How to prepare a cash flow forecast for a bank

Ask a bank what it wants with a business loan application and a 12-month cashflow forecast will be near the top of the list every time. It is often the first document the assessor opens. Profit can be argued about. Cash cannot. Either the account balance covers the repayment each month or it does not, and the forecast is where you show which.

Here is what a bank-ready cashflow forecast contains, how lenders judge whether the numbers are believable, and the mistakes that quietly sink applications.

Cash is not profit

The most common failure in home-made forecasts is treating the P&L as if it were cash. It is not. A profitable month can be a terrible cash month: you invoiced strongly but customers pay in 45 days, the quarterly BAS fell due, and a loan repayment went out. A cashflow forecast tracks money as it actually moves, with the timing gaps that make or break a tight month.

Make every assumption checkable

An assessor does not take forecast numbers on faith. Each one gets tested against something: last year's actuals, the BAS history, an industry benchmark, a signed contract. So build the forecast the same way. Start from at least twelve months of real history, carry the actual seasonality across, and tie every change from history to a reason you can point at in writing.

• Revenue growth needs a driver: a price change, a signed customer, added capacity. Not optimism.
• Debtor and creditor days come from the actual ledgers, not a default 30.
• Wages move with the roster and award rates, not a flat percentage.
• If you are buying the business, cross-check year-to-date trading against something independent, such as EFTPOS settlement data against the management accounts. It is one of the strongest credibility signals a forecast can carry.
• The worst month matters more than the average month. Banks look for the low point in the closing balance line.

Stress it before the bank does

Every lender stress tests. Rates go up 2 to 3% in their model whether you like it or not, and many will shave revenue as well. If your forecast only survives at today's rates and this year's best trading, it fails inside the bank where you cannot argue with it. Run the stress yourself: rates up, receipts down 10 to 20%, and show the closing balance still holding. Presenting the stressed case unprompted tells the assessor the numbers were built by someone who knows how credit works.

The traps that sink credibility

• A forecast that never has a bad month. Twelve smooth bars is a red flag, not a comfort.
• GST collected treated as revenue to spend, until the BAS quarter arrives and the balance goes negative.
• No working capital at handover when buying a business, so the model shows the till empty in week three.
• Loan repayments at the teaser rate with no sensitivity shown.
• A cashflow that does not reconcile to the P&L and balance sheet it travels with.

Where this fits in a loan application

The cashflow forecast is one leg of the case. The serviceability model proves the debt is covered on the earnings, the funding request tells the story the way an assessor reads it, and the 12-month forecast proves the cash arrives in the right months. Our lender packs include all three, with the forecast built in collaboration with you and your advisors from the information provided, at fixed published fees. The application itself is handled by our broking partner The Lending Lab Pty Ltd, with any referral relationship disclosed in writing.