CARES Works · The Debrief · Clean Books Series · 3 of 3
The 7 Things a Lender Checks First (Before Anyone Reads Your Business Plan)
You spent a week on the narrative. The underwriter spends nine minutes on the numbers, and the numbers decide. Here's the nine minutes.
Every loan officer I've ever worked with, across thirty-five years of buying buses, financing garages, and refinancing things that should never have been financed in the first place, runs the same quiet checklist before they read a single word you wrote about your vision. They'd never call it a checklist. But it's seven things, it's always the same seven, and if two of them come back wrong, the vision never gets read.
Here they are, in the order they actually get checked.
1. Do the financials match the tax returns?
The very first thing. The underwriter puts your P&L next to your filed return for the same year and looks for the same net income. A small, explained difference is fine. A large or unexplained one means one of the two documents is wrong, and since the return was signed under penalty of perjury, the loser is your P&L. From that moment, everything else you hand them is "management-prepared," which is bank language for "we'll believe it when we see it."
2. Debt service coverage
This is the number the loan lives or dies on. Take your net operating income, add back interest, depreciation, and amortization, then divide by the total annual payments on all your debt including the new loan. Most lenders want to see 1.25 or better, meaning $1.25 of cash flow for every $1.00 of payments. If your books are messy, this ratio is unknowable, and unknowable rounds down to no.
3. Are the balance sheet debts real and complete?
The underwriter pulls your credit and compares it to your balance sheet. If there's a $48,000 equipment loan on your credit report that isn't on your books, or a credit card balance that's twice what your books show, the conversation changes. Not because of the debt. Because of the gap. Every liability, at the current balance, tied to a statement. That's the whole ask.
4. Is the cash number believable?
They'll ask for bank statements and compare the ending balances to the cash on your balance sheet. Unreconciled books mean the two never match, and when cash is wrong, the underwriter assumes everything downstream of cash is wrong too. This one is fixable in a day if the feeds are intact. It's fatal if nobody's done it in two years.
5. Where's the owner's money?
Draws, contributions, loans to and from the owner, personal spending that ran through the business. Lenders don't punish owner activity. They punish owner activity they can't see. A clean "Owner Draw" account and a clean "Loan from Shareholder" account tell them you know where the line is. Personal spending buried in "Office Expense" tells them you don't, and they'll wonder what else is buried.
6. Do the trends make sense?
Three years side by side. They're looking for a story the numbers tell on their own: growth, stability, a rough year with a reason. What they can't accept is noise. Revenue that swings 40% because someone changed how they recorded deposits. Margins that jump because cost of goods got recoded to overhead. Noise looks like risk even when it's just bad bookkeeping, and it gets priced like risk.
7. Can you produce it fast?
The one nobody mentions. When the underwriter asks for an interim P&L, an AR aging, and the last three bank statements, the clock is running. An owner who sends clean reports in a day looks like a business that's under control. An owner who takes three weeks and sends four versions looks like a business that isn't, no matter what the reports say. Speed is a credit signal.
The nine-minute scorecard
| Check | What passes | What fails |
|---|---|---|
| Books vs. returns | Same net income, or a one-page tie-out | Unexplained gap |
| Debt service coverage | 1.25x or better, computable from clean books | Can't be calculated |
| Liabilities | Every debt on the books at current balance | Surprises on the credit report |
| Cash | Balance sheet matches bank statements | Unreconciled accounts |
| Owner activity | Clearly labeled draws, contributions, loans | Personal spend buried in operations |
| Trends | Three consistent, explainable years | Swings caused by bookkeeping changes |
| Responsiveness | Reports in a day | Weeks, and multiple versions |
Nothing on this list requires a bigger business. It requires books that a stranger can read and trust in nine minutes. Most owners are two or three years of unreconciled months away from that, and they find out on the day the rate lock is expiring.
Clean Books Series · 1. The buyer's CPA · 2. P&L vs. tax return · 3. The 7 lender checks · All free tools
Clean Books in 7 Days reconciles every account, ties each year to its return, and gets every liability onto the balance sheet where the underwriter expects to find it. Flat fee, seven business days from full access. Built for the borrower with a closing date.
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