So, you’re a small business owner. You want to apply for business financing. You know you are eligible for the option. You’ve turned in all the necessary documents. What happens now? Specifically: how do financial institutions judge you to be worthy of their financing?

If you have ever applied for working capital from any financial institution for your SME, be they banks or peer-to-peer (P2P) financing platforms, you would know that certain documents are mandatory. Requirements generally include identification, bank statements, company registration documents, and of course, financial documents.

A financial institution will then analyze the information provided by each applicant and their credit history to assess whether or not the applicant meets their criteria. This information gathering process is also called due diligence. All data is verified, analyzed, and summarized to paint a picture of each applicant. The evaluation process can be broken down into: initial assessment, thorough analysis, and a final recommendation.


The initial assessment starts with a thorough review of documents submitted by the applicant. A significant part of the analysis is based on financial statements. Information like liquidity, the ability to meet current obligations, turnover rate, and a company’s net worth relative to its liabilities can all be gleaned from a business’ financial statements.

Numbers and ratios are critical, but authenticity and accuracy are even more important. There are cases when SMEs don’t have audited financial statements. This is where supplementary documents such as bank statements, invoices, and tax returns are used as part of the financial analysis. Once all the numbers are validated, a financial institution would a have a clearer picture of the capacity of an applicant to repay his financing.


Financial institutions may also utilize other sources to inquire whether or not an applicant has had historical payment problems. They might look at an applicant’s credit score, payment trends, etc. This is done to establish an applicant’s character.

A financial institution will perform another round of assessment. Purpose of financing, industry norms, and the economic situation will be considered. If all results are positive and the final analysis approved, your funds will be disbursed.


We hope you now have a clearer view on the credit analysis process. If your business numbers are healthy, your facilities and staff are in good order, and your likelihood of repayment is high, it’s likely your application will be approved. It’s always good policy to be honest. Never fabricate details. If you are found out, you will be blacklisted for future financing applications.

This article was first posted on the blog of our sister company Funding Societies (Singapore) under the same title. Link to original article here.

This article was written by Funding Societies, the first peer-to-peer (P2P) financing platform to launch in Malaysia. We provide working capital financing for small and medium-sized enterprises (SMEs), along with attractive investment opportunities to the broader public. To learn more about us, click on our website here.