What your 30 June balance sheet tells a lender

Why the year-end snapshot matters more than any other day

Your income statement tells the story of the year. Your balance sheet tells a lender where the business stands on one particular day — and for most Australian businesses, that day is 30 June. The balance sheet at that date feeds the bank’s annual review, covenant tests, and every new application you make for the next twelve months.

That makes 30 June worth managing deliberately. Not by window-dressing — lenders see through that — but by making sure the snapshot reflects the business accurately and at its reasonable best.

What does a lender read first?

Item	What the lender asks	Why it matters
Net working capital	Do current assets comfortably exceed current liabilities?	Liquidity and ability to meet short-term obligations
Trade debtors	How much, how old, how concentrated?	Quality of the biggest current asset
Inventory	Is it saleable at book value?	Obsolete stock inflates assets
Trade creditors	Are suppliers being stretched?	Hidden funding and relationship risk
ATO balances	Are GST, PAYG and income tax current?	Statutory risk, director exposure
Director / related-party loans	Is money flowing out to owners?	May be excluded from assets or treated as debt
Debt classification	What’s current vs non-current?	Affects working capital and covenants
Equity	Has it grown or been drawn down?	Buffer against losses

business.gov.au defines working capital as the cash available to a business for day-to-day expenses and liquidity as how quickly assets can be converted to cash. A lender’s first pass at your balance sheet is really a test of both.

Common year-end issues that hurt borrowing

Debt classified as current. If a term facility matures within twelve months of balance date, or a covenant was breached at year-end without a waiver, accounting rules may require the whole balance to be shown as current. Working capital can suddenly look negative. Plan renewals and waivers before 30 June, not after.

Director loans. Amounts owed by directors to the company are often discounted by lenders, and tax rules can apply to certain loans from private companies to shareholders. Talk to your adviser about how to resolve them before year-end.

Aged debtors. Invoices more than 90 days old at 30 June draw questions. Chase, settle or provide for them.

Obsolete stock. Old stock at full book value flatters the balance sheet until a lender or buyer discounts it. Write it down or clear it.

ATO balances. A large ATO liability at year-end is read as a sign the business has been using tax money to fund trading. From 1 July 2025, general interest charge on ATO debt is no longer tax deductible, so carrying it is also more expensive. See ATO debt for established businesses.

Stretched creditors. Paying suppliers late to reduce the overdraft at 30 June simply moves the problem. Lenders compare creditor days with prior years.

A pre-30 June checklist (April to June)

1. Collect. Push hard on debtors in May and June; the balance at 30 June is what counts.
2. Clear stock. Sell or write down slow-moving lines.
3. Resolve related-party balances with your adviser.
4. Bring the ATO current. Lodge everything outstanding; clear or formalise debts. Businesses lodging quarterly have the June-quarter BAS due on 28 July; monthly lodgers (GST turnover of $20 million or more) lodge by the 21st of the following month.
5. Deal with maturities. Renew or refinance facilities that mature within the next year, so they can be classified correctly.
6. Test covenants. Calculate year-end ratios on your facility’s definitions and talk to the bank before the test if they’re tight. The guide to debt service cover explains the adjustments.
7. Time capex sensibly. Asset purchases may have tax consequences — the ATO has confirmed the $20,000 instant asset write-off is permanent from 1 July 2026 for businesses with aggregated turnover under $10 million, per asset. Get advice; buy what the business needs, not what the tax rule suggests.

If you expect the year-end numbers to create problems at review, it’s worth exploring your options early. Talk to a specialist before 30 June — there’s no credit check to enquire.

After 30 June: speed matters

The sooner year-end accounts are finalised, the sooner the review can run on real numbers. Delays cause problems:

• reporting covenants may require accounts within a set number of days
• facilities may roll on short extensions pending the review
• new lenders will rely on older accounts, which may understate recent improvement

Aim to have management’s year-end numbers within weeks and the financial statements finalised well within the reporting deadline. Send the bank a short commentary with them. Our guide to preparing for the annual review covers the pack.

Illustrative year-end preparation

Illustrative only; no real business. A $24 million turnover building-services company expected a tough review: its overdraft was heavily used, a term loan matured in eight months, and a director owed the company a significant amount. In April the CFO asked the bank to renew the term loan early, which was done before 30 June, so it stayed non-current. The director’s loan was dealt with on the accountant’s advice. The team ran a collections push in June and wrote down two slow-moving stock lines. The year-end balance sheet showed positive working capital and gearing within covenant, and the review was routine.

Balance sheet health all year

Year-end is the snapshot, but lenders increasingly want monthly or quarterly management accounts too. The habits that produce a good 30 June balance sheet — tight collections, lean stock, current tax, clean related-party arrangements — make every month look better. Measure the working capital position regularly with the working capital cycle calculator, and keep revolving facilities cycling rather than pinned at the limit. See business lines of credit.

How the balance sheet and the income statement work together

Lenders rarely read the balance sheet in isolation. They connect it to the income statement to test whether the numbers tell a consistent story. Three connections come up again and again:

Connection	What the lender checks	Warning sign
Revenue growth vs debtors	Are debtors growing faster than sales?	Debtor days lengthening
Cost of sales vs inventory	Is stock growing faster than cost of sales?	Inventory days lengthening, possible obsolescence
Profit vs equity	Has retained profit actually built equity?	Profit reported but equity flat — drawings or dividends absorbing it

The third one surprises many owners. A business can report a solid profit every year and still show a thin balance sheet because the profit has been drawn out through dividends, director loans or trust distributions. A lender sees equity that isn’t growing and asks where the money went. There’s nothing wrong with owners being paid, but a deliberate retention policy — leaving an agreed share of profit in the business each year — strengthens every future borrowing conversation.

If the connections show a lengthening cycle, measure it properly with the working capital cycle calculator and explain the cause in your review commentary.

Questions to ask your accountant in May

• Will any facility need to be classified as current at 30 June, and can we fix that beforehand?
• How should director and related-party loans be handled this year?
• Is any stock or debtor balance likely to need a provision?
• What’s the realistic date for final accounts, and does it meet our reporting covenant?
• Are there asset purchases that should be timed before or after year-end for sound commercial and tax reasons?

Heading into a new financial year?

If your year-end numbers point to a tight review, a covenant issue or a facility that needs replacing, the best time to act is before the bank reaches its view. Tell us about the facilities, the year-end position and the security available.

Enquiring won’t touch your credit file. Your figures stay with the specialist assigned to your file — they’re not sprayed across a dozen lenders. Please be accurate about existing debt, ATO balances and security on the form, so our first conversation can focus on what to do next. See if you qualify.