A lender's credit analyst reads your financials differently to your accountant, your CFO, or the ATO. This guide explains what they look for, what triggers concern, and how to present your financials in the most favourable — and accurate — light.
Your tax return is written to minimise tax. A lender's credit analyst reads it to assess risk and repayment capacity. These are different objectives — and the gap between them creates some of the most common problems in commercial finance submissions.
Is revenue growing, flat, or declining? A declining revenue trend is a red flag that needs to be explained — ideally before the analyst asks. A flat trend in a growing market may also attract questions.
If gross margin is compressing year-on-year, that suggests input cost pressure or pricing power erosion. A credit analyst will want to understand why — and whether the trend will continue.
Net profit after tax is a poor proxy for cash generation. Analysts work from EBITDA (or a variation) to understand the actual cash the business generates before financial engineering.
If the director draws $350,000 from a business with $1.2M in revenue, an analyst will ask whether a replacement manager could be hired for less — and whether the remaining profit is real or illusory.
A year where revenue was unusually high due to a one-off contract, asset sale, or government grant will be adjusted out. If you're relying on that year for serviceability, we need to either support it with a narrative or select a lender who uses a multi-year average.
A balance sheet showing more liabilities than assets is concerning — unless it can be explained by above-market dividend payments, related-party loans, or asset-light operating structures. Context and narrative matter enormously.
Management fees, intercompany loans, and related-party rent arrangements are legitimate — but they require explanation. Unexplained related-party flows can make an analyst question whether the reported profitability is real.
A significant ATO debt, even if in an active payment plan, reduces net equity and is a direct charge on cash flow. It needs to be disclosed, quantified, and addressed in the credit narrative — proactively.
Before we submit to any lender, we build a credit memo in the same format an institutional analyst uses. This process identifies every red flag in your financials — and addresses it with narrative, add-backs, or lender selection — before the analyst gets to ask. It's the difference between a clean first read and a round of information requests.
Start a Free Finance Assessment →We'll review your last two years of financials through a credit lens — at no cost and no obligation — and give you a clear view of how lenders would assess your position.
General Advice Warning: Information in this guide is general in nature and does not constitute accounting or tax advice.
