What lenders look at in your financials (Canada)

Nine years reading small-business files taught me the order lenders actually read them in. It’s not the order owners expect.

The short answer: lenders read margins and their direction first, then debt-service room, then owner draws, then how old the receivables are. Revenue starts the conversation; those four carry the file.

Owners tend to walk into a financing meeting leading with revenue — the biggest number, the one that grew. But reading these files was my job, and revenue was never where the reading started. Here’s the actual order, and what each line is being read for.

1. Margins — and their direction

Not “is the business profitable,” but “which way is it heading, and does the story hold together?” A steady 12% beats a 20% that was 30% last year. Trend is character; a single good year is weather.

2. Debt-service room

The core question of every loan: after the business pays for everything it already owes, is there comfortably enough left to carry the new payment? Kitchen-table version: if the business throws off $40,000 a year of cash after expenses, and all loan payments — existing plus the new one — total $28,000, there’s about $1.40 of cash for every $1 of payments — the debt service coverage ratio, the first number most lenders compute. They want that cushion, not a photo finish. If the new payment would eat the margin to the bone, the answer drifts toward no — however good the revenue looks.

3. Owner draws

What the owner takes out, next to what the business can support. Draws that quietly exceed earnings are the most common silent alarm in a small-business file — the business can be “profitable” while the bank account starves.

4. Receivables — and their age

Being owed money is an asset; being owed money for 90+ days is a question. A fat, old receivables column reads as revenue that may never become cash.

What’s conspicuously absent

The revenue number, on its own, almost never decided anything. Revenue starts the conversation; the four things above are what carry a file. (If that sounds familiar — it’s the same reason to know your bottom line.)

None of this is secret. It just usually isn’t explained — the file gets read this way behind the desk, and the owner only hears the outcome. Having your statements organized in this order, before you’re asked, is most of what “lender-ready” means — and most of what the Lender Prep Package does.

More notes

The Bank-Ready Report: what a lender-legible month looks likeSeptember 27, 2026 · 5-min read Owner draws: paying yourself without starving the fileSeptember 27, 2026 · 5-min read

Borrowing on the table this year?

The Lender Prep Package builds exactly this: your statements, organized the way a lender reads them; the ratios above, computed and explained; a 12-month forecast; and support through the application. Flat price, quoted up front — the page lays out what’s included and where it starts.

Get your free Books Checkup → Or read about the Lender Prep Package →

Notes like this are general information, not advice on your specific situation — that’s what the kitchen table is for. — Dominic

What lenders actually look at in your financials.