Borrowing Blueprint: How Much Can You Borrow with Business Loans?

Business loans play a crucial role in the growth and success of businesses by providing financial resources for various purposes. Before applying for a business loan, it is essential to understand how much you can borrow. Several factors determine borrowing capacity, and the type of loan and specific terms need to be considered. By following specific steps and understanding loan terms and conditions, you can determine your borrowing capacity effectively.

The first step is understanding what business loans are and their significance in providing funds for business needs. Business loans are financial products offered by lenders to businesses for a specific purpose. It can be used for various purposes such as expansion, working capital, purchasing equipment, or real estate.

To determine your borrowing capacity, several factors come into play.

1. Credit Score and Your credit score and credit history play a significant role in lenders assessing your creditworthiness. A higher credit score increases your chances of being eligible for a larger loan amount.

2. Business Revenue and Cash Flow: Lenders evaluate your business’s revenue and cash flow to determine its financial stability and ability to repay the loan. Higher revenue and consistent cash flow can increase your borrowing capacity.

3. Debt-to-Income Ratio: Lenders evaluate your debt-to-income ratio, which is the ratio of your total debt obligations to your income. A lower ratio indicates a healthier financial position and a higher borrowing capacity.

4. Collateral and Personal Guarantee: Collateral is an asset that you pledge as security for the loan. Personal guarantees may also be required, which means you are personally liable for repaying the loan. The value and quality of collateral can impact your borrowing capacity.

Various types of business loans are available, such as term loans, lines of credit, equipment financing, and SBA loans. Each type has its own eligibility criteria, terms, and conditions, impacting your borrowing capacity differently.

Calculating your borrowing capacity involves evaluating specific ratios such as the loan-to-value ratio, debt-service coverage ratio, and analyzing your personal financial statement.

To determine your borrowing capacity, you need to assess your financial health, determine the purpose of the loan, research lenders and loan programs, and gather required documentation.

Understanding loan terms and conditions is crucial to make an informed decision. Factors such as interest rates, fees, repayment terms, and prepayment penalties need to be considered.

By taking into account these factors and following the necessary steps, you can determine your borrowing capacity and make informed decisions regarding business loans.

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What are Business Loans?

Business loans are funds provided to businesses for various purposes like starting a new venture, expanding operations, purchasing equipment, or managing cash flow. These loans enable businesses to access capital, allowing for growth opportunities and the achievement of objectives. Business loans can be obtained from banks, credit unions, or other financial institutions.

The amount and terms of borrowing vary based on factors such as creditworthiness, revenue, cash flow, debt-to-income ratio, and collateral value. Before applying for a loan, businesses should carefully consider their needs and evaluate their financial position. It is important for them to assess their financial health, determine the purpose of the loan, research lenders and loan programs, and gather necessary documentation. Understanding the terms and conditions of the loan, including interest rates, fees, repayment terms, and prepayment penalties, is crucial.

In a true story, a small manufacturing company acquired a business loan to invest in new machinery and expand production capacity. Through careful evaluation of their borrowing needs and comparison of different loan options, they were able to secure favorable financing that facilitated business growth and increased profitability.

Factors that Determine Borrowing Capacity

Did you know that when it comes to business loans, your borrowing capacity is determined by several key factors? In this section, we’ll uncover the secrets behind what influences the amount you can borrow. From the crucial role of your credit score and history to the impact of your business revenue and cash flow, we’ll leave no stone unturned. We’ll also take a close look at how your debt-to-income ratio factors into the equation, as well as the significance of collateral and personal guarantees. Prepare to have your borrowing potential demystified!

Credit Score and History

Your credit score and history play a crucial role in determining your eligibility for a business loan. Lenders rely on this information to assess your creditworthiness and evaluate the risk associated with lending to you. Demonstrating a good credit score and positive credit history shows your ability to responsibly manage debt and make timely payments.

Lenders take into account your credit score, which is a reflection of your creditworthiness based on your credit history. Higher credit scores indicate lower default risk and improve the likelihood of obtaining a loan. On the other hand, a poor credit score may result in higher interest rates or even loan denial.

Your credit history provides lenders with essential information about your past borrowing behavior and payment patterns. They analyze factors such as the number of credit accounts, length of credit history, and any negative marks like late payments or bankruptcies.

By consistently maintaining a strong credit score and positive credit history, you demonstrate financial responsibility and reliability to lenders. It is important to periodically review your credit report, correct any errors, and make timely payments to enhance your credit score and increase the chances of receiving favorable loan terms.

Business Revenue and Cash Flow

When analyzing the borrowing capacity for a business loan, one crucial factor is the business revenue and cash flow. This can be assessed by examining the financial statements of the business, including the income statement and cash flow statement.

Financial Statement Importance

– Income statement: Provides information about the business’s revenue and expenses, allowing lenders to assess profitability and sustainability.

– Cash flow statement: Shows how much cash is flowing into and out of the business, providing insights into liquidity and ability to meet debt obligations.

Lenders consider business revenue and cash flow to determine the capacity to repay the loan. They want assurance that the business generates enough income to cover loan payments regularly. A higher revenue and positive cash flow demonstrate the ability to manage debt effectively.

Businesses seeking loans should provide accurate and complete financial statements to lenders. This allows lenders to make an informed decision about borrowing capacity and the risk associated with the loan.

Many businesses have successfully secured loans by demonstrating strong revenue and cash flow. They have gained the trust and confidence of lenders, enabling them to secure the necessary funding for growth and expansion.

Debt-to-Income Ratio

The debt-to-income ratio is a crucial factor in applying for a business loan. It measures your debt compared to your income. Here are some key points about the debt-to-income ratio:

1. Calculate the ratio by dividing your total monthly debt payments by your gross monthly income.

2. Lenders use this ratio to assess your loan repayment ability. A lower debt-to-income ratio indicates lower risk for the lender.

3. Most lenders prefer a debt-to-income ratio of 36% or lower. This means your monthly debt payments should not exceed 36% of your gross monthly income.

4. A higher debt-to-income ratio may make it harder to qualify for a loan, as more of your income is already allocated to debt payments.

5. If your debt-to-income ratio is too high, it is recommended to pay off existing debts or increase your income before applying for a loan.

6. Include all recurring debts in the calculation, like credit card payments, student loans, and mortgage payments.

7. Lenders may have different requirements for the debt-to-income ratio depending on the type of loan.

Understanding and managing your debt-to-income ratio increases your chances of qualifying for a business loan and achieving financial success.

Collateral and Personal Guarantee

Collateral and personal guarantee are crucial considerations when seeking a business loan. Lenders typically require borrowers to offer collateral, which serves as a valuable asset subject to seizure and sale in the event of loan default. Examples of commonly accepted collateral include real estate, vehicles, equipment, or accounts receivable. Lenders may request a personal guarantee, whereby the borrower personally assures the repayment of the loan and places their personal assets at risk. The inclusion of a personal guarantee provides assurance to the lender regarding loan repayment.

It is of utmost importance to thoroughly analyze the consequences of collateral and personal guarantee prior to availing a business loan. While collateral can secure favorable loan terms and lower interest rates, it also entails the possibility of losing valuable assets. On the other hand, personal guarantees safeguard the lender’s interests but expose the borrower’s personal finances and assets to potential jeopardy.

Types of Business Loans

Looking to fuel your business growth? Let’s dive into the world of business loans and explore the different types available. From term loans to lines of credit, equipment financing to SBA loans, each sub-section has its own unique features and benefits. Get ready to discover how these loan options can give your business the boost it needs. No more wondering how much you can borrow – let’s uncover the borrowing blueprint together!

Term Loans

Term loans, also known as business loans, are a widely used financing option for businesses. These loans provide borrowers with a lump sum of money, which is then repaid over a fixed period of time, along with interest. Term loans are typically utilized for long-term investments, such as purchasing equipment, expanding operations, or financing properties.

When considering a term loan, it is crucial to take into account the interest rate. Different lenders offer varying rates, so it is recommended to shop around and compare options in order to secure the most favorable deal. The interest rate has a significant impact on the overall cost of the loan, making it essential to find a competitive rate.

Another important factor to consider is the repayment term. Term loans come with varying repayment periods, usually ranging from one to ten years. Opting for a shorter term may result in higher monthly payments, but it allows for the loan to be paid off sooner. On the other hand, longer terms may offer lower monthly payments, but they can lead to paying more in interest over the life of the loan.

It is vital to assess your business’s ability to repay the loan. Lenders evaluate factors such as cash flow, profitability, and credit history to determine eligibility. Having a solid business plan, financial statements, and a good credit score can increase the chances of loan approval.

Lines of Credit

– Flexibility: Lines of credit offer borrowing and repayment flexibility. Businesses can access funds as needed, up to a predetermined credit limit.

– Revolving credit: Lines of credit provide businesses with a revolving credit facility. As businesses repay the borrowed amount, the credit becomes available again.

– Working capital: Lines of credit are commonly used for managing working capital needs, such as inventory purchases, payroll, and day-to-day expenses.

– Variable interest rates: Interest rates on lines of credit can vary based on market conditions and the borrower’s creditworthiness. This can be both an advantage and a disadvantage, as rates can increase over time.

– Collateral requirements: Depending on the lender and the business’s creditworthiness, collateral may be required to secure a line of credit. Collateral helps mitigate the lender’s risk and may lower interest rates.

When considering a line of credit, businesses should carefully assess their borrowing needs and repayment capabilities. It’s important to understand the terms and conditions, including interest rates, repayment terms, and any associated fees. Businesses should compare options from different lenders for the best possible terms. Ultimately, lines of credit are valuable for managing cash flow and meeting short-term financing needs for business growth and stability.

Equipment Financing

Equipment financing, also known as equipment leasing or equipment loans, is a specialized business loan that focuses on acquiring essential equipment for operations. Whether it’s machinery, vehicles, technology, or any other necessary equipment, equipment financing can provide businesses with the funds they need to obtain these assets.

One of the key advantages of equipment financing is its flexible terms. Lenders understand that every business is unique, and they offer loan durations and payment structures that align with the cash flow and revenue projections of the borrower. This flexibility allows businesses to comfortably manage their finances and repay the loan without straining their cash flow.

Another benefit of equipment financing is that it is collateral-based. This means that the equipment itself serves as collateral for the loan. As a result, even businesses with lower credit scores can become eligible for this type of financing. Lenders are more willing to provide equipment financing because they have the security of the equipment as collateral, reducing their risk.

One of the appealing aspects of equipment financing is the lower interest rates it typically offers compared to other business loans. Since the equipment serves as collateral, lenders have greater confidence in the loan and, therefore, can offer better interest rates. This can save businesses a significant amount of money over the loan term.

Furthermore, equipment financing can provide tax benefits depending on the jurisdiction. Businesses may be able to deduct the interest paid on the loan and depreciate the value of the equipment. These tax advantages can result in potential savings for businesses, further increasing the appeal of equipment financing.

When considering equipment financing, it is crucial to evaluate factors such as the equipment’s lifespan, projected value, and the potential savings and revenue it can generate for the business. Thorough research is essential to find lenders specializing in equipment financing who can offer the best terms and rates. By carefully weighing these factors, businesses can make informed decisions that support their growth and pave the way for success.

SBA Loans

SBA Loans, provided by the Small Business Administration, a US government agency, come with favorable terms and lower interest rates compared to traditional bank loans. There are various types of SBA loans available, such as the 7(a) program for general business purposes and the 504 program for purchasing fixed assets.

SBA loans typically require businesses to provide a personal guarantee and collateral. To qualify for SBA loans, businesses must be for-profit, have a reasonable credit history, and demonstrate the ability to repay the loan. These loans offer access to capital at competitive rates and flexible repayment terms. It is crucial to conduct thorough research and fully comprehend the loan requirements before applying. Notably, as of 2020, the SBA approved over 50,000 loans, totaling more than $30 billion in funding.

Calculating Borrowing Capacity

When it comes to business loans, knowing your borrowing capacity is crucial. In this section, we will dive into the nitty-gritty of calculating your borrowing capacity. From understanding the loan-to-value ratio to delving into the debt-service coverage ratio, we’ll explore key factors that determine how much you can borrow. We’ll even look at the importance of assessing your personal financial statement. So, hang tight as we uncover the secrets behind unlocking your borrowing potential.

Loan-to-Value Ratio

The Loan-to-Value (LTV) ratio is a crucial factor in determining the borrowing capacity for business loans. It is naturally calculated by dividing the loan amount by the appraised value of the collateral used as security for the loan. Understanding the LTV ratio is essential as it determines the percentage of the collateral that will be financed by the loan.

A lower LTV ratio signifies less risk for the lender and can lead to more favorable loan terms, such as lower interest rates. To illustrate, suppose the loan amount is $500,000, and the appraised value of the collateral is $750,000. In this case, the LTV ratio would be 67%.

Lenders establish maximum LTV ratios based on factors like collateral type and the creditworthiness of the borrower. For instance, a lender may set a maximum LTV ratio of 80%, indicating that they will provide financing for up to 80% of the appraised value of the collateral.

Having a higher LTV ratio can have an impact on a borrower’s ability to secure a loan. It suggests greater risk and may result in higher interest rates or stricter repayment terms. Before applying for a loan, borrowers should thoroughly assess their LTV ratio and evaluate if they possess sufficient collateral for the desired loan amount.

Debt-Service Coverage Ratio

The Debt-Service Coverage Ratio (DSCR) is important for determining a business’s borrowing capacity. It measures the company’s ability to cover its debt obligations, specifically its loan payments.

The formula for calculating DSCR is simple: divide the business’s net operating income by its total debt service. Net operating income is the company’s revenue minus its operating expenses, and total debt service includes both principal and interest payments on loans.

A DSCR of 1 or higher indicates the business has enough income to cover its debt payments. A ratio below 1 suggests the business may struggle to meet its financial obligations and may be at higher risk of defaulting on its loans.

Lenders usually prefer a DSCR of at least 1.25 to 1.5 as it shows a healthier financial position and lower risk of default. Different lenders may have different requirements, so it’s important to research and understand the specific lender’s criteria before applying for a loan.

Assessing the DSCR is crucial when considering borrowing capacity. It helps business owners understand their ability to take on additional debt. By maintaining a strong DSCR, businesses can show lenders they have enough income to repay the loan, increasing their chances of obtaining favorable loan terms and higher borrowing limits.

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Personal Financial Statement

A personal financial statement, also known as a PFS, provides a comprehensive overview of an individual’s financial status. It covers various aspects including assets, liabilities, income, and expenses.

Incorporating information about assets such as savings accounts, investment accounts, real estate properties, and retirement accounts. Liabilities such as mortgage, auto loans, credit card debt, and student loans are also considered. Additionally, income sources like salary, business income, rental income, and investments, as well as expenses including rent, utilities, insurance, and taxes are taken into account.

For lenders, this statement is crucial in assessing the financial health and repayment ability of a borrower, particularly for business loan applications. It enables lenders to determine the borrower’s net worth and financial obligations, providing a clear picture of their financial stability. This aids lenders in making informed decisions regarding loan amounts, interest rates, and repayment terms.

A personal financial statement plays a key role in helping lenders evaluate the borrower’s financial situation and enables them to make sound lending decisions.

Steps to Determine Borrowing Capacity

Determining how much you can borrow with a business loan is a crucial step towards securing the funds you need. In this section, we will explore the steps to determine your borrowing capacity, ensuring you make informed financial decisions. From assessing your financial health to researching lenders and loan programs, we’ll provide valuable insights and practical tips. Plus, we’ll guide you on gathering the required documentation for a seamless loan application process. Get ready to unlock your borrowing potential!

Assess Financial Health

When evaluating financial health for business loans, consider the following factors:

1. Credit score: Evaluate your credit score and history to determine creditworthiness. A higher credit score indicates better chances for favorable loan terms.

2. Business revenue and cash flow: Examine your business’s revenue and cash flow to determine stability and ability to repay a loan. Lenders consider these factors to assess repayment capacity.

3. Debt-to-income ratio: Calculate your debt-to-income ratio by dividing total monthly debt payments by gross monthly income. This ratio helps lenders gauge ability to take on additional debt.

4. Collateral and personal guarantee: Assess assets for collateral and determine if a personal guarantee is required. These factors can affect borrowing amount and interest rates offered.

By carefully evaluating credit score, business revenue, cash flow, debt-to-income ratio, and collateral, you can assess financial health and determine borrowing capacity for Borrowing Blueprint: How Much Can You Borrow with Business Loans? business loans.

Determine Loan Purpose

When determining the loan purpose for your business loan, it is important to consider the following factors:

1. Business expansion: If you want to grow your business, you may need a loan to fund activities such as opening a new location, hiring more employees, or investing in marketing.
2. Equipment purchase: If your business requires specialized machinery, vehicles, or technology, you may need a loan to finance these purchases.
3. Working capital: If you need funds for day-to-day expenses, managing cash flow, or buying inventory, a loan for working capital can help keep your business running smoothly.
4. Debt consolidation: If your business has multiple high-interest loans or debts, consolidating them into a single loan can simplify your finances and potentially lower your monthly payments.
5. Startup capital: If you are starting a new business, you may need a loan to cover initial costs such as renting a space, purchasing inventory, or hiring employees.
6. Emergency funds: Unexpected expenses or emergencies can arise in any business. Having a loan for emergencies can provide a safety net and help you manage unforeseen circumstances.

Determining the purpose of your loan is crucial for selecting the appropriate loan type and ensuring that the funds are used effectively for your business’s specific needs.

Research Lenders and Loan Programs

When conducting research on lenders and loan programs for your business, it is important to carefully consider the following factors.

Compare the interest rates provided by different lenders in order to find the most competitive rates available to you.

Take into account any additional fees that may be associated with the loan, such as origination fees or closing costs.

It is crucial to evaluate the repayment period and payment frequency, as this will help you determine if it aligns with your business’s financial capabilities.

It is also recommended to research the minimum and maximum loan amounts that different lenders offer in order to ensure that they meet your specific funding needs.

In addition, it is crucial to understand the specific requirements set forth by each lender.

These requirements may include factors such as credit score, revenue, or the number of years your business has been in operation.

Knowing these requirements will help you determine your eligibility for a loan.

It is also important to consider if the loan program allows for flexibility in terms of repayment options.

This may include options such as early repayment or loan modifications.

It is recommended to look for reviews or testimonials from other business owners who have previously worked with the lender.

This will provide valuable insights into their experience and overall satisfaction.

Certain lenders specialize in specific industries and may offer tailored loan options specific to your business sector.

It is worth researching if there are any lenders that specialize in your industry and can provide additional guidance and support.

Thoroughly review the application process and gather all the necessary documentation required to apply for the loan.

Ensuring that you have everything ready will streamline the application process.

By diligently researching lenders and loan programs, you will be able to make an informed decision and select the option that best suits your business’s financial needs.

Gather Required Documentation

To gather the required documentation for a business loan, you need to follow these steps:

1. Assess the financial health of your business by reviewing financial statements, balance sheets, cash flow statements, and income statements.

2. Determine the purpose of the loan and how it will be used.

3. Research lenders and loan programs that align with your business needs, comparing interest rates, fees, and repayment terms.

4. Gather the necessary documents such as a business plan, tax returns, bank statements, financial projections, proof of ownership, and legal documents (licenses and permits).

It is important to note that the documentation required may vary depending on the lender and loan type. The lender will typically provide a checklist to guide you. Providing accurate and complete information increases your chances of loan approval. Keep your documents organized and readily accessible for submission. By following these steps and providing the necessary documentation, you can streamline the loan application process and increase your chances of obtaining the funds your business needs.

Understanding Loan Terms and Conditions

Discover the key to decoding loan terms and conditions in this section. We’ll dissect the components that make up these agreements, including interest rates, fees, repayment terms, and prepayment penalties. By uncovering the nuances and understanding these aspects, you’ll gain invaluable insights that can help you make informed borrowing decisions. Get ready to unravel the mysteries of loan jargon and pave your way to financial success.

Interest Rates and Fees

Loan Type	Interest Rate	Fees
Term Loans	4% – 10%	Origination fee: 1% – 5%
Lines of Credit	5% – 20%	Annual fee: 1% – 5%
Equipment Financing	5% – 30%	Processing fee: 1% – 3%
SBA Loans	5% – 10%	Guarantee fee: Up to 3.5%

When choosing a business loan, it’s important to consider the interest rates and fees. The interest rate determines the borrowing cost, while the fees contribute to the overall loan cost. Rates and fees vary based on the loan type.

For term loans, interest rates range from 4% to 10% with an origination fee of 1% to 5%. Lines of credit have interest rates of 5% to 20% and an annual fee of 1% to 5%. Equipment financing may have interest rates between 5% and 30% with a processing fee of 1% to 3%. SBA loans have interest rates of 5% to 10% and a guarantee fee of up to 3.5%.

To get the best deal, compare interest rates and fees from different lenders. Consider your business’s financial situation and repayment ability when deciding which loan offers the most favorable rates and fees for your needs.

Over time, interest rates and fees for business loans have evolved as the lending landscape has become more competitive. Borrowers now have access to a wider range of loan options with varying rates and fees. It’s crucial to carefully examine the terms and conditions, including the interest rates and fees, before making a decision. By understanding and comparing these factors, businesses can make informed choices to borrow wisely and achieve success.

Repayment Terms

Repayment terms for business loans are crucial. It is important to understand these terms in order to effectively plan cash flow and fulfill obligations. Here are some key considerations to keep in mind when it comes to repayment terms:

– Interest Rates: It is advantageous to opt for lower interest rates as they result in lower overall costs.

– Loan Duration: Shorter terms may come with higher monthly payments, but they also incur lower interest costs in the long run. On the other hand, longer terms result in lower monthly payments but higher overall interest expenses.

– Payment Frequency: Depending on the business’s cash flow, it is advisable to choose a repayment frequency that can be monthly, bi-weekly, or quarterly.

– Prepayment Penalties: Some loans come with penalties for early repayment. It is essential to be aware of these penalties before making any decisions.

– Collateral Requirements: Certain loans may have collateral requirements. Failing to meet the repayment terms could result in the lender seizing the collateral.

Understanding the various aspects of repayment terms is pivotal for making informed decisions and maintaining financial well-being. Research has shown that favorable repayment terms contribute to the overall success and long-term growth of businesses.

Prepayment Penalties

Prepayment penalties, also known as early repayment fees, are charges imposed by lenders when borrowers pay off loans before the scheduled time. These fees are meant to compensate lenders for the interest they would have otherwise earned. It is crucial to consider prepayment penalties when contemplating business loans, as they can have a significant impact on the overall cost of borrowing.

The specific amount of prepayment penalties can vary depending on the lender and the terms of the loan. Typically, they are calculated as a percentage of the remaining loan balance or as a certain number of months’ worth of interest. For instance, if a borrower repays a loan within the first two years, the lender may impose a penalty equal to 2% of the outstanding balance.

Before signing a loan agreement, it is essential to carefully review the terms, paying close attention to any provisions related to prepayment penalties. If possible, try to negotiate the elimination or reduction of these penalties, especially if early repayment is anticipated.

Understanding the implications of prepayment penalties is crucial when seeking financing for your business. Take these costs into account when evaluating different loan options and determining the most suitable financing solution.

Make sure to thoroughly read the loan agreement and consider consulting with a financial advisor or an attorney if you have any inquiries or concerns. By making informed decisions regarding prepayment penalties, you can borrow wisely and steer your business towards success.

Frequently Asked Questions

1. How much can I borrow with a small business loan?

The amount you can borrow with a small business loan can vary depending on factors such as the lender, loan type, business credit score, and annual revenue. Traditional banks, for example, typically offer higher loan amounts, while online lenders may have smaller loan limits. On average, small business loan amounts range from $500 to over $5 million.

2. What are the borrowing limits for online business lines of credit?

Online business lines of credit typically have borrowing limits ranging from $2,000 to $250,000. These credit lines offer flexibility in accessing capital, but the amount you can borrow will depend on factors such as your personal and business credit, business revenue, and time in business.

3. How much can I get with an online term loan?

Online term loans usually range from $1,000 to $500,000. The specific loan amount will depend on various factors, including your credit profile, business revenue, and the lender you choose.

4. What loan amounts are available with invoice factoring?

With invoice factoring, you can typically receive between 70% to 90% of the amount invoiced to your customers. This type of financing allows you to access funds based on your unpaid invoices.

5. Can I borrow larger amounts with a merchant cash advance?

Merchant cash advances offer upfront cash based on a portion of your future credit card or debit card sales. The specific loan amount will depend on your average card sales volume. While the limits may vary, it’s important to keep in mind that merchant cash advances typically offer smaller loan amounts compared to other financing options.

6. How can I increase my borrowing power for a business loan?

There are several ways to increase your borrowing power when applying for a business loan. One option is to offer collateral, such as property or equipment, which can help secure a larger loan amount. Improving your credit score, paying down existing debts, and offering a down payment can also enhance your eligibility for a larger loan. It’s important to carefully assess your financial capabilities and avoid borrowing more than you can comfortably afford to repay.