When you apply for business finance—whether it’s equipment finance, a line of credit, or a small business loan—your financial statements do a lot of the talking for you. For many lenders, these documents are the first real insight into your business’s financial health, stability, and ability to repay the loan. So, what exactly are lenders looking for in your financials? And how can you present your business in the best possible light?
This article will walk you through the key areas lenders assess, how to prepare your financial statements, and tips to strengthen your application—especially in the competitive world of small business loans in Australia.
Table of Contents
- Why Financial Statements Matter to Lenders
- The Key Financial Statements Lenders Want
- What Lenders Look for in Each Statement
- How to Make Your Financials Lender-Ready
- Common Red Flags (and How to Fix Them)
- Final Thoughts: Get Finance-Ready with Capital Plus
Why Financial Statements Matter to Lenders
Financial statements give lenders a snapshot of your business’s financial position and recent performance. They’re used to:
- Assess risk
- Estimate your repayment capacity
- Evaluate the value of any assets (especially for equipment finance)
- Understand how well you manage cash flow
In short, lenders want to feel confident that you can meet the repayments and that you’re running a viable business.
The Key Financial Statements Lenders Want
When applying for business finance in Australia, lenders will typically request:
1. Profit and Loss Statement (P&L)
Also known as an income statement, this shows your revenue, expenses, and net profit (or loss) over a set period.
2. Balance Sheet
Provides a snapshot of your assets, liabilities, and owner’s equity at a specific point in time.
3. Cash Flow Statement
Details how cash moves in and out of your business—vital for understanding liquidity.
4. BAS Statements and Tax Returns
Help confirm that your reported financials align with what’s submitted to the ATO.
What Lenders Look for in Each Statement
Let’s break it down a bit further.
Profit and Loss Statement
Lenders want to see:
- Consistent or growing revenue
- Reasonable cost of goods sold (COGS)
- Profit margins that make sense for your industry
- Evidence that your business can generate enough profit to service debt
Balance Sheet
They’re assessing:
- Asset value (especially for secured loans or equipment finance)
- Liability levels—too much debt may be a red flag
- Equity—the more the owners have invested, the better
Cash Flow Statement
Cash flow is one of the biggest reasons businesses struggle. Lenders will look at:
- Whether you have positive operating cash flow
- How much cash you’re keeping in reserve
- How reliant you are on external financing to stay afloat
How to Make Your Financials Lender-Ready
Getting your financial statements in shape is more than just good record-keeping—it’s part of building a case for why your business is a safe bet.
Tips to Strengthen Your Application:
- Work with a registered accountant – A well-prepared set of statements by a qualified professional increases lender confidence.
- Be consistent across documents – Discrepancies between tax returns and internal financials are a red flag.
- Update your balance sheet – Outdated assets or incorrect liabilities will throw off your numbers.
- Explain any anomalies – If you had a rough quarter due to COVID, seasonality, or another reason, include a brief note or addendum.
- Show forward planning – Forecasts or budgets can support your case, especially for growth-related finance.
Common Red Flags (and How to Fix Them)
Some issues in your statements can stall or sink your finance application. Here are a few to watch out for:
- Negative cash flow – Consider tightening expenses or restructuring repayments.
- Erratic revenue trends – Try to show stabilisation or explain the fluctuations.
- High debt-to-equity ratio – You might need to reduce liabilities or invest more capital.
- Tax debt – Many lenders won’t lend if you owe the ATO unless you’re on a payment plan.
If any of these apply to you, it doesn’t mean you’re out of options. Brokers like Capital Plus Finance can help match you with lenders who are more flexible or specialise in your industry.
Final Thoughts: Get Finance-Ready with Capital Plus
Understanding what lenders want to see in your financial statements puts you in a stronger position to secure business finance—whether it’s for growth, cash flow support, or investing in equipment.
If you’re unsure how your financials stack up, Capital Plus Finance can help. We’ll work with you to prepare a strong finance application and connect you with lenders that suit your needs.
👉 Talk to Capital Plus Finance today about small business loans, equipment finance, and other tailored solutions for Australian businesses.
About Capital Plus Finance
Capital Plus Finance is a trusted equipment finance broker based in Sydney and The Hills Shire, connecting Australian businesses to over 40 reputable lenders. Whether you need working capital or a vehicle loan, we’ll help you find the right finance fit.
