EXPLORE THE FULL CURRICULUM
BeLOW, BEfore YOU BUY

Real-world video examples of how lenders view documentation to determine loan eligibility.

3. How lenders read your business tax returns

Lenders aren’t just looking at your bottom line; they are looking for consistency and debt-service coverage. They will jump straight to your “Net Income” and then add back non-cash expenses like depreciation. They use the last two to three years of returns to see if your revenue is trending upward or if the business is in a period of decline.

4. How lenders read your profit and loss statement

Your profit and loss (P&L) statement tells a story. We show you how lenders calculate “add-backs” to see your true cash flow. Beyond the totals, lenders look at your operating margins to see how efficiently you manage costs. They will specifically look for “one-time” expenses—like a legal settlement or a large equipment repair—that can be “added back” to your profit to show you actually have more cash available to repay a loan than it appears.

5. How lenders read your financial projections

For lenders, projections are a test of your realism and preparation. They compare your “Pro Forma” statements against industry benchmarks to see if your growth targets are achievable. If your projections show a 500% increase in revenue with no increase in marketing spend, it will signal a red flag regarding your business logic.

6. How lenders read your bank statements

Think of bank statements as a “health check” of your daily habits. Lenders look for average daily balances to ensure you aren’t living “hand-to-mouth.” They also scan for NSF (non-sufficient funds) fees, consistent payroll withdrawals, and whether your deposits align with the revenue reported on your tax returns.

7. What lenders think about your stated loan purposes

Lenders prefer “growth-oriented” debt over “survival” debt. If your purpose is working capital for a new contract or purchasing equipment that increases production, you are a lower risk. If the purpose is “to pay off other high-interest debt” or “cover general expenses,” they may worry the business is struggling to stay afloat.

8. How lenders read your business plan

Lenders don’t read a business plan like a novel; they read it like a risk assessment. They focus heavily on the Executive Summary and the Management Team section. They want to see that you have a “Plan B” for market downturns and that you deeply understand your competition and target demographic.

9. What lenders require from start-ups

Since start-ups lack a financial track record, lenders shift their focus to the borrower’s character and “skin in the game.” You will likely need to show a significant personal injection of capital (usually 10–30% of the project cost) and provide a secondary source of income or a strong cosigner to mitigate the high risk of a new venture.

10. How lenders read your credit report

It isn’t just about the three-digit score. Lenders look at your credit utilization and payment history. They are specifically looking for any “derogatory marks” like tax liens or bankruptcies. Even with a high score, a history of late payments to previous creditors can suggest a lack of financial discipline.

11. What lenders think about your personal assets and collateral

Collateral is the lender’s safety net. They evaluate your personal assets—such as real estate, investments, or equipment—based on their “liquidation value,” not just their market value. They prefer “hard assets” (like a building) over “soft assets” (like inventory), as they are easier to value and sell if the loan goes into default.

12. How lenders might calculate loan eligibility

Demystify a typical formula lenders might use to decide if you can afford a loan (and how much), known as the debt service coverage ratio.

13. HOW LENDERS SEE Red Flags & Deal Breakers

Identify the common mistakes in business financials that lead to automatic denials—and how to fix them before you apply.