How Much Should You Borrow?
Approval and capacity are not the same thing. Just because a business can borrow doesn’t mean it should borrow to the maximum available.
That distinction matters.
As Martin Brady, President of First Bank of Central Ohio, puts it: “The question isn’t how much you can qualify for. It’s how much your business can comfortably carry.”
Lenders determine what the numbers support. Business owners have to decide what feels manageable.
That decision requires thinking beyond the approval amount.
Borrowing Capacity Is About Comfort, Not Limits
Lending decisions are based on financial statements, projections, and historical performance.
But projections assume stability.
A more practical question is this: If revenue softens for a period of time, will this debt still feel manageable?
Smart borrowing decisions leave room for normal fluctuations—not just best-case performance.
Growth Requires Cushion
When businesses expand, they often focus on the cost of the investment itself.
What’s sometimes overlooked is the temporary strain growth can place on cash flow.
New locations take time to ramp up. Equipment installations disrupt operations. Hiring increases payroll before revenue follows.
Borrowing to the limit may leave little margin for those transitions.
Thinking Through the Downside
Most borrowing decisions are made when the business is performing well. But financing decisions often last longer than favorable conditions do.
Before committing to additional debt, it helps to ask a few simple questions:
- What happens if revenue dips 10%?
- What happens if a project runs over budget?
- What happens if receivables slow down?
Fluctuations are normal in every business. Smart borrowing decisions leave room for them.
When there’s room in the structure, normal ups and downs are easier to absorb. When there isn’t, even small shifts can create stress.
Why This Matters for Real Estate and Professional Practices
For real estate owners, leverage is often part of the model. Properties are financed over time, and income is expected to cover those obligations. That structure works well, as long as there’s room for vacancy, maintenance, or market shifts.
Professional practices face a different rhythm. Revenue may depend on reimbursement cycles or patient volume. When those cycles slow, fixed obligations don’t.
In both cases, the issue isn’t whether to borrow. It’s how much flexibility the structure allows.
Financing should support your business model, not stretch it.
The Bottom Line
Qualifying for a certain amount doesn’t mean you should borrow it.
The goal isn’t to maximize approval. It’s to choose a level of debt your business can carry comfortably, even if conditions soften.
Borrowing works best when it leaves room to adjust.
As Brady notes, “Good financing decisions don’t depend on everything going perfectly.”
