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Every lender says it "assesses affordability". This article says what that actually means at the level of signals: the specific patterns in a company's finances that push a decision towards yes, towards a smaller offer, or towards no. If what we look at when we decide is the map, this is the close-up terrain. The raw material is roughly six months of the company's business bank activity, read alongside its business credit file — and the question every signal feeds is the same one: can this company make these specific repayments without strain?
Signals that carry real weight
- Income regularity, not just income size. Twenty deposits a month from different customers is a stronger signal than one large monthly receipt from a single payer, even at the same turnover — it means no single customer failing can empty the account. Frequency and spread matter as much as the total.
- Headroom above the floor. An account that spends most of the month comfortably above zero can absorb a repayment; an account that scrapes its floor or overdraft limit before every income day cannot, whatever the turnover figure says. We look at where the balance lives, not where it peaks.
- Returned and failed payments. Bounced Direct Debits and refused standing orders are the single loudest negative signal, because they show the account already failing to meet the commitments it has. One isolated return with an obvious cause reads differently from a monthly pattern.
- Existing repayment load. Visible repayments to other lenders come off the top of what the account can support. A company already servicing several facilities has less room, and stacking short-term loans on top of each other is a pattern we treat with particular caution.
- Direction of travel. Six months of data has a slope. Gently rising income with stable outgoings supports a loan; a quarter of decline followed by an application can suggest borrowing to fill a hole rather than to fund an opportunity — which is exactly the situation described in when not to take a short-term business loan.
Signals that matter less than people think
A single quiet month in an otherwise steady record. Seasonal dips that recur at the same point each year. One large, explained outgoing such as a tax payment or equipment purchase. None of these sinks an application on its own, because we are reading the pattern, not hunting for a bad week. Equally, one spectacular month does not make an unaffordable loan affordable.
What we deliberately do not read
The director's salary, household outgoings, personal savings and personal credit history are not part of the assessment — the company borrows, so the company's finances answer the question. That also means a strong personal position cannot rescue a weak company application, as explained in lending to the company, not the director.
Reading your own account before we do
The useful exercise takes ten minutes: open the last six months of the business account and ask what a stranger would conclude. Does income arrive steadily? Does the balance keep clear of the floor? Are there returned payments to explain or fix? Would the proposed repayment fit inside the average month's surplus — not the best month's? If the answer to that last one is no, the right response is a smaller application or a later one, not optimism. We will sometimes offer less than requested for exactly this reason.
You provide the account data by read-only Open Banking or PDF statements — the signals are the same either way. Because we lend to a company for business purposes, the borrowing sits outside FCA consumer-credit regulation under Article 60B FSMA RAO 2001 and is not covered by the Financial Ombudsman Service or the FSCS. Current amounts, terms and costs are on our business loans page.