Should my business borrow to grow? A director's guide

2 min read

Return > costThe core test

Real demandProven, not hoped

Size the riskDon't bet the business

Amount borrowed (£)

Total cost of finance (£)

Expected gross return from the investment (£)

Compares the expected return on what the money funds against the cost of the finance.

The test that decides it

Compare the expected return on the growth against your cost of capital. If a step clearly earns more than the finance costs, borrowing to fund it creates value. If the margin is thin or uncertain, the risk outweighs the reward. This single comparison should drive the decision.

Why growth needs funding at all

Growth counter-intuitively drains cash: more stock, more staff, more invoices to wait on before the money lands — the "growing broke" trap. A short facility funds that working-capital gap so a real opportunity is not lost for want of timing.

Judging the demand

Fund proven demand, not wishful forecasts. A confirmed contract, a channel that already converts, a product with a waiting list — these justify borrowing. A hopeful projection does not. The more evidence behind the growth, the safer the borrowing.

Sizing the risk

Borrow enough to fund the specific step, sized so repayments stay comfortable even if the growth is slower than hoped. Stage the investment where you can, and never borrow so much that a slow ramp-up threatens the core business.

Borrow to grow, deliberately

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.

Read the affordability guide and run the numbers before you commit.

Frequently asked questions

When is borrowing to grow worth it?

When the growth returns clearly more than the finance costs and the demand is proven. Then borrowing accelerates a good business. When the return is thin or the demand speculative, the risk outweighs the reward.

How much should I borrow to grow?

Enough to fund the specific step, sized so repayments stay comfortable even if growth is slower than hoped. Avoid borrowing against optimistic forecasts or stretching to the maximum.

What if the growth is slower than expected?

That is why you size the borrowing conservatively and stage the investment. A well-sized loan survives a slow ramp-up; an over-sized one turns a delay into a crisis.