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Debt-to-Income Ratio (DTI)

Debt-to-Income Ratio (DTI) compares your total monthly debt repayments to your gross monthly income. It gives lenders a quick snapshot of how stretched you are before taking on extra credit.

For Australian business owners and directors, DTI is usually assessed alongside business cash flow when applying for Business Loans, Working Capital Loans, a Business Line of Credit or Vehicle Finance.

Why DTI Matters in Lending

Lenders don’t just look at how much you want to borrow – they also look at how much you already repay each month. DTI helps lenders:

  • check whether your existing personal and business debts are already high relative to your income
  • decide if you can safely take on an extra loan, lease or line of credit
  • compare applications from different borrowers using a consistent metric
  • spot riskier situations such as multiple short-term loans or stacked facilities
  • support responsible lending decisions alongside cash flow analysis and bank statement reviews

A lower DTI generally suggests more capacity to take on additional commitments, especially when your business has stable, predictable income.

How Debt-to-Income Ratio Is Calculated

DTI is usually calculated using the formula:

DTI = (Total monthly debt repayments ÷ Gross monthly income) × 100

  • Total monthly debt repayments can include home loans, personal loans, credit cards (assessed at a percentage of the limit), car and equipment finance, personal guarantees on business loans and buy now pay later commitments.
  • Gross monthly income is your income before tax – salary, drawings, business profits and other regular income sources.

Example: If your total monthly repayments are $3,000 and your gross monthly income is $10,000, your DTI is 30%. Lenders will then look at this alongside your business turnover, seasonality and structure (for example, sole trader, Pty Ltd company or Trust).

What Is a “Good” DTI and How Can You Improve It?

There’s no single magic number, and each lender has its own policy. Broadly, lower DTIs are viewed as safer, especially when your business has consistent cash flow and clean bank statements.

To improve your DTI before applying:

  • pay down or close unused credit cards and buy now pay later facilities
  • refinance high-cost debts into a better structured low doc cashflow loan where appropriate
  • avoid stacking multiple short-term facilities and instead use a well-planned cashflow system (Working Capital Loan + Line of Credit + Invoice Finance)
  • keep your accounts in order and follow steps similar to the Rebuilder Credit Roadmap

A broker can help you model different scenarios and choose products that keep your total repayments in a comfortable range.

For general education about managing debt and repayments, you can also refer to ASIC’s MoneySmart guidance at moneysmart.gov.au.

This glossary entry is general information only and does not take into account your objectives, financial situation or needs. Always seek personalised advice before making credit decisions.

Is DTI the only thing lenders look at?
No. DTI is just one input. Lenders also look at your business financials, bank statements, security position, industry risk and whether a new facility (for example a Working Capital Loan) will improve or worsen your overall cash flow.
Do business lenders always calculate DTI the same way?
No. Each lender has its own credit policy. Some place more weight on business serviceability; others look closely at the personal DTI of directors or Beneficial Owners giving guarantees.
Does my business structure change how DTI is assessed?
Yes. Sole traders and director-guarantors in a Pty Ltd or Trading Trust structure are often assessed using both personal and business income. Lenders want to see the full picture.
Can I still get finance if my DTI looks high?
Potentially, yes. A broker may be able to restructure your debts, use Invoice Finance or a Business Line of Credit instead of stacking term loans, or stage applications to bring your DTI down first.
How can a broker help with my DTI?
A broker can calculate your current DTI, workshop different structures, and connect you to lenders who are more flexible for your profile – for example those comfortable with Low Doc Asset Finance or non-bank low doc options.