What do lenders look at when approving a revolving credit facility?

There are two separate questions here, and businesses tend to worry about the wrong one. Whether you clear the minimum criteria is usually easy to establish. How your bank statements read is what actually decides it.

The threshold criteria

These are the filters. You either pass them or you do not:

• A limited company, LLP or PLC. Revolving credit facilities are generally not offered to sole traders or ordinary partnerships. A business overdraft is the usual route there.
• At least 12 months of trading, evidenced by filed accounts or management accounts. If you are newer than that, see what a business under 12 months can fund.
• Turnover over £100,000 is a common minimum for committed facilities, though smaller facilities exist below it.
• A director prepared to give a personal guarantee, particularly on unsecured facilities.

Turnover through the account, or cash flow quality?

Cash flow quality, and it is not close.

Turnover volume does one job: it gets you past the minimum. Beyond that threshold, a lender reading your bank statements is looking at the shape of the account, not the total that passed through it.

What reads well:

• A balance that recovers to a surplus between peaks rather than sitting at or near zero.
• Receipts that arrive with some regularity, so the lender can see repayment capacity in the pattern.
• Existing loan and finance payments being met on time and comfortably.

What reads badly:

• High turnover with the account permanently scraped out. It tells the lender the business already consumes everything it earns.
• Returned direct debits or unpaid items, which signal strain more loudly than almost anything else on the statement.
• A stack of existing short-term facilities all debiting in the same week.

A business turning over £2m that never holds a positive balance is a harder case than one turning over £600,000 that runs a consistent buffer. The first looks like it needs the money. The second looks like it can repay it.

Covenants

Covenants are conditions you agree to keep to for the life of the facility, and breaching one can make the balance repayable.

They are much more common on bank facilities and larger limits than on the specialist SME market, where many facilities carry few or none. Where they do appear, the usual types are a minimum turnover or profitability level, a debt service cover requirement, a cap on taking on further borrowing without consent, and an obligation to provide management accounts at set intervals.

The one to look at hardest is any reporting obligation, because it is the easiest to breach by accident. Missing a management accounts deadline is a technical default even when the business is trading perfectly well.

Documents to have ready

• Recent business bank statements, usually the last few months.
• Filed accounts, plus management accounts if the filed set is out of date.
• An up-to-date aged debtor and aged creditor report.
• Details of existing borrowing, including anything secured at Companies House.
• Director details for the personal guarantee.

Tidy, current financials do more for your terms than almost anything else, because lenders price with more confidence when the picture is clear.

Can you apply fully online?

Largely, yes. Most of the specialist market runs applications online, and open banking means you can usually share bank data digitally rather than sending statements. Decisions on smaller facilities can come back quickly.

The caveat is that a facility of any size still tends to involve a conversation, and it is usually to your benefit. An underwriter who understands why your account looks the way it does in a particular month is a better outcome than one working purely from the data.

You can start an application with us online. We do not run a credit search at enquiry stage, so there is no footprint from finding out where you stand. A formal search happens later, when you progress with a specific lender, which is exactly why applying to several lenders directly is the expensive way to do this.