I’ve sat across the desk from plenty of bankers in forty years of building, buying, and occasionally bailing out companies. One thing never changes: the fellow with the neat folder gets the money; the one who waves his arms and says, "Sales are up!" gets shown the door. Alex Fenton over at FBX Capital just told the same tale in plain English—only he used the polite phrase "preparation matters." Down here we just say, "Show me the books or keep walking."
Why Lenders Decline Good Folks with "Good" Sales
Bankers aren’t mean; they’re married to rules written in blood after the last recession. They plug your numbers into a matrix and out pops a color—green, yellow, red. Profit on paper don’t pay interest; cash in the checking account does. Fenton puts it this way:
"A company can be profitable on paper and still struggle to meet loan repayments if cash is tied up in stock or unpaid invoices."
Translation: your shiny revenue figure means squat if the dough is parked in somebody else’s pasture.
The Three Papers You’d Better Carry
- Profit & Loss—current within 45 days, not the copy you sent Uncle Sam last April.
- Balance Sheet—assets, liabilities, and whatever you call owner equity. Make sure it foots; typos smell like smoke.
- Cash-Flow Forecast—next 12 months, three versions: best, expected, and oh-crap. If you don’t know how to build one, hire a kid with Excel for two hundred bucks. It’s cheaper than a declined application.
The Story Behind the Numbers
Numbers talk, but they mumble. You’ve got to translate. Profits fell off a cliff last year? Fine—tell the banker you doubled headcount to land a three-year government contract. Show the purchase order. Lenders aren’t looking for perfection; they want a plot line that makes sense.
Keep It Short, Keep It True
I once watched a owner spend twenty minutes on a speech about "synergistic market penetration." The banker stared at his watch. Finally I said, "Jimmy needed forklifts, bought five, doubled throughput, and paid the note early." Loan approved in ten minutes. Moral: talk like you’re at the feed store, not the Harvard Club.
Vague Ask, Vague Answer—Usually Expensive
Fenton nails it again:
"‘Working capital’ is one of the most frequently used phrases in loan applications, but on its own, it tells lenders very little."
Ask for 200 grand because "stuff happens" and you’ll get a 28 % APR with daily drafts. Ask for 120 grand to buy a CNC machine that cuts cycle time 30 %, show the quote and the purchase contract, and you’ll sniff single-digit rates. Specificity drops risk; risk drops price.
Timing: Don’t Wait Until the Coffers Are Empty
Nothing smells like desperation except a man asking for a loan the same week payroll hits the overdraft. Line up credit when you don’t need it; that’s when it’s cheap. Walk in broke and you’ll pay broker fees that’d make a used-car salesman blush.
A Simple Tool That Keeps Your Numbers Presentable
Most freelancers I know can’t spell "chart of accounts," but they still need invoices that look professional and records that don’t resemble a shoebox. That’s why I point folks to Invoice Gini. You literally say, "Send Acme Design 4,200 bucks for the logo project," and it spits out a clean PDF, logs the receivable, and nudges the client when he’s late. When the banker asks for your aging report, you export it instead of rifling through coffee-stained envelopes.
Bottom Line
Clean books, clear purpose, and a story that holds water—do those three and you’ll beat 80 % of the applicants whining that "banks don’t lend." The money’s there; it just walks past the messy desks.
Source: SME: preparing for investment