- What matters most in a bank credit meeting is whether the company’s story is consistent with its numbers. The financial statements, cash projection and debt schedule should show the same picture.
- The core pack to prepare before the meeting: recent financial statements and interim figures, a list of debt and collateral, a cash flow projection, and the purpose of the loan and its source of repayment.
- Answering the bank’s questions in advance helps turn the meeting from information gathering into a decision meeting.
A credit application may be made when the need arises, at short notice and with scattered documents. The bank, meanwhile, assesses the application within its own credit process, trying to understand the company’s financial position and capacity to repay. This article explains what the finance side should prepare before the meeting. Every bank has its own credit policy and document list; the framework below does not replace the documents the bank asks for but aims to bring them together into a consistent whole.
The questions the bank wants answered
Banks assess credit in different ways, but the questions they seek to answer are similar:
- What will the loan be used for? Working capital, investment, refinancing existing debt.
- What cash will repay it? Operating cash, asset sales, shareholder support.
- Where does the company stand today? Profitability, leverage, liquidity and their trends.
- What if the plan does not materialise? Repayment capacity and collateral in a downside scenario.
- Can management be relied on? The consistency of the information given and whether past commitments were kept.
The financial pack to prepare
| Document | Content | Point to watch |
|---|---|---|
| Financial statements | Balance sheets and income statements for recent years; the independent audit report, if any | Consistency with the bank’s records and with tax returns |
| Interim figures | Year-to-date actuals compared with the same period last year | The close is current and reconciled |
| Debt schedule | Limit, utilisation, interest, maturity and collateral by bank | Principal repayments concentrated in the short term |
| Cash projection | Monthly or quarterly cash flow over the life of the loan | Assumptions compared with past performance |
| Receivables and inventory ageing | Overdue receivables, slow-moving stock | Doubtful items shown clearly |
| Purpose note | What the loan is for, how it will be used and the source of repayment | Short and supported by numbers |
Consistency check
Banks may compare the figures a company presents with their own records and with other sources. Before the meeting, check:
- Is an explanation ready for differences between the financial statements presented and those underlying the tax returns?
- Do the balances in the debt list reconcile to bank statements?
- Can the sales and margin assumptions in the projection be explained by recent actuals?
- If the projection assumes short-term loans will be rolled over, is that stated clearly?
An unexplained difference raises more questions than the figure itself.
Showing repayment capacity
Repayment capacity cannot be described by a single ratio, but it can be summarised by one. The ratio of operating cash to debt service can be used for this purpose. For the calculation and differences in definition, see DSCR. Showing at least one downside scenario alongside the ratio shows that management sees the risks. For how to build a scenario, see the collection delay stress test.
The meeting itself
- A short presentation: The business, recent performance, the purpose of the loan and the source of repayment in a few pages.
- Figures ready for questions: Customer concentration, currency position, investment plan, payments to shareholders.
- One spokesperson: Agree in advance who speaks to the numbers; the bank should not hear different figures from different people.
- Follow-up: Keep a list of additional information requested and send it on the promised date.
Common mistakes
- Preparing a projection only for the loan: If the plan management uses differs from the plan given to the bank, the inconsistency will surface sooner or later.
- Withholding negative information: When information such as overdue receivables or a lost customer comes out later, trust suffers.
- Leaving the purpose vague: “General business needs” leaves the source of repayment unanswered.
- Last-minute preparation: A meeting held with unreconciled figures may need a second meeting.
What it means for management
Preparing for a credit meeting means the company asking itself, in advance, the questions the bank will ask. Consistent financial statements, a reconciled debt list and a cash projection with explained assumptions speed up the meeting and strengthen management’s credibility. The credit decision belongs to the bank; preparation does not guarantee it, but it prevents the decision from resting on incomplete or inconsistent information.
Banks’ credit policies, document lists and assessment methods differ; obtain the current document list from the bank before the meeting. Method: This article is professional analysis; it makes no claim that rests on legislation, a provision of a standard or statistics.
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