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Debt service cover ratio = cash available for debt ÷ annual repayments — a core lender affordability test.
What affordability really measures
Affordability is not about your profit on paper — it is about the cash your business actually generates and whether that cash can service the loan. The core test is the debt service cover ratio (DSCR): the cash available to pay debt divided by the annual repayments. A DSCR of 1.25 means you generate £1.25 of cash for every £1 of repayment — a comfortable cushion.
The free cash flow a lender can see
Lenders work from cash they can verify: bank statements, filed accounts and, increasingly, open-banking data. They strip out one-offs and look at the steady, repeatable cash your trading throws off. That is why a business with strong sales but chaotic bank activity can still struggle — the lender cannot see reliable cash. Tidy cash-flow records make the case for you.
Stress testing: cover when things get harder
A good lender does not just check that you can afford the loan today — it checks that you could still afford it if sales dipped or rates rose. That is why borrowing the maximum you technically qualify for is rarely wise. Leave headroom so a bad quarter does not turn a manageable repayment into a missed one.
Work out your cover
Use the calculator to enter the cash your business has available for debt and the annual repayments you are considering. Aim for a ratio of at least 1.25 before you apply — and read how to check loan affordability for the full method.
Strengthen your case, then apply
Before applying, clear obvious drags on affordability: chase overdue invoices, trim discretionary spend, and make sure your accounts are filed and up to date.
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 DSCR do lenders want to see?
Many working-capital lenders look for at least 1.25, meaning your cash comfortably exceeds the repayments. Higher is stronger; below 1.0 means the business does not generate enough cash to cover the debt as it stands.
Does affordability depend on my personal finances?
For a company loan assessed on the business, no — Credicorp lends to the company and looks at its cash flow, not your personal income. That is different from lenders who require a personal guarantee.
Can I improve affordability quickly?
Somewhat. Collecting overdue invoices and cutting non-essential outgoings lifts free cash flow. A longer loan term lowers the monthly payment and improves cover, though it raises the total interest.
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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.