What does a lender look at that my accountant does not?

A lender is asking a different question. Year-end statements report the year that happened. A lender wants to know whether the business will produce the cash to repay him, how soon he will find out if it is not, and what he can recover if it does not.

So the lender looks forward and looks often. He looks at cash flow against the payments due, usually as a ratio written into your credit agreement. He looks at the covenants and how close you are to them. On an operating line, he looks at which receivables and inventory he will lend against, and he usually leaves out old receivables and anything concentrated in one customer. And he looks at whether your monthly reporting arrives on time, because late reporting is often the first sign he gets.

None of this needs a new set of books. It needs the same numbers, closed every month, and read the way the lender reads them before he does.

When the bank starts asking questions you cannot answer, the problem is rarely the answer. It is that nobody on your side worked out what the lender is really worried about.

What you can look at this week: find the covenants in your credit agreement and calculate last quarter against each one. Then age your receivables and mark anything past ninety days or owed by your largest customer. That is roughly what the lender will leave out.