GGS Lender Readiness: What a Credit Officer Needs to See

Management accounts: the three-month rule

A credit officer's first question when they see your filed accounts is: how old is this information? Year-end accounts that are 18 months old tell them almost nothing about where the business is today. Management accounts bridge that gap - but only if they are current.

The standard expectation is management accounts dated within the last three months. Anything older and the credit officer will ask for an update, adding time to the process. Anything older than six months is unlikely to be accepted as a primary source.

Management accounts do not need to be audited, but they must be internally consistent. Turnover, gross profit, and net position should be clearly stated. If your accountant prepares them, make sure the period-end date is recent enough to be usable at the time you apply, not at the time you start preparing.

• Accounts dated within 3 months of your application date - not your intended application date
• Profit and loss showing turnover, cost of sales, gross margin, and net profit
• Balance sheet including current liabilities and any director loan account
• Consistent with your bank statements: if revenue in management accounts differs materially from bank receipts, expect questions

Bank statements: reconciliation to filed accounts

Bank statements are the credit officer's ground truth. They will compare your stated monthly revenues with actual receipts, your stated cost base with actual outgoings, and your average balance with your stated working capital position. Inconsistencies between what the accounts say and what the statements show are one of the most common reasons applications stall.

The practical issue is timing: your filed accounts cover one period, your bank statements cover another. If your year-end turnover was £900,000 but the 6 months of statements you provide show only £300,000 in receipts, the credit officer will want to understand why. Seasonal trading, customer concentration, and timing of large payments all affect this. Get ahead of it with a brief written explanation rather than waiting to be asked.

Three to six months of statements is the standard requirement, covering all business accounts. If you operate multiple accounts - including a sweep account, a foreign currency account, or a secondary trading account - include all of them. A credit officer who spots unexplained intercompany transfers between accounts you have not disclosed will treat this as a red flag.

• Three to six months of statements for all business bank accounts
• Average balance consistent with stated working capital position
• Turnover receipts reconciling to management accounts (within normal timing differences)
• Written explanation ready for any month with materially lower or higher receipts than the average

Account conduct: three to six months of clean behaviour

This is the area where businesses most often underestimate the lead time needed. Account conduct is assessed over the three to six months immediately before your application. It cannot be retroactively fixed. If your account shows returned direct debits, unarranged overdraft usage, missed HMRC payments, or a deteriorating average balance, the credit officer will see it regardless of how strong your accounts look.

The practical implication is that preparation should start a quarter before you intend to apply. If your account conduct has been patchy in recent months, use the next quarter to stabilise it: clear any informal borrowing, ensure all direct debits meet without issue, avoid going into the red at month-end, and if you have a HMRC time-to-pay arrangement, keep it clean.

A lender who sees three months of clean conduct after a difficult period will often take a contextual view, particularly if you can point to a specific event (loss of a customer, pandemic-related disruption) that explains the earlier period. Silence - applying while the difficult months are still visible and saying nothing - is what triggers declines.

• No returned direct debits or standing orders in the most recent 3 months
• No unarranged overdraft usage in the period under review
• Average end-of-month balance stable or improving
• HMRC payments current or any time-to-pay arrangement up to date
• Start preparing a quarter before your intended application date if conduct has been mixed

Debt schedule: matching the charges register

The debt schedule is a list of every current borrowing commitment: lender name, outstanding balance, monthly repayment, security given, and remaining term. Credit officers use it to calculate your debt service coverage ratio - the question being whether your monthly cash generation, after existing commitments, leaves enough headroom to service the new facility.

The issue most businesses encounter is discrepancy between the debt schedule they provide and what the credit officer finds when they check the charges register at Companies House. If you have a charge registered against a lender that is not on your debt schedule, the credit officer will ask about it. If the balance you have stated is materially different from the lender's own records, it will also be queried.

Before you apply, pull your own charges register from Companies House and compare it to your debt schedule. Any charge that has been satisfied should be formally discharged and marked as such. Any charge that remains should be accurately reflected on the schedule with current balance and monthly commitment figures.

• Full list of all borrowing: term loans, hire purchase, finance leases, revolving credit facilities, directors' loans
• Outstanding balance and monthly repayment accurate as of the application date
• Security given for each facility - must match the charges register
• No active charges on the register that are not reflected on the schedule
• Early repayment charges noted for any facility you intend to refinance

Companies House hygiene: satisfied charges and filing currency

Companies House is the first external check a credit officer runs. Overdue confirmation statements, filed accounts that are behind schedule, or charges still showing as outstanding against facilities that have been repaid are all visible before the credit officer has read a single document you have submitted.

Satisfied charges are a common issue. When a loan is repaid, the lender should file a discharge of the charge at Companies House. In practice, this often does not happen promptly, and some lenders do not file it at all without being chased. A charge showing as outstanding against a lender you have not disclosed on your debt schedule will raise immediate questions about whether the facility is actually closed.

Check your Companies House record six to eight weeks before you intend to apply. File any overdue confirmation statement. Chase lenders to discharge any satisfied charges. If a charge is disputed or in the process of being discharged, prepare a brief explanation. Credit officers are accustomed to administrative delays, but they need to understand what they are looking at.

• Confirmation statement filed within the last 12 months
• Accounts filed and not materially overdue at the time of application
• All satisfied charges formally discharged and marked as such
• Director and shareholder register accurate and current
• No pending strike-off notices or compulsory strike-off actions

Forecasts with downside sensitivities

A cash flow forecast is required for almost all GGS applications for growth capital or investment purposes. The document most businesses provide is an optimistic base case: the loan enables the plan, the plan delivers the expected return, the loan is comfortably serviced. Credit officers discount base cases automatically.

What distinguishes a strong application is a downside sensitivity alongside the base case. The downside does not need to be catastrophic - it needs to be credible. What happens if revenue comes in 20% below forecast? What if the project takes six months longer than planned? At what revenue level does the loan repayment become unserviceable, and how likely is the business to reach that point?

The purpose is not to highlight risk. It is to demonstrate that management has thought rigorously about the range of outcomes and has a plan for each. A credit officer who sees a sensitivity analysis will treat the application as coming from a management team that understands its business. One who sees only the best case will apply their own worst-case assumptions, which are typically more conservative than your own.

• Base case: month-by-month cash flow for the loan term, showing DSCR each month
• Downside case: revenue 15 to 25% below base, with assumptions stated
• Break-even analysis: the revenue level at which loan repayments are met from operating cash flow
• Key assumptions clearly stated and defensible
• Seasonal adjustments reflected where the business has material seasonality

Worked Example

A manufacturing business with 4 years of trading history applies for a £400,000 GGS term loan to purchase new equipment. It begins preparing three months before the intended application date.

1. Month 1: pulls its Companies House record, identifies two satisfied charges still showing as outstanding, and chases both lenders to file discharges
2. Month 1: reviews the last 6 months of bank statements and identifies two months where a supplier direct debit was returned due to a timing issue. Prepares a one-paragraph explanation
3. Month 2: instructs its accountant to prepare management accounts to a recent period-end date, with a follow-up set timed to be current at the point of application
4. Month 2: compiles a full debt schedule against the charges register, reconciles balances, and confirms the hire purchase outstanding matches the HP lender's current balance statement
5. Month 3: prepares a base-case cash flow showing the £6,800 estimated monthly repayment against current net cash generation, plus a downside at 20% below forecast revenue showing DSCR remains above 1.0x
6. Application submitted with all six areas addressed. Credit decision received in 4 working days with no requests for additional information

Credit approval at 8.5% over 5 years on first submission. The credit officer's notes referenced the clean presentation of the debt schedule and the downside sensitivity as factors in the straightforward decision.

Frequently Asked Questions

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