Getting your financial statements bank-ready - what lenders actually read in your accounts

Many SME owners only think about their financial statements when the bank asks for more documents in a loan application. That is when they discover years of reported losses, thin equity and piles of balances with the owner - while the business is actually doing much better. Banks cannot lend on a reality they cannot see. This article explains how banks read your financial statements and what to prepare in advance.

What do banks base their assessment on?

Lending is governed by the Law on Credit Institutions No. 32/2024/QH15 and Circular 39/2016/TT-NHNN on lending, amended several times, most recently by Circular 29/2026/TT-NHNN effective 15 August 2026. Under Article 7 of Circular 39/2016/TT-NHNN, a bank considers lending when the customer has legal capacity, a lawful funding need, a feasible plan for using the funds and the financial capacity to repay. Article 17 allows banks to use internal credit rating systems combined with data from the National Credit Information Centre (CIC). The last two conditions are proven mainly through the financial statements and cash flow forecasts.

Article 16.2 of Circular 39/2016/TT-NHNN also requires the customer to provide truthful, accurate and complete information and documents and to be responsible for them, and to report on the use of the loan for its stated purpose after disbursement.

What credit officers actually read

Beyond the numbers, banks read the notes to the financial statements closely: related-party transactions and balances, other receivables, advances, commitments and contingent liabilities. Banks also commonly compare revenue in the financial statements with revenue in VAT returns and with cash received into bank accounts; unexplained differences undermine the credibility of the whole application.

Common mistakes that lower your credit score

• Large other receivables or advances to the owner: the bank sees this as money that has left the company and may not come back.
• Personal expenses booked in the company: they depress profit, create tax risk and weaken repayment capacity on paper.
• Missing depreciation or provisions: profit looks good but is less reliable, and credit officers tend to adjust it down themselves.
• Large registered charter capital not fully paid in: the gap between registered and actual capital is the first question a bank asks.
• Financial statements given to the bank that differ from those filed with the tax authority: this is the most serious mistake, and its damage goes well beyond the loan application.

A 3-6 month roadmap before you apply

1. Close the books monthly and reconcile cash, receivables, payables and inventory, rather than only at year-end.
2. Reconcile revenue and VAT in the books with tax returns and e-invoice data, and resolve every difference.
3. Clean up balances with the owner and related parties: recover advances, sign a proper loan agreement if the owner lends to the company, or increase contributed capital.
4. Review depreciation, bad debt provisions and inventory write-downs under the accounting regime; from the 2026 financial year apply Circular 99/2025/TT-BTC or the regime suited to your size, under which the balance sheet is called the Statement of Financial Position.
5. Consider an audit: foreign-invested enterprises are subject to mandatory audit under the Law on Independent Audit No. 67/2011/QH12; for other companies, voluntarily audited accounts usually make a loan application more convincing.
6. Prepare a plan for using the funds with a monthly cash flow forecast showing clearly how principal and interest will be repaid - this is the evidence for the feasible plan condition.

Illustrative example: a company has other receivables of VND 2 billion from its director against total equity of VND 5 billion. Many credit officers will exclude this balance in their analysis, cutting adjusted equity to VND 3 billion and raising leverage accordingly. Recovering the advance or converting it into contributed capital before applying lets the ratios reflect the company's true financial health.

How Kaizen can help

Kaizen reviews your financial statements through a credit officer's eyes, pinpoints what drags down your rating and works with you to clean up the books, reconcile tax and build a cash flow forecast before you apply. Start with our free tax health check to see where your accounts stand against what the bank expects.