A lender’s first impression of your business usually comes from its numbers. Clean, current accounts let them understand how you trade without a long list of follow-up questions. Messy or out-of-date records slow everything down and can make a sound business look riskier than it is. A few weeks of preparation before you apply is often time well spent.
Bring your bookkeeping up to date
Before anything else, make sure your records reflect what has actually happened. That means every bank account reconciled, sales and purchase invoices entered, and personal spending kept separate from business spending.
- Reconcile all business bank and card accounts to the most recent month end.
- Clear old unallocated payments and suspense items.
- Check your debtor list for invoices that will never be paid and deal with them properly.
- Make sure loans, hire purchase and lease agreements show the correct balances.
- Record any money directors have lent to or taken from the company.
Check your filed accounts
Lenders will look at your most recent filed accounts and may check Companies House themselves. Private limited companies usually have nine months after their year end to file accounts, and late filing is visible to anyone who looks. If your last set is overdue or due soon, getting it filed before you apply avoids an awkward question. LLPs should check that their filings and member information are up to date too.
If last year’s accounts show a loss or a dip in profit, prepare a short explanation. A one-off cost, a change in strategy or an unusual year is easier to accept when you raise it first.
Prepare management accounts
Filed accounts can be many months old by the time you apply. Management accounts show how the business is trading now. A simple profit and loss account and balance sheet for the year to date, with a comparison against the same period last year, is usually enough. Your accounting software or accountant can produce these quickly once the bookkeeping is current.
Know your numbers before you are asked
Being able to answer basic questions confidently helps a lender understand the business and trust the figures.
- Turnover and profit for the last full year and the year to date.
- Your gross margin and how it has changed.
- Total existing borrowing and monthly repayments.
- How long customers take to pay on average.
- Any tax arrears and any arrangement in place with HMRC.
Make the story consistent
The figures on your application, your accounts and your bank statements should agree. If they don’t, have the reason ready. Lenders don’t expect every business to have perfect records, but they do expect the explanation to make sense. A brief note from your accountant can help where there are unusual items, such as a large one-off sale, a grant or a change of year end.
Finally, think about how the borrowing fits the numbers. Show what the money is for, what it will change and how the business will afford the repayments. When the accounts and the plan point the same way, the conversation becomes much more straightforward.
This article is general information, not financial advice. Loanleaf is an introduction service, not a lender or broker, and is not authorised by the FCA.
