Short answer: lenders want to see reliable financial statements, a believable forecast, enough cash flow to cover debt payments, collateral that supports the borrowing base, and a management team that reports consistently. Companies that prepare these before they ask, and ask before they need the money, get better terms.
Why preparation matters now
Most companies in the third-quarter 2026 Richmond Fed CFO Survey said financing was not holding them back, often because they had enough cash. But just under one in five said access to or the cost of financing did constrain them. For growing companies, the difference between those two groups is often preparation.
What lenders look for
- Quality financial statements. Timely, accrual-basis statements, ideally reviewed or audited by a CPA as the company grows.
- Cash flow coverage. Enough operating cash flow to cover interest and principal with room to spare. Lenders often look at a debt service coverage ratio.
- A credible forecast. A monthly projection showing how the company will perform and repay, with assumptions a banker can follow.
- Collateral. For asset-based lines, eligible receivables and inventory form a borrowing base. Aged receivables and slow inventory reduce what you can borrow.
- Consistency. Covenant reports and financial packages delivered on time, every time.
- Management and story. A clear explanation of what the money is for and how it creates value.
How to prepare
- Clean up the last two to three years of financials and close the books promptly each month.
- Build a driver-based forecast with base and downside cases.
- Calculate your own covenant ratios before the bank does.
- Prepare a short lender package: company overview, financials, forecast, use of funds and key metrics.
- Talk to more than one lender and compare terms, not just interest rates.
Terms worth negotiating
- Covenant levels and how they are calculated
- Reporting requirements and frequency
- Borrowing base eligibility and advance rates
- Personal guarantees
- Fees, renewal terms and prepayment provisions
Frequently asked questions
When should we apply for a line of credit?
When results are strong and you do not urgently need it. Lenders are more flexible, and you have time to compare offers.
What is a borrowing base?
It is the amount you can borrow on an asset-based line, calculated from eligible receivables and inventory multiplied by agreed advance rates.
Can a fractional CFO help with bank relationships?
Yes. A fractional CFO can prepare lender materials, run the process, negotiate terms and handle ongoing covenant reporting.
Preparing for a new facility or renewal? See how we prepare companies to raise capital or talk with our CFO team.