Business loans after a loss-making year

A bank’s lending decision is often made on last year’s numbers. If last year was the one where a major customer went under, the roof leaked through the stockroom, or you spent heavily on a move, the accounts show a loss, and the bank’s serviceability test fails. It doesn’t matter that this year is going well. The test looks backwards.

Specialist lenders look forwards as well.

What is a serviceability test, and why did I fail it?

Serviceability is a lender’s check that the business earns enough to cover the new repayments, plus existing debts, with a margin to spare. Banks usually calculate it from lodged financial statements and tax returns. The government’s own guide to applying for a business loan lists financial reports, cash flow statements and forecasts among the things lenders ask for, precisely because they feed this test.

When the most recent year shows a loss, the calculation often can’t work however the rest of the file looks. The Reserve Bank’s October 2025 Bulletin noted that strict lender requirements remain one of the main barriers small businesses report when seeking finance.

How do specialist lenders look past a bad year?

They ask four questions:

1. What caused the loss? A single, identifiable event is easier to lend around than a gradual slide.
2. Is it over? The lender wants to see the cause has ended.
3. What does trading look like now? Recent business bank statements, and ideally year-to-date management accounts, show whether revenue and margins have recovered.
4. What’s securing the loan? Property reduces the weight on the profit figure.

Here’s how different loss stories tend to read:

The story	How it tends to land
Customer collapsed owing a large sum, now replaced	Strong, if the bank statements show the recovery
Big one-off spend (fit-out, relocation, equipment)	Strong, especially if it’s lifting revenue now
Accounting treatment (write-offs, depreciation) with healthy cash flow	Often fine once the accountant explains it
Two or three years of gradual decline	Harder. Needs security and a credible turnaround plan
Losses with no clear cause	Difficult. A lender will want to understand the business model first

Which loans suit a business coming out of a loss?

Property-secured loans from $20,000 to $5,000,000 lean on the security and your plan to repay, so they’re the most tolerant of a weak year. First mortgages, second mortgages and caveat loans are all possible.

Unsecured and cash-flow loans, typically $5,000 to $500,000, are sized on turnover and bank statements. Because they look at deposits rather than lodged profit, a recovering business with steady revenue can qualify even when the last return disappoints. See unsecured loans with bruised credit.

Lines of credit suit a business whose loss came from lumpy cash flow rather than weak margins. Draw when you need it, repay as customers pay. See lines of credit for difficult files.

If you want someone to look at which fits, start a 60-second enquiry. There’s no credit check when you first enquire.

What should I prepare?

• Six to twelve months of business bank statements.
• Year-to-date profit and loss from your accountant, if you have it.
• A short explanation of the loss: cause, dates, what changed.
• Evidence the cause has ended, such as a replacement contract, an insurance payout or completed works.
• Details of any property, including value, debt and ownership.
• A list of existing debts and repayments, so the lender can see the full commitment picture.

If your lodgements are also behind, see loans with overdue lodgements, because the two often come together.

Illustrative example: flood, loss, recovery

Illustrative only, not a real client. A furniture retailer in northern New South Wales loses most of its stock and several weeks of trading to flooding. Insurance covers part of the damage, but the year’s accounts show a significant loss. Twelve months later, sales are back above pre-flood levels, and the owner wants to fund a second showroom.

The bank declines on serviceability. A specialist lender reviews the insurance correspondence, the last nine months of bank statements and a year-to-date profit and loss statement, and offers an unsecured facility sized on current turnover. The owner plans to refinance with the bank once a full year of recovered trading is lodged.

Can the loan itself help the recovery?

Sometimes the loss has left a hangover: supplier arrears, a tax balance, or expensive short-term finance taken on during the bad months. Paying those out as part of the new loan can do more for cash flow than the new money itself. Lenders like this when it’s part of a clear plan, because it removes pressure that could otherwise undo the recovery. Our page on refinancing expensive business debt explains how that works, and the decline decoder helps if more than one reason was behind the bank’s answer.

One bad year shouldn’t define your business

We look at where your business is heading, not only where it’s been. Tell us about the year in a one-minute enquiry, and know there’s no credit check when you first enquire. It reaches one specialist rather than a lender list, and they’ll call to hear the recovery story properly.

Please be accurate about last year’s result and what’s happening now. The right lender for a recovery story is easy to find when we know the story. See if you qualify →