I’ve helped dozens of small business owners prepare for lending conversations, and one thing becomes clear fast: lenders don’t approve loans based on hope or good intentions. They read your accounts like a detective — and they’re looking for evidence that your business will be able to repay the money. In this article I’ll walk you through what lenders really look for on your accounts, how to present information that reassures them, and practical steps you can take today to improve your chances of getting the right loan for your business.
What lenders actually read in your accounts
When a lender asks for accounts, they’re after a story — not just numbers. They want to understand the business model, the reliability of income, and the risks. Here are the key areas they focus on:
Turnover and revenue trends: Is revenue growing, flat or falling? Steady or seasonal fluctuations matter depending on the product.Gross and net profit margins: Lenders check whether you’re actually making money once direct costs are included. Thin or deteriorating margins are a red flag.Operating cashflow: Profit on paper can still hide cash shortages. Banks want to see that the business generates enough cash to meet interest and repayments.Accounts receivable and aging: Lots of overdue invoices suggest cashflow risk. Lenders will ask about your debtor days and credit control processes.Balance sheet strength: Assets vs liabilities, levels of stock, and any encumbrances (charges) on assets like property or machinery.Owners’ drawings and personal guarantees: Excessive owner withdrawals can weaken the business financially; directors’ personal credit and guarantees also matter.Historical accuracy and management accounts: Lenders prefer up-to-date, reconciled management accounts rather than month-old spreadsheets.Projections and use of funds: A clear forecast showing how the loan will be repaid and what it will be spent on.Common red flags that kill loan applications
From my experience, these are the most common issues that make lenders hesitate — and they’re fixable if you spot them early.
Untidy bookkeeping — unreconciled bank accounts, unexplained adjustments, or mixed personal and business transactions.Inconsistent figures — your management accounts don’t match filed accounts or your VAT returns.Large director’s loans or drawings that leave the business short of working capital.High debtor days and concentration risk where a few customers make up most sales.Negative cashflow despite showing an accounting profit.Weak or unrealistic forecasts — models that assume instant sales increases or impossible margin improvements.How to present your accounts so lenders can’t ignore you
If you tidy a few things beforehand, you’ll be amazed how much more confident lenders become. Here’s a practical checklist of actions I recommend:
Produce up-to-date management accounts — include P&L, balance sheet and a cashflow statement for the last 12 months, ideally prepared monthly.Reconcile your bank accounts and clear suspense items. Lenders will ask for bank statements; mismatches raise questions.Prepare a clear cashflow forecast for at least 12 months showing the loan repayments and the assumed sales/revenue that support them.Explain one-off items in the accounts — any extraordinary gains or losses should be annotated.Show strong credit control — a debtor ageing report and a brief note on collections procedures helps.Separate personal and business finances — using a single bank account for both is a common instant rejection reason.Have supporting documents ready — recent contracts, purchase orders, supplier terms, and customer invoices that underpin projected revenue.Documents lenders typically ask for (and why)
Gathering these documents in advance speeds things up and projects competence. I often prepare a single zipped pack for lenders:
| Document | Why lenders want it |
| Last 2–3 years statutory accounts | Shows historical performance and trends |
| Latest 12 months management accounts | Shows current trading and cash position |
| Cashflow forecast (12 months) | Demonstrates ability to service loan |
| Bank statements (3–6 months) | Verifies cash balance, turnover and patterns |
| Debtor and creditor aging | Assesses working capital needs and concentration risk |
| Contracts / purchase orders | Evidence of future revenue or commitments |
What you can do to improve your application fast
Not every improvement takes months. Here are practical steps I recommend you start this week:
Clean up bookkeeping in Xero, QuickBooks or FreeAgent — reconcile bank accounts and explain any unusual entries.Reduce debtor days by chasing overdue invoices and introducing payment incentives like early payment discounts or Stripe/GoCardless for recurring fees.Temporarily reduce owner drawings to demonstrate cash retention and strengthen the balance sheet.Get a short, realistic cashflow together — even a simple weekly cash forecast is better than nothing.Talk to your accountant about presenting adjusted EBITDA or normalised profits if there are one-off costs that mask performance.Picking the right lender for your situation
Not all lenders are the same. High street banks look for established, low-risk businesses with clean accounts. Challenger banks and fintech lenders like Tide, iwoca, OakNorth or Funding Circle can be more flexible but often charge higher rates. Invoice finance or a merchant cash advance might suit businesses with strong receivables but weaker historic profits.
Match the lender to the strength in your accounts:
If you have strong, consistent profits and assets — approach banks for term loans or overdrafts.If you have good invoices but need cash quickly — invoice finance or factoring may be better.If your accounts have gaps but you have growth potential — consider peer-to-peer or specialist SME lenders who underwrite on future potential as well as past performance.What I ask when coaching clients preparing to borrow
When I work one-to-one with founders, I always ask:
How will the loan be used, specifically?What repayments can the business afford without endangering operations?How reliable are your major customers and suppliers?Are there any upcoming seasonality or large one-off expenses?Answers to these shape the forecast and the lender approach. A clear use-of-funds and a realistic repayment plan reduce lender anxiety — and get you better terms.
If you’d like, I can review a sample set of documents and point out the specific tweaks that would make your application stronger before you apply. A small amount of preparation often makes the difference between a rejection and a competitive offer.
