Mr says
Most lenders start with two questions: what is the money for, and how will it be repaid? Then they read your bank statements for turnover and how you manage cash, check any security you're offering, look at your ATO position and lodgements, and review the credit history of the business and its directors. A clear purpose and a believable repayment plan carry more weight than most owners expect.
Key points
- Purpose and repayment plan come first, even before the numbers.
- Bank statements are read for consistency and conduct, not just totals.
- Security can offset weaknesses elsewhere in the file.
- Unlodged ATO statements worry lenders more than a managed tax debt.
What’s the very first question?
It’s not your credit score. It’s “what is the money for?” — followed immediately by “how will it come back?”
Those two questions shape everything else. They tell the lender which kind of loan makes sense, how long it should run, what evidence to ask for and how much risk it’s being asked to take. business.gov.au lists your financial health, business plan, assets and creditworthiness as the things lenders assess — and the purpose-and-repayment story is the thread that ties them together.
“Working capital” isn’t a purpose. “Paying a $60k supplier invoice to secure a 7% early-payment discount, repaid over six months from the extra margin” is. The second one gets a faster, more confident answer every time.
What happens next, in order?
Every lender has its own process, but the order Mr sees most often is:
- Purpose and repayment — does the request make sense?
- Bank statements — does the business’s real cash flow support it?
- Security — what’s the fallback if things go wrong?
- Tax position — are BAS and returns lodged, and is any ATO debt being managed?
- Credit history — of the business and each director.
- Documents and identity — confirming what you’ve told them.
What are they reading in my bank statements?
Bank statements are the closest thing a lender has to watching your business run. They read for:
| What they check | Good sign | Worrying sign |
|---|---|---|
| Turnover level | Matches what you stated | Lower than claimed |
| Consistency | Regular deposits month to month | One big month, several empty ones |
| Account conduct | Rarely overdrawn, no dishonours | Frequent overdrawn days, bounced payments |
| Other lenders | Few, manageable repayments | Several daily or weekly repayments |
| Unusual transfers | Explained | Large, unexplained movements |
| Trend | Stable or rising balances | Steady decline |
You can’t rewrite history, but you can explain it. A note on a bad month (“major customer paid 60 days late; paid in full in March”) turns a red flag into a footnote.
How much does security change the picture?
A lot. Property with equity gives the lender a fallback, which means it can be more relaxed about other weaknesses — a short trading record, a credit blemish, a tax debt. Without property, the lender relies on the business’s cash flow and usually a director’s guarantee, so it scrutinises the statements more closely. Our comparison of secured and unsecured loans goes into the trade-offs.
Why do lenders ask about the ATO so early?
Because tax debt sits ahead of most other things in a business’s priorities, and the ATO has real collection powers. Lenders look at two separate things:
- Lodgements. Are BAS and tax returns up to date? Unlodged statements are unknown risk, and lenders hate unknowns.
- Debt. Is there a tax debt, and if so is there a plan? A managed debt is often workable. A large unmanaged one may even show up on your business’s credit file: once $100,000 or more has gone unpaid for over 90 days and the business has gone quiet on the ATO, the ATO is able to tell the credit bureaus about it.
If that’s your situation, read whether you can get a business loan with an ATO debt.
Where does credit history fit?
Further down the list than people think, but it’s there. Lenders check the business and its directors for defaults, judgments, recent credit applications and past insolvency. A clean file helps. A bruised one doesn’t end the conversation — it changes which lenders and structures are realistic. See business loans with bad credit.
What should I have ready?
The short list:
- a clear, one-paragraph purpose and repayment plan;
- six months of business bank statements;
- your latest BAS (and tax returns or financials for larger loans);
- details of any property you might offer;
- your ATO position, in writing if there’s a debt;
- ID for each director.
The full list, with what each document proves, is on what documents you need for a business loan. For a personalised version, run Mr’s loan-readiness interview.
How does the lender check what I’ve told it?
Verification is a normal part of every application, so expect it. Lenders commonly confirm your identity, check your ABN and how long it has been active, search the company register if you trade through a company, run credit checks on the business and its directors once you decide to proceed, and compare the turnover you stated with your bank statements and BAS. For property-secured loans, they search the title and order a valuation.
The practical lesson: the details you put on the enquiry form should match what the documents will show. If turnover dipped last quarter, say so. If there’s a second loan over the property, mention it. Small gaps between what you said and what the paperwork shows slow an application far more than an honest explanation would.
Do lenders look at the people as well as the business?
Yes, particularly in smaller businesses where the owners are the business. They look at how long you’ve worked in the industry, whether you’ve run a business before, your personal credit history and, for guarantors, your personal position. A first-time owner with fifteen years’ trade experience reads very differently from someone new to the industry. Put your experience in the enquiry — it’s part of the case.
How does your business look to a lender?
The fastest way to find out is to ask someone who reads files for a living. Send Mr a 60-second enquiry — what the money is for, how it will be repaid, your turnover, any property and your ATO position. There’s no credit check to enquire, your details aren’t scattered across a list of lenders, and a real person calls to tell you how your file reads and what would strengthen it. The more accurate the form, the more useful that call. See if you qualify.
Frequently asked questions
Do lenders care more about credit score or cash flow?
For most business loans, cash flow and the ability to repay carry more weight. Credit history still matters, especially for unsecured lending, but a strong repayment story can offset a past blemish.
What do lenders look for in bank statements?
Regular deposits, the overall level of turnover, how often the account is overdrawn or payments bounce, repayments to other lenders, large unexplained transfers and whether the balance trends up or down.
Does the reason for the loan really matter?
Yes. A specific, costed purpose that earns or saves money is far easier to approve than vague working capital. It also tells the lender which loan structure suits.
What is the first thing I should prepare?
A one-paragraph explanation of what the money is for and how it will be repaid, plus six months of business bank statements. Those two things answer the lender's first questions.