facilities entirely
• Improve EBITDA — pricing, operating leverage, cost reduction
• Reduce existing debt service — refinance to lower rates, extend term, consolidate facilities
• Build longer financial track record — banks reward 3-year audited financials over single-year statements
• Add security — bring more property under bank security, even cross-collateralised
• Add a guarantor — directors' guarantees are standard but a stronger guarantor can lift approval
• Switch lenders — appetites differ between majors and second-tier banks

For new business approaches, expect 4–8 weeks of underwriting and provide a complete document pack upfront: 3 years of financials + tax returns, 12 months of bank statements, debtor/creditor lists, business plan, and security details.