Can a business with existing debt get another loan?

Yes, it is possible for a business that has existing loans to borrow more money as long as you meet their requirements and can demonstrate the ability to repay the new loan. Before lending you more money, lenders will assess the overall financial condition of your business and closely review your current cash flow and repayment of your existing obligations.

The two primary areas lenders look at are your debt-to-income ratio and debt service coverage ratio. A debt-to-income ratio shows how much of your income is being called for already in existing loan payments. A debt service coverage ratio indicates whether your income is enough to make the new loan payment as well. Most lenders also have some experience with your loan repayment history; if you have a history of loan payments and repayments made on time, and renewals of those loans, that can also work for you.

The purpose for wanting to borrow the more money is also important to lenders. They want to know your proposed loan, or loan repayment scheme, relates to something productive, like expanding your business or buying a piece of equipment rather than satisfying a loss that is ongoing. If you are able to provide the lenders with any collateral, this can also improve your chance of being considered a good candidate for a loan.

Too many outstanding loans can quickly erode any buffer your financial status might have. Too many loans can also jeopardise the overall sustainability of your business. Practicing regular reviews of your current loans, and whether refinancing or debt consolidation is an option will help ensure you keep within sustainable limits, and keep your business on a trajectory for potential growth.