What lenders actually want to see.

What the bank actually looks at

Before a banker ever talks rate, they’re answering one question: will this business generate enough cash to make the payment every month, even in a bad stretch? Everything they request exists to answer it. The core is a current P&L and balance sheet — not last year’s, not “I’ll get you something after tax season.” Current, closed, and reconciled to the bank statements.

The second thing they check is consistency. Your books, your filed tax returns, and what you say across the desk need to tell one story. Small differences are normal and explainable. Big unexplained gaps between what the books show and what the returns show will stall a deal faster than weak numbers will — weak is workable, contradictory is not.

And they look at you. For most small-business loans you’re signing personally, so your personal credit, personal debts, and personal financial statement ride along with the business numbers. Bankers lend to the whole picture — the company and the person guaranteeing it — and it helps to walk in already knowing that’s the frame.

The package that gets a yes

Start with two full years of year-end financial statements — P&L and balance sheet — plus an interim set for the current year, closed within the last 60 days. Stale interim numbers signal that nobody is watching the books month to month, and that alone is enough to make a careful banker slow down.

Add an AR aging — the report showing who owes you money and how old each invoice is — and an AP aging, the same view of what you owe vendors. Together they tell the bank how collectible your revenue really is, and whether you’ve been quietly financing the business by stretching your vendors past terms.

Then a debt schedule: every loan, line, and financed vehicle on one page — lender, balance, payment, rate, maturity date. Bankers will build this themselves from your statements if you don’t provide it. Handing it over already finished marks you as an owner who knows their obligations cold, which is exactly who they want to lend to.

Round it out with two to three years of filed business and personal tax returns and a personal financial statement. None of this is exotic. What gets a yes isn’t a fancy package — it’s a complete one, delivered in days instead of weeks, with numbers that agree with each other from page to page.

The ratios, in plain English

Debt service coverage is the big one: the cash the business generates in a year, measured against a year of loan payments — including the new one you’re asking for. Banks want cushion, meaningfully more cash than payments, not a photo finish. If the deal only works when everything goes right, expect a polite no.

Leverage is how much of the company is funded by debt versus what you’ve actually built up in it. High leverage doesn’t kill a deal by itself, but it shrinks your margin for error in the bank’s eyes — and it puts that much more weight on your personal guarantee when they price the risk.

Current ratio is the short-term version: what you can turn into cash soon — money in the bank, receivables — against what comes due soon. Below one, you owe more in the near term than you can readily raise, and the banker will ask how you plan to cover the gap. Have that answer ready before they ask it.

What makes a banker nervous

Negative equity — a balance sheet showing the company owes more than it owns — is the first eyebrow-raiser. Sometimes it’s real trouble; often it’s just years of messy books and owner draws that were never recorded properly. Either way you’ll be explaining it, so know the reason and the fix before anyone has to ask.

Big swings without a story are next. Revenue up 60 percent, margin down 15, a loan that appeared and vanished mid-year. Bankers don’t need your history to be smooth — they need it to be explained. A one-page narrative that walks through the bumps in plain language turns a red flag into a footnote.

Personal spending running through the business is the quiet killer. Trucks, trips, the lake house utilities — bankers see it constantly, and it does two kinds of damage at once: it muddies your real margins, and it signals that nothing in the books can be taken at face value without digging.

The worst one: books that contradict the tax returns. If your P&L shows profit the returns never reported — or the reverse — the banker has to decide which document is lying to them, and there is no good answer to that question. Get the two reconciled before anyone outside the company looks at either.

The 90-day prep plan

Days 1–30: get the books current and reconciled. Every bank and card feed matched to statements, personal spending pulled out or clearly tagged, the balance sheet cleaned up until it says something true. This is the heavy lift of the whole plan, and it’s exactly what our Catch-Up Cleanup does as a one-time fixed quote if you’re starting from behind.

Days 31–60: close each month like it matters, because now it does. A monthly close means the numbers get locked, checked, and finished within a couple of weeks of month-end. Two clean, on-time closes in a row are evidence that the numbers you hand the bank will still be true a quarter from now — which is what the bank is really buying.

Use this stretch to work the agings, too. Chase the receivables sitting past 60 days and either collect them or write them off, because a receivables list padded with dead invoices quietly undermines everything else in the package. Do the same honesty pass on old vendor balances.

Days 61–90: build the story and assemble the package. One page: what the business does, why you’re borrowing, what the money produces, and how the payment gets covered even if revenue dips. Walking in complete and rehearsed changes the entire meeting — you’re presenting a case, not asking a favor.

Where bonding is different for contractors

If you’re a contractor chasing bonded work, the surety looks at everything above and then goes a layer deeper. The document they live in is your WIP schedule — work in progress: each open job’s contract value, costs to date, billings to date, and estimated cost to finish. It shows whether you earn money as you build, or discover losses at the end.

Sureties also price capacity: whether your working capital and track record support the size of job you want bonded. Bond capacity runs roughly as a multiple of your financial strength, so every dollar of profit you leave in the company and every point of working capital you protect literally buys room to bid bigger work next season.

The pattern they hate most is profit fade — jobs that looked healthy at fifty percent complete and shrank by closeout, which tells them your estimates flatter early and confess late. Consistent, slightly conservative cost-to-finish numbers beat optimistic ones every single time, even when the optimistic ones are occasionally right.

The preparation is the same 90-day plan, plus the WIP discipline: job-level cost tracking feeding an updated schedule at least quarterly. If you want bigger bonded jobs next year, the path runs through cleaner statements this year. That’s CFO-level work — and it’s exactly the kind of project our CFO Core engagement exists to run.