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Affordability

Affordability refers to a business’s ability to comfortably manage loan repayments, interest, and operational costs without negatively affecting cashflow. Lenders consider affordability when assessing applications for Low Doc Asset Finance, Working Capital Loans, and broader cashflow solutions such as the Business Cashflow System (WCL + LOC + Invoice).

Strong affordability helps you avoid the traps covered in 9 Cashflow Mistakes SMEs Make and 5 Red Flags a Business Loan is Bad, and supports long-term growth instead of constant repayment stress.

Why Affordability Matters

Affordability ensures businesses can meet repayments without jeopardising operations or credit standing. It directly impacts your Borrowing Capacity and helps lenders determine appropriate Credit Limits. Businesses in the Tradie Hub, Truckie Hub, Café Hub, and Whitecoat Hub rely on affordability assessments for safe finance decisions that don’t choke their cashflow.

How Affordability is Assessed

  • Compare income, cashflow, and operating expenses against proposed loan repayments.
  • Review trading history, bank statements, and BAS to verify financial stability.
  • Calculate debt-to-income ratios and repayment capacity.
  • Check existing commitments, card limits, and other facilities that affect cashflow.
  • Determine a maximum loan amount and repayment schedule that is comfortable for the business.

If you’re unsure how a facility will impact day-to-day cash, our Working Capital Loans 2025 guide and Business Line of Credit Guide show how different structures can improve affordability and resilience.

Related Switchboard Resources

Official info on running and funding a business: business.gov.au

How do lenders check affordability?
They review cashflow, income, expenses, trading history, BAS, and bank statements to make sure repayments are manageable alongside existing commitments.
Why is affordability important for SMEs?
It prevents overborrowing, protects cashflow, and helps the business maintain operations, pay staff, and keep suppliers happy while servicing debt.
Can affordability affect loan approval?
Yes. If projected repayments are too high relative to cashflow, lenders may reduce the loan amount, change the structure, or decline the application entirely.