The difference between a successful loan application and a rejected one rarely comes down to the business itself. It comes down to how the financials are presented.
Lenders make decisions based on risk. Every document you provide is evaluated through a single lens: can this business reliably repay this loan? If your financials are messy, incomplete, or unrealistic, the answer defaults to no, regardless of how strong the underlying business is.
This guide walks through exactly what Australian lenders look at, in what order, and how to prepare each element so your application gives itself the best chance of approval.
Lending criteria have tightened in recent years. Under APRA's updated APS 220 standard, lenders now prioritise cash flow resilience over historical profitability. They want to see how your business would handle a 30% revenue drop, not just that you made money last year.
The general order of scrutiny is:
Different lenders have different thresholds:
Regardless of lender type, most require a minimum annual turnover (commonly $100,000 or more) and current BAS and tax lodgements. Compliance is a gating factor. If your BAS is overdue or your tax returns are not lodged, most lenders will not even begin assessing your application.
Your P&L tells a lender whether your business is viable and how your revenue and cost structure looks over time. Before submitting, make sure it is clean and accurate.
Key steps to clean up your P&L:
Lenders look at trends, not just a single period. Two to three years of clean, consistently categorised P&L data lets them see whether your business is growing, stable, or declining.
Your balance sheet shows your financial position at a point in time: what you own, what you owe, and the net equity in the business. Several red flags on a balance sheet can end an application before it reaches detailed assessment.
Negative equity or very thin net worth. If your liabilities exceed your assets, it signals the business is technically insolvent or overleveraged. This is one of the most common deal-killers.
High debtor days. A large, aging debtor ledger, particularly with amounts over 90 days outstanding, signals collection problems and cash flow risk. The exception is if you are specifically applying for invoice financing, where the debtor ledger is the asset being financed.
Negative working capital. If your current liabilities exceed your current assets, your business cannot cover its short-term obligations from short-term resources. Lenders view this as a structural problem.
Undocumented director's loans. Money flowing between directors and the company without clear documentation makes the financial position murky and raises governance concerns.
Large overdue payables. If you owe significant amounts to suppliers or the ATO that are past due, lenders see a business that is already struggling to meet its obligations.
Inconsistencies. If the balance sheet does not reconcile with the P&L and cash flow statement, or if there are unexplained movements between periods, the entire set of financials loses credibility.
Cash flow forecasts are arguably the most important document in your application. Lenders want to see a 12-month projection (some request up to 24 months) that demonstrates how you will repay the loan from operating cash flow.
Key requirements for a strong forecast:
This is non-negotiable. Up-to-date BAS lodgements and tax returns are a prerequisite for serious consideration by any lender. If your lodgements are overdue, resolve this before you apply.
Key compliance requirements:
If you have compliance gaps, address them before submitting your application. Applying with overdue lodgements almost always results in either an immediate rejection or a request to fix the issue first, adding weeks to the process.
Personal guarantees are standard for most Australian SME lending. Lenders will require directors to personally guarantee the loan, which means they assess the directors' financial position alongside the business.
What lenders look at for directors:
Having "skin in the game" through a personal guarantee is expected and not inherently negative. It becomes a problem only when the director's personal financial position is weak or overleveraged.
Knowing what goes wrong is just as important as knowing what to do right. The most common mistakes include:
Before you submit, make sure you have the following prepared:
Having all of these ready before you approach a lender saves weeks and demonstrates that your business is well managed.
If you are an Australian small business owner preparing for a loan application and your financials are not where they need to be, Scale Suite can help.
Scale Suite provides embedded finance teams for Australian SMEs. Our team cleans up your books, prepares lender-grade financial statements, builds cash flow forecasts, and ensures your BAS and tax compliance is current before you apply.
We regularly help clients prepare for loan applications, investor due diligence, and grant submissions. Our fractional CFO service provides the strategic financial oversight that strengthens your application, while our bookkeeping team ensures the underlying data is accurate and up to date.
As a registered BAS agent and Chartered Accountant practice based in Sydney, Scale Suite provides the financial credibility that lenders look for. We do not just prepare the documents. We help you understand what lenders are really assessing and position your application accordingly.
Whether you need a bookkeeper to reconcile your accounts, a fractional CFO to build your cash flow forecast and business case, or a complete outsourced finance team to manage your financial operations, Scale Suite delivers.
Learn more at www.scalesuite.com.au
You need business tax returns (two to three years), personal tax returns for directors (two years), year-to-date P&L and balance sheet, six months of bank statements, a 12-month cash flow forecast, current BAS lodgement confirmations, a business plan, aged debtor and creditor reports, director credit reports, and asset valuations if applying for a secured loan.
Australian lenders prioritise cash flow and serviceability first, assessing whether your business can repay the loan from operating cash flow under both normal and stressed conditions. After that, they assess the purpose of funds, trading history, collateral, and credit history in roughly that order.
Major banks typically require two to three years of financial history. Non-bank ADIs require 12 to 24 months. Fintech lenders may accept as little as 6 to 12 months. Longer and more consistent trading history significantly improves approval rates and terms.
The most common red flags include negative equity, high debtor days (particularly over 90 days), negative working capital, undocumented director's loans, large overdue payables, and inconsistencies between the balance sheet and other financial statements.
Yes. Current BAS and tax lodgements are a non-negotiable requirement for virtually all Australian business lenders. If your BAS is overdue, most lenders will not begin assessing your application until compliance is resolved. This is often described as a "gating factor" in the assessment process.
A strong cash flow forecast is monthly (not quarterly or annual), uses conservative and evidence-based assumptions, includes the loan drawdown and scheduled repayments, links the capital to specific revenue outcomes, and includes a sensitivity analysis showing performance under a 10 to 30% revenue decline. Most lenders expect an Excel-based format.
A broker can help you navigate the lending market, particularly if you are unsure which lender type suits your needs. Brokers have relationships across major banks, non-bank ADIs, and fintech lenders and can match your profile to the most appropriate options. They can also help you prepare your documentation and anticipate lender questions.
A personal guarantee is a commitment by the business directors to personally repay the loan if the business cannot. It is standard for most Australian SME lending. Lenders will assess your personal credit history, tax returns, and net worth as part of the guarantee assessment. Having a strong personal financial position supports rather than hinders your application.
The number one cause of delays is incomplete documentation. Submitting a partial package can add 7 to 14 days for resubmission alone. Other common delays include unrealistic property valuations for secured loans (adding 5 to 7 days in regional areas), unresolved BAS or ATO compliance issues, and lender questions triggered by unexplained anomalies in your financials.
Frame your application around growth and investment rather than survival. Lenders assess "growth capital" applications more favourably than those covering operational shortfalls. Explicitly connect the loan to revenue generation outcomes and demonstrate that you have modelled repayment under conservative assumptions.
Scale Suite delivers embedded finance and human resource services for ambitious Australian businesses.Our Sydney-based team integrates with your daily operations through a shared platform, working like part of your internal staff but with senior-level expertise. From complete bookkeeping to strategic CFO insights, we deliver better outcomes than a single hire - without the recruitment risk, training time, or full-time salary commitment.
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