Let the company do the borrowing
Your personal limit is tied to your salary. A company's limit is tied to its cash flow and assets, and a profitable business can often raise far more than its owner ever could alone.
A second credit file
Cash flow, not salary
Business lenders look at profit and debt service coverage, usually wanting 1.2 to 1.5 times the yearly payments. Grow profit and the limit grows with it.
Often outside your personal cap
Company debt usually isn't counted in personal income multiples. A personal guarantee can change that, and some banks ask about it anyway, so always answer honestly.
Assets carry the loan
Machines, vehicles, invoices, stock and property can all secure financing on their own, often without touching your home.
Set it up so banks take it seriously
Most rejections come down to messy paperwork, not bad businesses. Sort these out at least a year before you need the money.
- Use a limited companyAS, Ltd, LLC, GmbH, BV, SAS. Lenders prefer a separate legal entity with its own accounts, and you get limited liability as long as you don't sign it away.
- Keep company money separateA dedicated business account, no personal spending on it. Mixed accounts are the fastest way to look unbankable.
- File accounts early and properlyTwo full years of filed accounts is the magic number for most banks. Audited or accountant-prepared accounts carry more weight.
- Build business creditIn the US, get an EIN and a D-U-N-S number and use suppliers that report payments. Elsewhere, pay every invoice on time, because Dun & Bradstreet, Creditsafe and others score companies too.
- Show profit, even if it costs some taxSame trap as for the self-employed. Aggressive expensing lowers tax and also lowers what the bank thinks you can carry.
- Keep your own credit cleanSmall business lenders almost always check the owners. Your personal file still matters.
What a company can borrow
Stack a few of these and the total can get well past any personal limit.
Term loans and credit lines
The basics. A credit line you open before you need it is worth more than a loan you beg for when cash runs short.
Government guarantee schemes
The state guarantees part of the loan, so banks lend more. Think SBA 7(a) and 504 in the US, Innovasjon Norge, KfW, Bpifrance, Business Finland, British Business Bank.
Equipment and vehicle finance
Leasing or hire purchase secured on the machine itself. Approval is quick and it rarely needs extra security.
Invoice financing and factoring
Borrow against unpaid invoices, often 80 to 90% of their value. The limit grows automatically with sales.
Revenue-based financing
Repaid as a share of monthly sales. Popular with online businesses and SaaS that have steady revenue but few assets.
Commercial and investment mortgages
Buying rental property in a company is common in the UK and elsewhere. Lenders test the rent, often wanting it to cover 125 to 145% of the interest, rather than your salary.
Tips for a bigger approval
- Know your DSCR before the bank doesYearly operating profit divided by yearly loan payments. Above 1.25 and most lenders relax.
- Bring a real planWhat the money is for, what it earns back and when. A loan that pays for itself is an easy yes.
- Borrow when things look goodApply after a strong quarter, not during a dip. Banks lend to momentum.
- Build a relationshipKeep your operating account, payments and payroll at the bank you want to borrow from. They lend more to customers whose cash flow they can see.
- Negotiate the personal guaranteeAsk for a cap, a time limit, or for it to drop away once the loan is paid down to a certain level.
- Mix lendersA bank loan for the core, asset finance for equipment, invoice financing for working capital. Different lenders, different limits.
The company's money isn't yours. Taking cash out as a "loan" to yourself is restricted or taxed in most countries. In Norway it's taxed as a dividend, the UK charges a 33.75% s455 tax on unpaid director's loans, and US tax authorities can reclassify it as income. Pay yourself salary or dividends the proper way.
A personal guarantee puts your own assets on the line, so limited liability doesn't help you there. And never use a business loan for private purposes the bank didn't agree to.