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DSCR = net operating income ÷ total debt service. Lenders typically look for 1.25 or higher.
Cover barely above 1.0
If your cover ratio sits just above 1.0, every pound of cash is spoken for and there is no cushion. It is the clearest red flag that the loan is at or beyond your comfortable limit. Aim to keep cover at 1.25 or more — see headroom.
A plan that only works at peak
If the repayment fits only when trading is strong, a normal or slow month will break it. Affordability must hold in your typical and quiet months, not just your best. This is especially true for seasonal businesses.
Borrowing to service borrowing
Using one facility to make payments on another is a serious warning. It signals the total debt has outrun the cash flow, and it compounds quickly. If you find yourself here, stop adding debt and look at restructuring instead.
Slipping toward late payments
Regularly paying suppliers or finance a few days late to manage cash is an early sign of strain — and it damages your credit score. Treat it as a prompt to reassess affordability, not a workable normal.
Re-test before it bites
Use the calculator to check your cover honestly and resize if any flag is showing.
Credicorp lends to your company, not to you personally, and takes no personal guarantee. See indicative terms on business loans, or apply online in minutes.
Frequently asked questions
What are the signs a business loan is too much?
A cover ratio barely above 1.0, a repayment that only fits in good months, borrowing to service other borrowing, and regularly paying suppliers or finance late. Any of these signals the loan is beyond comfort.
What cover ratio is a warning sign?
Cover close to 1.0 means every pound of cash is committed, leaving no cushion for a slow month. It is a clear red flag — aim to keep cover at 1.25 or higher after taking any new loan.
Is paying suppliers late a problem?
Yes — it is an early sign of cash strain and it damages your credit score, since suppliers may report it. Treat regular late payment as a prompt to reassess affordability, not a sustainable habit.
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Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.