The five documents your bank actually reads before approving a loan
A lender is trying to answer one question: can this business repay the debt when trading is less convenient than the forecast?
1. Current financial statements
The profit and loss statement shows trading performance. The balance sheet shows what the business owns, what it owes and the equity left for its owners. A cash flow statement explains how profit turned into cash, or why it did not.
Lenders commonly ask for two years of final financial statements and recent interim figures. They read the trend, not just the latest profit number. They will look for margin movement, debtor and stock growth, related-party balances, existing debt and one-off items that make the result look stronger than the underlying business.
2. Tax returns, BAS and ATO account records
Tax records let the lender cross-check the accounts against amounts reported to the ATO. Company, trust and individual returns may all be relevant where the group is connected or directors provide guarantees.
Expect a lender to ask why the tax return differs from the management accounts. There may be a sound reason, such as depreciation or timing, but the reconciliation should be ready. Unlodged returns, overdue BAS or an unexplained ATO debt can delay a decision because the lender cannot see the complete obligation.
3. Bank statements and a debt schedule
Bank statements show actual conduct. They reveal cash receipts, overdraft use, dishonours, repayment history and whether the trading account behaves like the financial statements say it does.
Add a single schedule of every loan, lease, card and guarantee. Show the lender, limit, balance, repayment, interest rate, remaining term and security. A clean schedule saves the credit analyst from reconstructing your commitments across several statements.
4. The owners' financial position
Directors, partners and guarantors are often asked for personal tax returns, notices of assessment and a statement of assets and liabilities. This is not a substitute for business repayment capacity. It helps the lender understand guarantees, outside income, household commitments and available security.
Do not overstate values or omit liabilities because they sit with another bank. Credit enquiries and statements will be compared. A conservative, supportable position is more useful than an optimistic one that creates another question.
5. A forecast tied to the purpose of the loan
The forecast should show what changes if the loan is approved. If the funds buy equipment, include the purchase, loan drawdown, repayments, depreciation, operating savings and any additional revenue. If the funds support working capital, show the customer payment cycle and the point at which the facility is repaid.
For a material application, use a linked profit and loss, balance sheet and cash flow forecast. State the assumptions, include a downside case and reconcile the opening position to the latest actual accounts.
Present one consistent story
The five documents do not need to show a perfect business. They need to agree with each other. Explain known weaknesses directly, quantify the remedy and show who is responsible for it. Surprises discovered by the lender are harder to manage than issues disclosed with a plan.
Requirements vary by lender, product, industry and security. Ask for the lender's checklist early and submit one indexed pack rather than sending files in fragments over several weeks.
Primary sources
Rules and lender requirements change. These sources were checked when this article was published.
This article is general information current at the date of publication. It doesn't take your circumstances into account and isn't tax, legal or financial advice. Speak to a registered tax agent about your situation.
