Quick answer
Before borrowing, know ten numbers: cash on hand, monthly deposits and their trend, gross margin, net profit, debtor days, creditor days, stock turn, current ratio, how much of your income already goes to repayments, and whether tax is set aside and lodgements are current. Together they show whether the business can carry new debt comfortably, and they are exactly what a lender will look at.
Key points
- Ten numbers give you a lender's-eye view of your business in under an hour.
- Trends matter more than single snapshots — compare this quarter with last.
- The ATO's small business benchmarks let you compare key ratios with your industry.
- Knowing your numbers makes the funding conversation faster and more useful.
Most business owners can tell you roughly what they turned over last year. Far fewer can tell you their debtor days, their gross margin by product, or what share of their monthly income already goes to repayments. That’s not a criticism — you’re busy running the thing. But those numbers are exactly what a lender looks at, and more importantly, they tell you whether borrowing is a good idea.
Think of this as your pre-borrowing health check. Ten numbers, each explained in plain English, with a quick way to work it out. Grab your last few months of bank statements, your latest profit and loss report and a coffee. It’ll take about an hour the first time and fifteen minutes every quarter after that.
Why check your numbers before you borrow?
Three reasons:
- It tells you whether you should borrow at all. If the numbers are shaky, more debt may make things worse.
- It tells you how much and what type. A business with long debtor days has a different need to one with slow stock turn.
- It makes the conversation with a lender faster and more useful. When you know your numbers, the first call is about solutions, not fact-finding.
business.gov.au recommends reviewing your balance sheet, profit and loss statement, cash flow statement and budget regularly, and watching for trends like falling sales, thin margins and rising debt. The ten numbers below turn that advice into something concrete.
1. How much cash do you have on hand?
What it is: The combined balance of your business accounts today, minus anything already committed (like GST and PAYG withheld that you’ll owe at BAS time).
Why it matters: It’s your first line of defence. Cash that’s really the ATO’s isn’t yours to spend.
Quick check: Divide your available cash by your average weekly costs. That’s your runway in weeks. Our cash runway guide goes deeper.
2. What are your monthly deposits, and which way are they heading?
What it is: The total money from sales landing in your business account each month.
Why it matters: For unsecured lending especially, deposits are the main evidence of what the business can carry. The trend matters as much as the level.
Quick check: List the last six to twelve months side by side. Rising, steady, seasonal or falling? If falling, can you explain why?
3. What’s your gross margin?
What it is: Sales minus the direct cost of making those sales (materials, stock, direct labour), as a percentage of sales.
Why it matters: Gross margin is what pays for everything else — rent, wages, repayments, you. Thin margins leave little room for new debt.
Quick check: (Sales − cost of sales) ÷ sales × 100. The ATO’s small business benchmarks, which look at costs relative to turnover for businesses in your industry, are a useful comparison.
4. Is the business actually making a profit?
What it is: What’s left after all expenses, including your own pay if you draw a wage.
Why it matters: A business can have strong sales and still lose money. Lenders look at profit to judge whether repayments come from genuine earnings.
Quick check: Your profit and loss report shows it. If you don’t pay yourself a wage, subtract a realistic amount for your time to see the true picture.
5. How long do customers take to pay you? (Debtor days)
What it is: The average number of days between invoicing and getting paid.
Why it matters: Long debtor days are one of the biggest causes of cash flow gaps in otherwise healthy businesses.
Quick check: (What customers owe you ÷ sales for the last 90 days) × 90. If your terms are 30 days and your debtor days are 55, you’re funding your customers for nearly a month.
6. How long do you take to pay suppliers? (Creditor days)
What it is: The average number of days between receiving a supplier’s bill and paying it.
Why it matters: Compared with debtor days, it shows the gap you’re funding. Stretching suppliers too far can damage relationships and your credit.
Quick check: (What you owe suppliers ÷ purchases for the last 90 days) × 90.
At this point you’ll already know a lot more about your business than most owners do. If you’d like a real person to look at what these numbers mean for your funding options, start a quick enquiry — there’s no credit check when you first enquire.
7. How fast does your stock turn?
What it is: How many times a year you sell through your average stock level (only relevant if you hold stock).
Why it matters: Slow-moving stock is cash sitting on a shelf. Fast turn means stock funding pays back quickly.
Quick check: Cost of goods sold for the year ÷ average stock value. Higher is usually better; compare with your own past years.
8. What’s your current ratio?
What it is: What you own that will turn into cash within a year (cash, debtors, stock) compared with what you owe within a year (suppliers, tax, short-term debt).
Why it matters: It’s a quick test of whether you can meet near-term obligations.
Quick check: Current assets ÷ current liabilities. Below 1 means short-term obligations outweigh short-term resources — worth understanding before adding debt.
9. How much of your income already goes to repayments?
What it is: Total monthly repayments on all business debts as a share of monthly deposits.
Why it matters: This is the number that decides whether a new repayment fits. Lenders look at it closely, and so should you.
Quick check: Add up every repayment — loans, advances, equipment finance, ATO plan instalments — and divide by average monthly deposits. Then do it again using your quietest month.
10. Is tax set aside and are lodgements up to date?
What it is: Whether GST, PAYG withholding and income tax are provided for, and whether every BAS and tax return has been lodged on time.
Why it matters: Overdue lodgements are one of the most common snags in funding applications. Unprovided tax is a hidden debt.
Quick check: Log in to your ATO online services and check your account balance and lodgement status. If anything is overdue, lodge it now — even if you can’t pay yet.
How do you read the results together?
No single number tells the whole story. A few combinations to watch for:
| Pattern | What it might mean |
|---|---|
| Strong deposits, thin margin | Busy but not very profitable — review pricing before borrowing to grow |
| Good profit, long debtor days | Profitable but cash-starved — a line of credit or tighter terms may help |
| Slow stock turn, rising supplier bills | Cash tied up on shelves — buy less, sell through, then reorder |
| High repayment share, falling deposits | Debt is squeezing the business — look at consolidation or a reset |
| Everything steady, lodgements current | You’re in a strong position to borrow for the right purpose |
An illustrative worked example
Illustrative only. A small bakery with two shopfronts runs its health check before deciding whether to fund a third site.
- Cash on hand covers about five weeks of costs.
- Monthly deposits have risen steadily for a year.
- Cost of sales relative to turnover sits within the ATO benchmark range for its industry.
- Debtor days are low (mostly card sales) but the wholesale café accounts average 48 days.
- Repayments take a modest share of monthly deposits.
- All BAS lodgements are current.
The verdict: the business is in good shape to borrow for a third site. But the check also flags the wholesale debtor days — tightening those terms would free up cash and reduce how much they need to borrow.
What should you do with your results?
- If they look healthy: you’re well placed. Use the 2-minute funding profile to see which options fit your goal.
- If one or two are weak: fix those first where you can — shorter terms, a price review, clearing old stock.
- If several are weak: focus on stabilising the business before adding debt. Our guide to good debt vs bad debt can help you decide.
Know your numbers? Let’s put them to work
Running a health check is the kind of thing strong operators do — and it shows. When you come to us knowing your numbers, the conversation gets straight to what fits your business.
It takes about 60 seconds to enquire and there’s no credit check. We won’t send your details to a crowd of lenders; a real person looks at your situation and calls you. Use the numbers you’ve just worked out to fill in the form accurately — especially monthly deposits and existing repayments — and we can match you properly first time.
Frequently asked questions
What financial numbers do lenders look at?
Mostly the ones that show whether repayments can be met: the trend in deposits, profit, existing repayments, how quickly customers pay, and whether tax lodgements are up to date. For property-secured loans, the property's value and equity matter too.
What is a good gross margin?
It varies hugely by industry — a café and a consultancy look completely different. The ATO's small business benchmarks let you compare key ratios with similar businesses, which is more useful than any single rule of thumb.
How do I calculate debtor days?
Divide what customers currently owe you by your sales over a period, then multiply by the number of days in that period. For example, debtors divided by the last 90 days of sales, multiplied by 90.
How often should I do a business health check?
Quarterly is a good rhythm, lined up with your BAS. It only takes an hour once you've done it the first time, and it spots problems while they're still small.
Where can I compare my business with others in my industry?
The ATO publishes small business benchmarks built from 2023–24 data that show typical ratios by industry. business.gov.au's financial health review page also points to useful tools.