What Do Lenders Look For When Assessing a Business?

Underwriters are not looking for perfection. They are looking for evidence that the business can afford the repayments and that nothing in the file suggests it will not. Understanding their checklist is the fastest way to a yes.

1. Affordability

The first question is always the same: can the business service this debt from its existing cash flow? Lenders look at EBITDA or net profit, add back non-cash items and directors' drawings where appropriate, and compare the result to the proposed annual repayments. A comfortable margin is what they want to see.

2. Bank statements

Three to six months of business bank statements tell an underwriter more than a set of accounts. They look for consistent income, regular payments to suppliers and HMRC, absence of returned items, and how the account behaves at the end of the month. Persistent reliance on the overdraft limit is a warning sign.

3. Trading history and accounts

Filed accounts confirm the pattern over time. Growing turnover with stable margins is ideal. A dip is fine if it is explained. Late-filed accounts are a red flag because they suggest poor financial control.

4. Existing borrowing

Lenders check what you already owe and how you have managed it. Existing facilities that are well serviced help your case; a stack of short-term loans taken in quick succession hurts it.

5. Directors

Personal credit files, homeowner status, experience in the sector and how long the directors have been in the business all matter, particularly for smaller companies where the business and its directors are effectively one and the same.

6. Purpose and plan

What is the money for and how will it generate the return that repays it? A specific purpose, whether a new van, a stock order or a fit-out, is easier to fund than "cash flow". If it is cash flow, explain why and what changes.

7. Sector and security

Some sectors attract more caution than others. Security, whether the asset being funded or property, can change a marginal decision into an approval.

How DNA Finance uses this

We review your business against these criteria before approaching any lender, fix the fixable issues, and present a complete, well-explained application to the lenders whose criteria you meet. That is why our clients get decisions faster and on better terms than going direct.