Before examining a project, a business, or an idea, a bank looks at four numbers. They don’t look at them individually; they combine them. Therefore, a company with a weak indicator but a well-explained one often receives a better evaluation than one with all indicators being equal, but without context.
The four numbers that you check first.
| Indicator | What are you measuring? | What makes it seem bad without context. |
|---|---|---|
| Liquidity | If the company can meet its short-term obligations. | One month of tight cash flow, without explanation of the reason. |
| Debt | What is the level of debt the company has relative to its assets? | Recent debt, with no indication of how it was used. |
| Debt coverage. | How much of the operational cash flow is sufficient to cover the fees? | Projected flow, without breaking down the underlying assumptions. |
| Payment history | If the company fulfilled its previous commitments. | A slight delay, without a specific date or reason, combined with the rest. |
These four indicators are interconnected: a company with high debt but strong debt coverage (significant operating cash flow relative to payments) can be evaluated more favorably than one with little debt but tight cash flow. Looking at any single indicator in isolation leads to incorrect conclusions, in either scenario.
What can someone do if they appear without having initiated an action?
This isn’t about concealing information, but rather about not presenting it raw and without explanation.
- Sales concentrated in a single client. There’s no point in hiding it: we need to reveal the plan for diversification, if one exists, or the reason why that concentration is manageable.
- A sudden increase in short-term debt. If it’s being cited as a means to fund a specific, immediate purchase, stating that changes the way that figure is read entirely.
- A single, isolated payment delay. When presented separately from the rest of the history, it reads as a pattern; once identified and explained, it reads as an exception.
- Projections without breakdowns of assumptions. A bank doesn’t reject a supposed aggressor; it rejects someone they can’t verify.
The role of the electronic tax dossier.
The tax dossier issued by the Internal Tax Service (SII) is, in practice, the document that consolidates all the previous information. If the reported sales flow doesn't match the figures presented in the financial statements, the assessment stops before the four indicators are reached. Therefore, it’s advisable to request an updated version, rather than using one that’s months old.
Here’s an example: the same figure, read in two ways.
Let’s assume that a company’s short-term debt increased by 40% in the last quarter. When viewed alone, within a spreadsheet alongside other twenty figures, this increase appears as a sign that the company is relying on debt to cover current expenses, which simultaneously worsens the assessment of its liquidity and debt coverage.
When accompanied by an explanation ("the increase reflects advance stock purchases for the peak season, 70% of which had been sold by the end of the following quarter"), the same figure changes from a warning sign to a reasonable operational decision with a verifiable result. The number has not changed. What changes is whether the analyst has to guess the cause or the company explains it upfront.
What to ask the bank before signing.
The evaluation isn’t just about one thing. Before accepting a condition, it’s advisable for the company to ask:
- How long does it take to finalize the decision, once all the information has been provided? A specific date, not “in a few weeks.”
- What portion of the evaluation relies on a committee, and what portion relies on the executive? Let’s adjust the amount of room for negotiation that’s actually on the table.
- Is the rate or condition offered final, or does it depend on a subsequent review? A preliminary offer isn’t always the one that ends up being finalized.
- What guarantees remain outstanding if the company makes an early payment? Not all institutions release the guarantee at the same time as the prepayment.
Asking this doesn’t weaken the company’s position in relation to the bank; on the contrary, it’s part of demonstrating that the case is as well-organized as the figures that accompany it.
How is that information prepared before the meeting?
The aim isn't to artificially inflate the numbers; it's to arrive with the context already established, rather than improvising it in front of the analyst. That’s precisely what this delivers. initial inquiryHere's the English translation: “This involves analyzing the four key indicators from a bank’s perspective, before the company initiates a loan. The Chilean Central Bank publishes the Bank Credit Survey quarterly, which reveals how strict banks are being in each cycle. During the most demanding cycles, the difference between a well-structured and an impromptu loan application becomes more apparent, not less.”
A bank doesn’t seek a perfect company. It’s looking for a company that understands its own numbers well enough to explain them without being asked twice.