How Covid-19 has reframed Lender Assessments for Small Business

A bank’s lens on business financials is generally a distant third to cashflow and tax minimisation. Except when it really matters.

It matters in 3 scenarios

- The owners wish to use their business income to substantiate a home loan.

- The business requires funding for growth

- An unprecedented event turns the world upside down and all stops are required to ensure the business comes out the other side.

If tax time wasn’t already complex enough when juggling a tax minimisation requirement with those of a lender, Covid-19 has added a degree of complexity for all businesses this year to consider. What flows out of this year’s financials has an impact on access to funding for the next 2-3 years.

Generally speaking, a lender will look at the last 2 years’ financials and tax returns as their measure of income sustainability. So what is reported this year is the baseline income result for any funding conversation up until at least July 2022 and likely into 2023.

Of course 2018 & 2019 financials are no longer the only figures a lender needs to review in making a lending decision today. Right now, and perhaps forevermore, they need to take a current and forward looking view as well. That means reviewing BAS, P&Ls and Bank Statements to ensure profit is in line with previous business performance, and have confidence that the business has a post-stimulus plan. In the early days, lenders put a hard ruler through restaurants, hospitality, tourism and the like. More recently they’ve been able to look through and see how some businesses have pivoted and used a number of levers to come out in front.

As always, the simpler the strategy and the financials, the easier it is to attract the funding a business, and family, need. Unfortunately, complex structures tend to land a loan application in the too hard basket unless the layers can be peeled back and a compelling case demonstrated.


For more tips & advice, contact Lanie Conquest or Nicola Tucker at Surf Coast Finance

With over 40 years combined banking & financial services experience, they help local families & businesses make smart financing decisions.

Ph: 03 5264 7702



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