Lenders do not decline businesses because they are bad. They decline them because they cannot see them. A profitable business with unlodged returns, an unreviewed debtor ledger and an ATO balance that goes up and down looks, from the credit desk, like a business in trouble. The fix is financials the lender can read and trust, prepared before the application rather than scrambled together afterwards.
A credit analyst has a file, a policy and limited time. If the financials are two years old, the Xero file is unreconciled and the ATO portal shows a string of late BAS, the analyst cannot measure the business, and a business that cannot be measured is declined or priced for the worst case. None of that says anything about whether the business is good. It says the numbers were not ready.
We prepare businesses for finance in both directions: getting the accounts and tax to where they need to be, and translating the business into the form a credit analyst expects. We also work alongside finance brokers, who often send a client to us precisely because the numbers are holding up the application.
The businesses that get the best outcomes treat finance as a project with a lead time, not a form to fill in. Three months of preparation produces a different file from three days, and lenders can tell the difference on the first page. The time is spent on the books and the ATO position, not on the application form.
Every lender has its own policy, but the same questions come up in nearly every SME application.
Each item is evidence for one of two questions: will the loan be repaid, and if not, what does the lender recover. Serviceability and ATO history answer the first. Security and account conduct answer the second. A weak answer on one can be offset by a strong answer on another, which is why presentation matters as much as the raw numbers.
The ATO history catches more businesses than anything else. Lenders read a tax debt or a run of late BAS as a sign the business is funding itself from the tax office, and the ATO now reports significant overdue debts to credit reporting bureaus. A payment plan that is being met is far better than an unmanaged balance, and clearing or restructuring ATO debt is often the first job before an application goes anywhere. Lenders also notice whether the business lodges on time even when it cannot pay on time, which is a cheap habit to keep.
If the financials and returns are behind, that is where we start. We bring every entity in the group up to date, reconcile the Xero files, clear the ATO accounts and prepare financial statements that are consistent across years. Consistency matters: a lender comparing two years prepared on different bases, or with wages in one year and contractor payments in the next, asks questions that slow the file down.
We also look at what the financials say before they go to the bank. Drawings run through a loan account, a one-off cost that should be shown as abnormal, a related-party rent above or below market, or stock that was never counted all change the serviceability calculation. This is not about dressing up the figures. It is about making sure the accounts show the real earning capacity of the business, which is what the lender is trying to measure.
If your last financial year ended more than a few months ago, the lender will want interim accounts: a profit and loss and balance sheet for the year to date, prepared by the accountant rather than printed from Xero. We prepare these with the same adjustments as year-end accounts, so they reconcile to what the bank will eventually see in the next set of returns.
For a loan that funds growth, a new site, an acquisition or a refinance, the bank also wants a forecast. The forecast has to show the repayments being covered, be built on assumptions the business can defend, and tie back to the historic figures. A forecast that shows revenue doubling with no explanation is worse than no forecast. We build a cash flow forecast that includes the loan itself, the GST and tax timing and the capital spend, and we can present it to the lender or broker alongside the owner.
Lenders also test the forecast against the history. If last year's gross margin was at one level and the forecast assumes a much higher one, there needs to be a reason: a price rise already implemented, a contract already signed, a cost already removed. We document the assumptions in a one-page note so the analyst does not have to guess.
The type of debt should match what it pays for. Equipment and vehicles are usually best financed on equipment finance such as a chattel mortgage, secured on the asset itself with a term that matches its useful life, which keeps the business's other security free. Working capital tied up in debtors can be funded by invoice finance, which grows with sales. Short-term timing gaps belong on an overdraft. Longer-term investments, acquisitions or property belong on term loans with a repayment schedule the cash flow can carry.
Mismatches cause problems in both directions. Funding a truck on the overdraft eats the working capital buffer. Funding working capital on a five-year term loan means paying interest on money the business did not need for most of the period. Part of getting bank-ready is deciding what to ask for, not just how much.
We also look at the whole debt position, not just the new facility. Several small loans and leases taken over the years can often be consolidated into fewer facilities at a lower blended rate, with security released. A lender is more comfortable with a business that has a clear debt structure than one with a dozen arrangements across five providers.
Almost every SME loan in Australia comes with a director guarantee, and often a guarantee from a related entity or a mortgage over the family home. Before signing, understand what is being pledged and whether the structure can limit it. A holding entity, a separate property-owning entity or a trust can keep some assets outside the lender's reach, provided it is set up before the guarantee is given, not after. Our structuring and asset protection work often starts with a finance application.
A good finance broker knows which lender will suit the business and how to present it. We work with brokers across Brisbane and Logan constantly and prepare the information pack they need. A complete pack answers the analyst's questions before they are asked, which is the difference between a two-week approval and a two-month one. We also brief the broker on anything in the figures that needs context, so the story the lender hears is consistent.
Lenders increasingly ask for direct access to the Xero file or for reports exported from it. A file reconciled to the day, with the bank balance in Xero matching the bank, debtors and creditors current and no uncategorised transactions, supports everything else in the application. A file three months behind undermines the financials no matter how good they are. As a Xero Platinum Partner we get the file to that standard as part of the preparation.
Refinancing deserves the same preparation. Many businesses sit on facilities set up years ago at rates and terms that no longer fit, with security the lender no longer needs. A refinance review every couple of years, with current financials and a forecast in hand, puts the business in a position to negotiate rather than accept. If you have an application coming up or a facility that needs reviewing, book a call and we will tell you what the lender will want to see. A common finding is a facility that rolled off a fixed rate years ago onto a rate nobody has questioned, or a guarantee still in place over a property that no longer needs to secure anything.
Most lenders want the last two years of lodged financial statements and tax returns for the trading entity and for each guarantor, interim accounts if the last year end is more than a few months old, ATO portal reports showing lodgement and payment history, debtor and creditor ageing, a summary of existing debt and security, and a cash flow forecast for larger or growth-related loans. A complete pack prepared by your accountant speeds the approval considerably.
Sometimes, but it is harder and dearer. Lenders read tax debt as the business borrowing from the ATO, and the ATO now reports significant overdue debts to credit bureaus. A payment plan that is being met is viewed far better than an unmanaged balance, and some lenders will fund the clearing of the debt as part of the loan. The best approach is to deal with the ATO position before applying, which we help with.
Interim financials are a profit and loss and balance sheet for the part of the current year that has passed, prepared by your accountant with the same adjustments as year-end accounts rather than printed straight from Xero. Lenders ask for them when the last financial year ended some months ago, so they can see current trading. Because they reconcile to the eventual year-end figures, they carry more weight than a raw software report.
It can. A director guarantee makes you personally liable for the company's debt if the company cannot pay, and lenders often also take a mortgage over the family home. The exposure can be limited by structure, such as holding assets in a separate entity or a trust, but only if that is in place before the guarantee is given. Review what you are signing and what it covers, and get structuring advice first where the amounts are significant.
Often, yes. A good commercial finance broker knows which lenders suit a given business, structures the application to match their policies, and manages the process. The broker still needs clean, current financials and a complete information pack, which is where we come in. We work alongside brokers regularly, prepare the numbers they need and answer the lender's questions about them, so the application moves quickly.
If the books are current and the returns are lodged, an information pack with interim accounts and a forecast can be ready in one to two weeks. If returns are behind, the Xero file is unreconciled or there is ATO debt to resolve, allow one to three months depending on how many years and entities are involved. Starting well before the finance is needed is the single biggest factor in a smooth approval.
