The six things every lender considers
1. Purpose
What will the money be used for, and does it make the business stronger? Lenders favour purposes that create value or solve a clear problem: working capital for a growing business, an acquisition with a sound price, consolidation that reduces pressure. Vague purposes raise questions.
Tip: state the purpose in one sentence, then support it with numbers.
2. Security
What happens if things go wrong?
- Property security gives a lender a registered mortgage over a home, rental, commercial property or land. It carries much of the lender’s risk, which is why property-secured loans can consider situations banks may not. See using property as security.
- Unsecured lending relies on the business’s cash flow, usually with a guarantee from the owners.
The Reserve Bank’s May 2026 Financial Stability Report observed that banks rely heavily on collateral to mitigate risk in small business lending.
3. Cash flow
Can the business afford the repayments?
For unsecured facilities, lenders analyse business bank statements:
| What they look at | What they want to see |
|---|---|
| Average monthly deposits | Turnover sufficient for the amount requested |
| Consistency | Regular deposits, understandable seasonal patterns |
| Low points | The account does not repeatedly run to zero |
| Dishonours | Few or none |
| Existing repayments | Other lenders’ deductions visible and manageable |
| Tax payments | Regular GST and PAYE payments to IRD |
For property-secured facilities, no financials or tax returns are needed for the initial assessment. Cash flow still matters, but the focus is on whether the exit plan is realistic.
4. Credit history
Lenders check credit files for the business and often the owners. Defaults, arrears and previous insolvencies are relevant, but context matters. A default from a difficult period that has been resolved is treated differently from a pattern of missed payments. For property-secured loans, bad credit, defaults and arrears are considered case by case. For unsecured facilities, weaker credit is considered.
5. Tax position
Tax arrears are one of the first things lenders check, because Inland Revenue can take enforcement action that affects the business’s survival. In 2026, IRD brought around two-thirds of company winding-up applications, according to Companies Office data reported by NewsWire. If there are arrears, show that they are under an arrangement or will be cleared by the loan. See options if you are behind with IRD.
6. Exit
How will the loan be repaid? Short to medium term loans in particular need a clear exit:
- business cash flow over the loan period
- collection of specific debtors or a contract payment
- sale of an asset
- refinance to a longer-term facility once the business has a track record
What else helps
- Trading history. Established businesses with several years of trading have more options. Unsecured facilities usually require six months or more.
- Management accounts. Current, reconciled accounts support larger requests. See management accounts lenders like.
- A cash flow forecast. Shows the lender you understand the gap and the recovery. See 13-week forecasting.
- Owner experience. Particularly for acquisitions and expansions.
- Clean bank conduct. Fewer dishonours and a steady balance.
Industry context
Lenders are cautious about sectors under stress. In 2026, Centrix reported that more than 2,900 hospitality businesses stopped trading in the previous 12 months, and construction liquidations have been elevated. Businesses in those sectors can still borrow, but should expect more questions and should prepare evidence of their own strength.
How pricing is set
Every loan is priced on the individual circumstances: security, purpose, trading history, credit and the exit. That is why published headline figures rarely match what a particular business is offered. Our lending specialists compare what is available for your situation and present the sharpest option.
Preparing your application: a checklist
- One-sentence purpose and the amount needed
- Security details: property address, estimated value, existing mortgage
- Recent business bank statements
- IRD position, including any arrangements
- Management accounts, if available
- Cash flow forecast, for larger or complex requests
- The exit plan
Then start a 60-second enquiry. It does not affect your credit score, and a lending specialist will call to talk it through.
Quick answers
What is the most common reason SME applications are declined?
Common reasons include insufficient security, bank statements that do not support the repayment, unresolved tax arrears and an unclear purpose. The Reserve Bank has noted that outright rejections are relatively uncommon, averaging less than 5% over the past decade.
Do lenders look at my personal credit as well as the business?
Usually, yes, particularly for smaller businesses where owners give guarantees or provide security. Past issues are considered in context.
How many months of bank statements do I need?
For unsecured lending, lenders commonly ask for several recent months of business bank statements, and more for seasonal businesses. Your lending specialist will confirm what each option requires.
Does my industry matter?
It can. Lenders consider industry risk, and some sectors, such as hospitality in 2026, are assessed more cautiously. A strong individual business can still be funded.