What a lender actually looks at in your accounts — and how to be ready before you apply

Deplexifi's founder is a Chartered Accountant, CA ANZ, and the habit that comes with the qualification is simple: read the accounts before you read anything else anyone says about the business. A credit assessor at a bank or a specialist lender does the same thing, usually in the first few minutes of opening a file — well before a cover letter, a business plan, or anything a broker has written on the applicant's behalf. Knowing what they pull out first, and what they discount, is the difference between an application that gets read properly and one that gets a fast, generic decline.

This isn't a guide to any one lender's scorecard — every lender weights these things differently, and criteria change. It's a plain description of the metrics and documents that turn up in almost every serviceability assessment across the UK, Australia and New Zealand, from the accountant's side of the desk rather than the marketing side.

Nothing here is regulated financial advice. Deplexifi arranges commercial finance for businesses — we are not authorised or regulated to advise on regulated financial products, and this article describes general lending practice, not a recommendation for any individual business.

01The numbers a credit assessor pulls out first

Before anyone looks at your logo, your pitch, or your five-year forecast, a credit assessor is triangulating four or five figures. Get these wrong — or unable to explain them — and everything else in the application is fighting an uphill battle.

Serviceability (DSCR)

The debt service coverage ratio — free cash flow available against total debt repayments, including the facility being applied for — is usually the single number that decides yes or no. Most lenders want to see comfortable headroom above 1.0x, not a figure that only just covers repayments in a good month. A DSCR that only works if nothing goes wrong is, to an assessor, a DSCR that doesn't work.

EBITDA and add-backs

Earnings before interest, tax, depreciation and amortisation is the starting point for measuring what a business generates — but the add-backs on top of it are where applications lose credibility fastest. A director's salary above a market replacement rate is a legitimate add-back; the full salary added back as if the business runs itself is not. One-off professional fees or above-market related-party rent can be defensible with paperwork behind them. Recurring costs relabelled "one-off," or add-backs with no invoice or journal to support them, get stripped straight back out — and once an assessor catches one undocumented add-back, they start re-checking everything else in the file too.

Gearing

Total debt against equity (or against EBITDA, depending on the lender). High gearing isn't automatically fatal — asset-heavy or high-growth businesses often carry more of it — but it changes what the lender needs to see elsewhere: stronger serviceability, more security, or a clear reason the new facility improves the picture rather than stacking on top of an already leveraged balance sheet.

Current ratio & working-capital cycle

Current assets against current liabilities tells an assessor whether the business can meet what's due in the next twelve months. Layered on top of that is the working-capital cycle — how many days pass between paying a supplier and being paid by a customer. A business that pays creditors in 30 days but collects from debtors in 75 is structurally short of cash regardless of how profitable it looks on the P&L, and that gap is exactly the kind of shortfall a working-capital facility or invoice finance line is built to close.

02Why the bank statements often matter more than the accounts

Statutory accounts describe a business at one point in the past, prepared under accounting rules that smooth and defer. Bank statements describe what actually happened, in real time, with no smoothing at all — which is exactly why many lenders now weight them more heavily than the accounts themselves, especially for facilities under roughly £250k / A$500k / NZ$500k.

iwoca, for example, publishes that it assesses affordability primarily from live transaction data pulled via Open Banking, and typically wants three to six months of bank statements rather than waiting on filed accounts. Prospa in Australia asks for the last three months of bank statements alongside BAS and profit-and-loss reports to confirm repayments can be comfortably covered on top of existing outgoings. What both are doing is reading the same handful of signals:

• Average daily balance — a consistently low or volatile balance reads as a business living transaction-to-transaction, whatever the P&L says about profitability.
• Days in debit — persistent time against an overdraft or near-zero balance is one of the clearest working-capital stress signals in the feed.
• Dishonours — a failed payment isn't an automatic decline; assessors read the counterparty and the pattern. One bounced payment to a trade supplier often reads as timing. A bounced payment to a credit provider or the tax authority reads as capacity, and is weighted very differently.
• Existing debt service already in the feed — every recurring debit to another finance provider gets serviceability-tested whether or not it was disclosed on the form. Debt found in the statements rather than declared upfront damages trust as much as it damages the ratio.

The practical implication: a business with unremarkable statutory accounts but six clean months of bank statements is often in a stronger position than one with a polished set of accounts sitting on top of a visibly stressed transaction account.

03Debtor and creditor ageing — and what concentration actually costs

For any business selling on credit terms, the aged debtor ledger is read almost as closely as the balance sheet, particularly for invoice finance and any facility secured against the sales ledger. Two things dominate that read: how old the debt is, and how concentrated it is.

Age matters because a debtor ledger padded with invoices well past terms isn't really an asset — it's a receivable that may never fully collect, and lenders discount it accordingly. Concentration matters because a facility secured against debtors is only as strong as the debtors behind it. Bibby Financial Services, one of the larger UK invoice finance providers, publishes debtor concentration as a direct pricing factor — a single customer making up a large share of the ledger pushes pricing up, and in higher-risk sectors can mean bad debt protection becomes a condition rather than an optional extra.

A single customer at 50–60% of turnover is one of the fastest ways to see an application declined or heavily conditioned, because the lender is really assessing your customer, with no visibility into that customer's own creditworthiness. If that concentration is real and can't be diversified before applying, raise it upfront and let the lender price around it, rather than let them find it in the ledger.

Creditor ageing gets read the other way. Extending payment terms to a normal 30–60 days is unremarkable; a creditor ledger stretching well past that — especially to the tax authority — is one of the more reliable early signs of cash-flow strain, and assessors know it.

04Your position as director or shareholder

For any business below a certain size, the lender isn't only assessing the company — it's assessing the people who run it, because in most cases those people end up standing behind the debt in some form.

Drawings and the director's current account

A director's current account that's been steadily overdrawn — the business has, in effect, been lending money to its owner — is a flag every credit assessor is trained to look for. It raises two separate questions: whether declared profitability has actually left the business already, and whether the owner has the personal discipline the lender is being asked to rely on. An overdrawn current account with no repayment plan sitting alongside it rarely improves an application.

Personal guarantees

Most unsecured lending to smaller or newer businesses, across all three of these markets, comes with a personal guarantee from the director attached — the British Business Bank's own guidance is explicit that a guarantee is what makes a lender willing to extend unsecured credit at all. Terms vary: some lenders want it to cover the full facility, others a partial share; some require every director above a shareholding threshold to sign, others just the controlling owner. Read exactly what's being guaranteed, and against what, before signing — a guarantee secured against a family home is a materially different commitment from one that isn't.

What "security" actually means

Security is any asset — property, plant and equipment, the debtor book itself, a fixed and floating charge over the company generally — a lender can call on if the debt isn't repaid. It's not the same as a personal guarantee, and a facility can carry either, both, or neither. The trade-off: more security offered generally buys a lower rate and a higher likelihood of approval, because it shifts risk off the lender's underwriting and onto a specific, realisable asset.

05The timing problem

Statutory accounts are, by design, old by the time a lender sees them. UK private limited companies have nine months after year end to file with Companies House — a December year end can legally still be showing December's numbers the following September, describing a business that may no longer exist in that form. Australia and New Zealand run different regimes again (more on that in section 08), but the common thread is the same: statutory accounts alone are rarely current enough to lend against.

That's exactly why lenders ask for management accounts, and the request isn't a box-ticking exercise. What makes a set useful to a credit assessor, rather than decorative, is specific: prepared on the same basis as the last statutory accounts, dated within roughly 60–90 days of the application, and accompanied by a short note on any material movement since the last filed year — a lost customer, a new contract, a one-off cost. An assessor left to guess why a number moved will usually guess conservatively.

06The common self-inflicted wounds

Most declines Deplexifi sees are not the result of a business being unfundable — they're the result of the application making the business look worse, or less trustworthy, than it actually is.

07A practical pre-application checklist

Before approaching any lender, the file that gets read fastest and taken most seriously generally has all of the following ready:

• Last two years' filed accounts (or since incorporation, if younger), plus management accounts within 60–90 days of the application date, prepared on a consistent basis.
• Six months of business bank statements for every operating account — not just the main one.
• An aged debtor and aged creditor listing, with any concentration above roughly 20–25% of the book flagged and explained before the lender finds it.
• A one-page reconciliation of every add-back claimed, with the source document for each one.
• A schedule of existing business debt — lender, balance, repayment, security — so the new facility can be serviceability-tested against the full picture, not a partial one.
• Confirmation of tax position: any arrangement, deferral or debt disclosed with a repayment plan attached.
• Clarity, before applying, on what each director is prepared to guarantee or secure — so that conversation happens once, deliberately, rather than being negotiated under pressure near completion.

08Where the three markets genuinely differ

It's tempting to treat "commercial lending" as one market with three postcodes. It isn't — the regulatory shape, the filing regime and the lender base differ enough that a checklist written for one doesn't transfer cleanly to another.

The accounts don't get better because a lender is reading them. They only get legible — and legible is what gets a fair decision instead of a fast decline.

None of this replaces a lender's own assessment, which will always be more thorough and more current than anything published here — and criteria at every lender named in this article change over time, so treat the specifics as illustrative of how assessment generally works, not as current terms to rely on. What doesn't change is the underlying discipline: numbers that hold together, disclosed early, presented the way the person reading them actually reads them.