The honest answer is not a multiple of turnover. It is whatever your cash flow can service after everything you already owe.
It is the first question most owners ask, and the one lenders answer least directly. There is no single published multiple. The number also moves depending on who is assessing you and which product you want.
But it can be estimated, and doing it yourself before you apply is worth the hour. It stops you asking for an amount likely to be declined. It also stops you accepting an amount you cannot comfortably repay.
Start where the lender starts
Most assessments come down to one question: how much of your monthly cash is genuinely free to repay new debt?
Work it out in this order.
Take your monthly surplus. This is money in minus every operating cost, in a normal month rather than your strongest one. Use the last twelve months and pick something close to the middle value, not the average of a few strong months.
Subtract existing obligations. Include every EMI you already pay, on every facility. Include personal borrowings too, because a lender will see them on the promoter's credit record.
Keep a genuine buffer. Lenders rarely lend against your entire remaining surplus. A business with nothing left over cannot absorb a bad month. How large a buffer each lender wants is its own policy, so build one in yourself.
Whatever is left is your realistic EMI capacity.
Turn the EMI into a loan amount
A worked example makes this concrete. The figures below are illustrations, not a quote.
Say your normal monthly surplus is ₹1,20,000 and you already pay ₹40,000 a month in EMIs. That leaves ₹80,000. You decide to hold ₹30,000 back as a buffer. Your EMI capacity is ₹50,000.
At an illustrative rate of 15% a year, a ₹50,000 EMI supports:
| Tenure | Loan it supports |
|---|---|
| 36 months | about ₹14,42,363 |
| 60 months | about ₹21,01,730 |
The same monthly capacity supports a much larger loan over a longer term. That is why tenure is the biggest lever on the amount. It is also the lever with a real cost, because you pay interest for longer. Choosing the right loan tenure covers that trade-off.
To try your own figures, use the business loan EMI calculator or the business loan eligibility calculator.
The ratios lenders use to check you
Lenders turn the same idea into ratios. Knowing them helps you see your file the way an underwriter does.
Debt service coverage ratio (DSCR). RBI's own wording for a year is: net cash accruals plus interest and finance charges, divided by the current portion of long-term debt plus interest and finance charges. Net cash accrual is commonly taken as profit after tax plus depreciation, though that breakdown is lender practice. A DSCR above 1 means the year's cash covers the year's debt payments. The further above 1, the more room you have. The DSCR guide and the DSCR calculator walk through it.
Fixed obligations to income ratio (FOIR). This is your total monthly EMIs, including the proposed one, divided by your monthly income. It is lender practice, not a regulator's definition, and each lender sets its own ceiling.
Total debt to EBITDA. This compares all your borrowing with profit before tax, interest, depreciation and amortisation. A lower figure means your debt is small relative to what the business earns.
Working capital is sized differently
A term loan is sized from repayment capacity. A working capital limit is often sized from turnover instead.
For micro and small enterprises with limits up to ₹5,00,00,000, the government has described a simplified method: the working capital limit is computed as at least 20% of projected annual turnover. Banks usually also expect you to bring part of the need from your own funds; how much is lender practice. So a business projecting higher sales can support a larger limit, provided the projection is believable.
The working capital calculator shows how the requirement is worked out.
What moves the number up
Longer tenure. The same monthly capacity supports a larger principal over more years.
Security. A pledged asset can raise what a lender will extend against the same cash flow. For small loans there is a limit to this: banks may not take collateral on loans up to ₹20,00,000 to micro and small enterprises, sanctioned or renewed on or after 01-Apr-2026. Above that, a credit guarantee can stand in for security. CGTMSE, the government-backed guarantee for micro and small enterprises, covers commercial bank loans up to ₹10,00,00,000.
Clean, consistent records. Where GST returns, income tax returns and bank statements agree, a lender can rely on the reported figure. Where they diverge, the assessment tends to fall back to the most cautious of the three, which lowers the amount. Why GST, ITR and bank statements must agree explains this in detail.
Trading history. More years of steady performance widens what a lender is willing to consider. Business vintage explains why.
What moves it down
Existing debt. It reduces the arithmetic. Undisclosed debt found during assessment also damages credibility.
Lumpy revenue. Two large orders a year is a harder credit story than the same annual figure arriving monthly.
A thin or damaged credit record, on the business or on the promoter.
A gap between what you trade and what you file. This is a common quiet reducer. A business whose declared profit is much lower than its real trading usually gets assessed on the declared figure.
Unsecured stress in the market. Lenders are watching unsecured business loans closely. The July 2026 MSME Pulse report from TransUnion CIBIL and SIDBI found that unsecured business loans opened in March 2025 were 2.9 times as likely as the overall market to fall 90 or more days behind within twelve months. That caution shows up as smaller unsecured amounts for files without a clear repayment story.
The number you should actually ask for
Do not ask for your maximum. Ask for your requirement, worked out from a forecast, plus a sensible buffer.
Asking for the most you might qualify for invites two bad outcomes. You get it and carry an EMI larger than the business needs. Or you are declined on affordability and leave an enquiry on your record for a loan you did not need at that size.
There is a third, subtler cost. A facility taken to its limit today constrains what you can borrow in eighteen months, when a genuine opportunity might need funding. Borrowing capacity is worth preserving.
Before you settle on a figure, compare the full cost of the offers you get, not just the EMI. The true cost of a business loan shows how.
A reasonable expectation
Consider a business with two or three years of clean trading, filings that agree, no existing strain and a specific purpose it can evidence. Lenders usually engage seriously with a request sized to that business's demonstrated cash flow.
If any of those are missing, the amount narrows. The fix is usually to strengthen the file rather than to shop the request around. The same business six months later, with reconciled records and a clean repayment run, is often offered more.
Work out your own number first. Then the conversation with a lender is about matching a product to a requirement.
Capnix is not a lender. Its free Capnix score rates your business from 0 to 100 and shows what to fix first.
Sources
- RBI, Resolution Framework for COVID-19-related stress: financial parameters (RBI/2020-21/34), Annex, checked 02-Oct-2026
- PIB, government reply on simplified working capital for MSE units (23-Jul-2019), checked 02-Oct-2026
- FOIR is lender practice with no regulator definition; EMI = P × r × (1+r)^n ÷ ((1+r)^n-1), the standard annuity formula; worked figures computed by Capnix on 02-Oct-2026
- RBI, collateral-free loans to MSE units (RBI/2025-26/206), checked 02-Oct-2026
- CGTMSE, Credit Guarantee Scheme document (updated 01-Apr-2026), checked 02-Oct-2026
- SIDBI and TransUnion CIBIL, MSME Pulse (July 2026), checked 02-Oct-2026
