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What Do Banks Really Look At When Lending to Companies?

How a credit decision is actually formed inside a bank, step by step, through cash flow, the balance sheet, debt service capacity and collateral.

In Türkiye, many company directors open the conversation with their bank with the same sentence:

“My company is trading, I am making sales, so why can I not get a loan?”

The answer is usually more complicated than whether sales are good or bad. For a bank, the fundamental question is not “is this a good company?”

The real question is this: “Can this company repay the loan we advance, on time and from the cash flow we have assumed?”

That distinction is the key to understanding corporate access to credit.

1. The bank wants to see the source of repayment first

This is one of the most basic principles of credit analysis. When a company asks for a TRY 10 million loan, the bank does not simply look at the property it owns. It asks this first:

which cash flow will service the principal and interest on TRY 10 million of debt?

The company might, for instance, be making TRY 100 million of sales a year. At first glance that looks strong. But if the collection period is very long, if inventory is growing fast, if suppliers are paid up front, if existing loan instalments are heavy or if profit is not converting into cash, then TRY 100 million of turnover is not on its own a strong credit indicator.

What the bank wants to see is debt repayment capacity rather than turnover.

2. Being profitable and generating cash are not the same thing

This is one of the most frequently overlooked points in credit applications. A company can report a profit in its accounts and still be under severe cash pressure in the same period.

Suppose the company made TRY 20 million of sales but gave its customers 120 days to pay. The sale has been recognised in the income statement, but the money has not yet reached the company. In the meantime wages, taxes, suppliers and bank instalments all have to be paid.

That is why the bank looks not only at the income statement but at cash flow, trade receivables, inventory and short-term liabilities together.

Are my operations genuinely generating cash, or am I financing growth with a constant stream of new debt?

3. Banks read several balance sheet ratios together

There is no single “magic credit ratio”. Banks assess a range of indicators together, according to the company's sector, size, history and the type of facility requested.

The ones that matter most are debt to equity, the current ratio, net working capital, interest cover, financial debt to EBITDA, receivable days, inventory days and the capacity to generate cash.

What counts here is not simply whether the ratios are high or low. It is whether you can explain why they are at that level.

A rise in inventory, for example, may look negative at first sight. But if the company has built stock temporarily against a large new order and can evidence that with order documentation, the same balance sheet line reads quite differently.

A credit file should therefore not consist of numbers alone. It should also tell the economic story behind them.

4. One of the bank's key questions: how much debt can the company carry?

The fact that a business can borrow does not mean it can borrow without limit. Banks assess existing debt and the total burden after the new facility.

One important measure here is DSCR — Debt Service Coverage Ratio, the debt service coverage ratio.

If, for example, the company's annual cash flow available for debt service is TRY 15 million against annual principal and interest obligations of TRY 10 million, then DSCR = 1,50 . That means the company has roughly TRY 1,50 of capacity for every TRY 1 of debt service.

Which definition of cash flow is used, and what ratio is acceptable, varies with the type of facility, the sector and the bank's own policies. DSCR is therefore not an approval criterion on its own. But it answers a very important question: can the company genuinely carry the burden of the new debt?

5. Collateral matters, but it does not replace poor cash flow

Collateral is one of the things businesses in Türkiye concentrate on most in credit discussions. Property, vehicles, deposits, assignment of receivables, guarantees or KGF-backed structures can all reduce credit risk.

But in a sound approach to lending, collateral is not the first source of repayment. The first source is the cash the company generates from its operations. Collateral is the second line of defence that reduces the bank's risk.

So the answer to “I have property worth TRY 10 million, why can I not get a TRY 5 million loan?” usually lies less in the value of the property than in the company's repayment capacity.

6. The history of the banking relationship shapes the decision

Credit assessment is not based on the latest balance sheet alone. Past loan repayments, cheque and note behaviour, account movements, limit utilisation, arrears, the way the company works with its banks, tax and social security obligations and the financial history of its shareholders can all form part of the risk assessment.

Trying to build a banking relationship on the day the need for credit arises is therefore too late for most companies. Access to finance is a process to be managed while the company is healthy, not once a crisis has begun.

7. The biggest mistake: going to the bank only to ask “how much will you lend?”

A strong credit application looks different. The company should go to the bank with answers to these five questions:

1. How much financing do I need?
2. Why will I use it?
3. What tenor do I need?
4. From which cash flow will I repay the loan?
5. If something unexpected happens, what is my second source of repayment?

Rather than saying “I want a TRY 20 million loan”, an explanation along the lines of “rising orders are opening a financing gap of about TRY 20 million in our working capital cycle. The funds will be used to buy raw materials. Our average collection period is 75 days. We are asking for a 12 month tenor, repaid from the collections arising on those sales” is a far more analysable request.

Set up your own credit committee before you borrow

Companies usually wait for the bank to assess them. The better method is for the company to run its own credit analysis before the bank does.

These questions should be answered before an application:

1. What are the key movements in the last three years of financial statements?
2. What is the company's genuine working capital requirement?
3. How is existing bank debt distributed across maturities?
4. What is the monthly cash flow for the coming 12 months?
5. How much does a change in interest rates affect the company?
6. Is total debt service capacity sufficient after the new facility?
7. Which assets can be offered as collateral?
8. Which points might the bank see as weak?
9. What is the economic explanation for those weaknesses?
10. Is the amount requested consistent with the company's real need?

Once that work is done, the discussion moves beyond “will you lend to us?” to “this is our financing need, our repayment capacity and the structure we propose.”

Conclusion: access to credit begins before you go to the bank

BDDK data for August 2026 shows the Turkish banking system continuing to carry a very large volume of credit. But the critical issue for a company is not how much credit exists in the system; it is how ready its own financial structure is for the bank's credit assessment.

A business that wants better access to credit should perhaps not start by visiting more banks. It should first assess its own financial structure through the eyes of a credit analyst.

Because the purpose of a well-prepared credit file is not to hide the facts from the bank. Quite the opposite: it is to translate the company's operating model, financing need, risks and repayment capacity into financial language the bank can understand.

And that is precisely where access to credit begins.