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Debt service cover ratio = cash available for debt ÷ annual repayments — a core lender affordability test.
Why it differs from company lending
A sole trader is not a separate legal entity, so there is no company credit file distinct from the individual and no limited liability. Affordability blends personal and business finances, and personal liability for the debt is inherent. It is a different starting point from a company loan.
What the assessment leans on
Lenders look at your self-assessment tax returns, business bank activity and, often, personal outgoings, to judge the cash available. Clean, separated banking still helps — even without incorporation, keeping business money distinct makes the affordability picture clearer.
Cash is still the core
As with any borrower, the central question is whether reliable cash covers the repayment with room to spare. The cover ratio logic still applies, drawn from your trading cash. See checking affordability.
Should you incorporate?
Some sole traders incorporate partly to separate liability and build company credit — a decision with wider tax and admin implications worth taking advice on. See limited liability explained.
Test your cash cover
Use the calculator to check your trading cash covers the repayment before applying.
Credicorp lends to companies, not individuals, with no personal guarantee. See indicative terms on business loans, or apply online in minutes.
Frequently asked questions
How is affordability assessed for a sole trader?
It blends personal and business finances, since a sole trader is not a separate legal entity. Lenders look at self-assessment returns, business bank activity and personal outgoings to judge the cash available to repay.
Is a sole trader personally liable for a business loan?
Yes. Without the limited liability of a company, a sole trader is personally liable for business debts. This is a key difference from a company loan assessed on the business with no personal guarantee.
Does keeping separate business banking help a sole trader?
Yes. Even without incorporation, keeping business money distinct from personal makes the affordability picture clearer and the assessment easier, and supports cleaner bookkeeping.
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