The Intent
You want to understand realistic borrowing capacity without overleveraging the business or being misled by optimistic assumptions.
How I Solve It
I use the 25 Factors to determine how much of the business value is actually financeable. Factor #5: Liquidity, Factor #4: Return on Investment, Factor #24: Risk, and Factor #7: Cost of Liquidation are critical here.
The 5 Senses Inspection Report confirms whether cash flow stability and operational discipline support debt service over time.
Experience
It is vital because "How much can I borrow against my business?" is not a mechanical calculation. It is a real-world judgment about risk, control, sustainability, and transferability — and that judgment is where 10–15 years of owner-operator and valuation experience, your gut–brain axis, does the heavy lifting.
Why It Is Not Mechanical
On paper, valuation appears formula-driven. In reality, governance rights, risk concentration, growth durability, market conditions, and stakeholder dynamics materially affect value.
Where Experience Changes the Number
Decisions around normalization, premiums, discounts, projections, and defensibility require judgment formed through lived ownership, negotiation, and financial accountability.
Why the Gut–Brain Axis Matters
The brain performs disciplined financial analysis. The gut recognizes unrealistic narratives, hidden leverage, emotional distortions, and deal risk. Together they produce conclusions that withstand scrutiny.
Protecting Financial Lives
The final number affects wealth, control, solvency, tax exposure, and long-term relationships. Requiring 10–15 years of serious hands-on business and valuation experience ensures the answer is fair, defensible, and durable. See my Experience page.
The Result
You receive a realistic borrowing range that protects both the business and your personal financial position.