For unsecured working capital, many small businesses qualify for about one to three months of revenue, or roughly 8% to 25% of annual revenue. Lenders set the exact amount with three tests: your monthly deposits, the cash flow left to cover a new payment, and the collateral behind the loan. The lowest result usually wins.
This guide walks through each test with worked arithmetic, using one hypothetical business throughout, so you can plug in your own numbers.
What determines how much a business can borrow?
Lenders size a loan with one or more of these methods, depending on the product:
| Method | Question it answers | Used mostly by |
|---|---|---|
| Revenue-based | How much does the business bring in each month? | Online and alternative lenders, lines of credit, short-term loans |
| Cash flow (DSCR) | Can the business afford the payment after existing obligations? | Banks, SBA lenders, larger term loans |
| Collateral-based | What is the pledged asset worth? | Equipment financing, factoring, AR financing, mortgages, HELOCs |
Many lenders run more than one test and offer the smallest result. That is why two businesses with identical revenue can get very different offers.
Our example: a hypothetical HVAC contractor with $1.2 million in annual revenue, average monthly deposits of $100,000, about $180,000 a year in cash available for debt payments (roughly, earnings before interest, taxes, depreciation, and amortization), and an existing truck loan costing $2,500 a month, or $30,000 a year.
How much can you borrow based on revenue?
Revenue-based lenders look at average monthly deposits over the last 3 to 6 months. A common rule of thumb in this part of the market is an offer somewhere between one and three months of average deposits, which works out to about 8% to 25% of annual revenue. Where you land inside that range depends on credit, time in business, consistency of deposits, and existing debt.
For the HVAC contractor:
| Multiple of monthly deposits | Estimated amount |
|---|---|
| 1× | $100,000 |
| 1.5× | $150,000 |
| 2× | $200,000 |
| 3× | $300,000 |
Treat these as ranges to plan around, not promises. A business already carrying short-term advances will usually be sized lower, because part of its deposits is already committed.
What if your revenue is seasonal?
Lenders average whatever months they see, so timing matters. Say a hypothetical pool service company deposits $30,000 a month from May through September and $10,000 a month the rest of the year. Annual revenue is (5 × $30,000) + (7 × $10,000) = $220,000, an average of about $18,300 a month.
| Statements submitted | Average monthly deposits | 1× to 2× range |
|---|---|---|
| June to September (peak) | $30,000 | $30,000 to $60,000 |
| November to February (off-season) | $10,000 | $10,000 to $20,000 |
| Full 12 months | about $18,300 | about $18,300 to $36,700 |
Submitting a full year of statements, or applying just after peak season, gives the lender the truest picture. Some lenders will still size on the weaker months, which is one reason seasonal businesses often do better with a line of credit set up before the slow season than with a lump sum requested during it.
How does debt service coverage limit your loan amount?
Cash flow lenders start from what the business can afford to pay, then work backward to a loan amount. The key number is the debt service coverage ratio (DSCR): annual cash available for debt payments divided by annual debt payments.
Conventional lenders commonly require a DSCR of around 1.25. For SBA 7(a) Small Loans ($350,000 or less), the SBA set a floor of 1.10 effective March 1, 2026.
Here is the math for the HVAC contractor at a 1.25 requirement:
- Maximum total annual debt payments: $180,000 ÷ 1.25 = $144,000
- Subtract existing debt: $144,000 − $30,000 = $114,000 a year available for the new loan
- Monthly: $114,000 ÷ 12 = $9,500 a month
Now convert $9,500 a month into a loan amount. The term and rate matter as much as the payment. Using hypothetical rates for illustration only:
| Term | Hypothetical rate | Loan amount $9,500/month supports |
|---|---|---|
| 5 years | 12% | about $427,000 |
| 7 years | 10% | about $572,000 |
| 10 years | 11% | about $690,000 |
The same monthly payment supports a loan 60% larger over ten years than over five. That is why longer-term products, like SBA loans with terms up to 10 years for working capital and 25 years for real estate, can fund bigger amounts from the same cash flow.
What if the DSCR requirement is lower?
At a 1.10 ratio, the contractor's maximum debt payments rise to $180,000 ÷ 1.10 = $163,636 a year, leaving $133,636 for a new loan. But the 1.10 floor applies only to 7(a) Small Loans of $350,000 or less. The ratio changes the ceiling, and the program's loan cap still applies on top of it.
How much can you borrow against collateral?
Secured products size the loan from the asset. Each asset class has its own typical advance:
| Product | Typical advance | Example |
|---|---|---|
| Equipment financing | Up to 100% of equipment cost | $85,000 excavator → up to $85,000 |
| Factoring | Up to 90% of invoice value | $200,000 in invoices → up to $180,000 |
| AR financing | 70% to 90% of eligible receivables | $300,000 eligible × 80% → $240,000 |
| Commercial mortgage | 75% to 90% of property value (10% to 25% down) | $1,000,000 building → $750,000 to $900,000 |
| HELOC | Up to 80% to 90% of home value, minus existing mortgage | See below |
The HELOC math, with hypothetical numbers: a home worth $600,000 at an 85% limit supports $510,000 in total mortgage debt. Subtract a $350,000 first mortgage and the available line is $160,000.
"Eligible" matters for receivables. Lenders typically exclude invoices that are too old or owed by weak customers, so $400,000 on the books might be $300,000 eligible.
Which number do lenders actually use?
Put the three tests side by side for the HVAC contractor:
| Test | Result |
|---|---|
| Revenue-based (1× to 3× monthly deposits) | $100,000 to $300,000 |
| Cash flow at 1.25 DSCR, 5-year term | about $427,000 |
| Cash flow at 1.25 DSCR, 10-year term | about $690,000 |
| Collateral (a new $85,000 excavator) | up to $85,000 for that purchase |
A short-term unsecured lender would likely offer something in the revenue-based range. A bank or SBA lender underwriting on cash flow could go higher, but would want the documentation and time that comes with it. The equipment purchase can be financed separately on its own collateral.
Each product also has its own range. Through Sagamore, a line of credit runs $5K to $500K, a term loan $10K to $2M, equipment financing $10K to $5M, and SBA loans $50K to $5M. At the program level, as of 2026, SBA 7(a) loans max out at $5 million, SBA Express at $500,000, and since July 4, 2026, a business can combine 7(a) and 504 loans for up to $10 million in total.
How can you qualify for a larger loan?
Every lever maps back to one of the three tests:
- Raise the cash flow number. Clean up your books so the P&L shows add-backs clearly, such as one-time expenses and depreciation.
- Reduce existing debt. Paying off the $2,500 truck loan would free $30,000 a year. At a 1.25 DSCR on a 10-year term at the same hypothetical 11%, that adds roughly $180,000 of borrowing capacity.
- Choose a longer term. As the table shows, term length can change capacity by more than half.
- Pledge collateral. Secured products lend against the asset, which can exceed what cash flow alone supports.
- Keep deposits consistent. Revenue-based lenders reward steady months and discount volatile ones.
- Improve credit. Better scores earn longer terms and lower rates, which raise capacity indirectly.
How do you find out your actual number?
Estimates get you close. The real number comes from lenders reading your statements. Sagamore's lending partners start with businesses that have 4+ months in business, $5,000+ in monthly deposits, and a 500+ credit score. If you clear those, apply once and compare the amounts different lenders offer against the math above.
