Building your lender pack
A lender pack is the collection of documents and information you present when applying for business finance, and having it organised in advance generally makes the process smoother. This typically includes business and personal identification, details of the business structure such as company or trust documents, an overview of the business and its purpose for the finance sought, and financial statements. It's worth tailoring the pack to the type of finance you're seeking, since a lender assessing an equipment purchase may focus more on the asset and cash flow, while one assessing working capital finance may focus more closely on overall trading performance and existing debts.
Financial statements
Lenders typically want to see at least two years of financial statements, including profit and loss statements and balance sheets, ideally prepared or reviewed by an accountant. These give the lender a picture of the business's trading history, profitability and financial position. If the business is newer, or financials aren't yet finalised for the most recent period, management accounts or interim figures can sometimes be used, though lenders generally treat these with more caution than audited or accountant-prepared statements. It's worth having your accountant review your financials before submission, both to check accuracy and to help explain any unusual figures or one-off items that might otherwise raise questions.
BAS and tax records
Recent Business Activity Statements, usually the last four to six quarters, are commonly requested by lenders since they provide a relatively up-to-date and independently lodged view of turnover, which can be used to cross-check figures in financial statements. Lenders may also request notices of assessment and tax returns for the business and, in many cases, for the individuals behind the business. Keeping BAS lodgements current and consistent with other financial reporting is generally important, since discrepancies between BAS figures and financial statements can raise questions during assessment and may need to be explained.
Cash-flow forecasts
For many types of business finance, particularly where a business is growing, seasonal, or taking on new debt, lenders often want to see a cash-flow forecast showing how the business expects to manage its income and expenses, including loan repayments, over the coming months. A realistic forecast, based on reasonable assumptions rather than best-case scenarios, tends to be viewed more favourably than an overly optimistic one, since lenders will typically test the assumptions behind it. It's worth being able to explain the basis for key figures in the forecast, such as expected sales growth or major upcoming expenses, since lenders may ask questions about how these were calculated.
Security and personal guarantees
Depending on the type and size of finance sought, a lender may ask for security, which could include a mortgage over a property, a general security interest over business assets, or a personal guarantee from directors or business owners. It's worth understanding exactly what's being offered as security and the implications if the business is unable to meet repayments, since this can affect personal assets in the case of a guarantee. Having a clear picture of what security you're willing and able to offer before applying can help streamline discussions with a lender and clarify which types of finance and loan sizes might be realistic for your situation.
Key points
- A well organised lender pack generally speeds up assessment
- Two years of financial statements are commonly required
- Recent BAS lodgements help lenders verify turnover independently
- A realistic cash-flow forecast is often requested for growth or new debt
- Understand what security or guarantees are being requested before applying
Frequently asked questions
What financial statements do lenders usually ask for?
Typically at least two years of profit and loss statements and balance sheets, ideally prepared or reviewed by an accountant.
Why do lenders ask for BAS?
BAS provides an independently lodged, relatively current record of turnover that lenders can cross-check against financial statements.
Do I need a cash-flow forecast for every application?
Not always, but it's commonly requested for growing, seasonal or new businesses, or where new debt is being added.
What counts as security for a business loan?
Security can include property, a general security interest over business assets, or a personal guarantee, depending on the finance type.
Can a new business get finance without two years of financials?
It can be more difficult, but some lenders consider newer businesses using management accounts, forecasts and other supporting information.