01
The low points
Not the average balance but the lowest, and how often it is reached. A lender sizing a revolving limit is asking how deep the business goes in an ordinary bad month, and this is where the answer is.
Guide
How a limit is set, and how it is kept.
Getting a limit and keeping it are different problems. The first is an application and the second is a pattern of behaviour, and most of what goes wrong happens at the second.
MS
Matt Stiles Editor
Published 8 September 2026 Last reviewed 8 September 2026 Read time 12 min
The short version
Five lines that explain most decisions.
- Bank statements carry the file. Particularly the low points and how often they are reached, because a lender is asking what a bad month looks like.
- A described cash cycle sizes better than a round number. A limit justified by how long the business waits between paying and being paid is easier to grant and easier to defend at review.
- The usage pattern is watched continuously. A facility that moves reviews well. One that has sat near its limit for a year does not.
- A limit can be reduced. Most small business facilities are uncommitted, and a reduction is most likely when the position has weakened.
- Indicative only. This describes how assessment generally works. Criteria vary by lender and no site can say what any particular one will decide.
The shape of it
Why a revolving limit is assessed differently.
A term loan’s exposure is known and falls on a schedule. A lender writing a $150,000 revolving limit is exposed to $150,000 on any day of the facility’s life, for as long as it exists, with nothing reducing it. That is a materially different commitment and it produces a materially different assessment.
The practical effect is that a lender is less interested in whether a single repayment can be met and more interested in whether the business can operate within the limit and come back down. That is a question about the cash cycle rather than about affordability in the term-loan sense.
It also explains why the ongoing relationship matters more here. A term facility, once drawn, is largely settled. A revolving facility is reassessed continuously, in the sense that every month of account behaviour is visible and feeds the next review.
Exposure
Up to the limit, any day
Duration
Indefinite
Amortisation
None
Consequence
A closer watch
The bank statements
Six things a lender reads that are not the balance.
A general description of what is assessed rather than any lender’s criteria, which are their own and vary considerably.
02
The shape of the month
Whether the account rises and falls on a rhythm or drifts in one direction. A visible cycle supports a limit sized to that cycle; a drift does not.
03
Existing facility conduct
How any current limit has been used, including excesses, dishonours and whether it clears. This is the single strongest predictor of how a new limit will be used.
04
Other lenders’ payments
Regular outgoings to other financiers are visible whether or not they were disclosed, and an undisclosed facility found this way affects the file more than the facility itself would have.
05
Tax payments
Regular payments to Inland Revenue read as a business current with its obligations. A long absence raises a question better answered in the application than in a follow-up call.
06
Owner drawings
Consistency here reads as discipline. Large irregular drawings against a facility application invite a question about whether the limit is funding the business or the owner.
Sizing
How to ask for a number that gets granted.
A request for a limit is far stronger when it comes with the arithmetic behind it. A business that says it needs $150,000 because its cash cycle runs about seventy days at roughly $2,100 a day of cost of sales is describing a mechanism a lender can check in minutes. One that says $150,000 feels about right is asking the lender to construct the case.
The same arithmetic protects the limit at review. A facility justified by a described cycle can be defended by pointing at the cycle; a facility justified by a preference has nothing to point at when the lender is looking for a reason to reduce it.
The figures come from the accounts rather than from a forecast. Inventory, receivables and payables against cost of sales give the cycle in days, and the cycle multiplied by daily cost of sales gives the capital tied up. That is the number the limit should be sized around, with a margin for the worst month rather than the average one.
The review
Three things a review actually looks at.
01
Whether the facility moves
The most important input, and the one businesses least expect. A limit drawn and cleared through several cycles is doing what it was written for. One that has sat between eighty and one hundred percent for a year is funding a permanent position, which is a different risk and a worse one from the lender’s side.
02
Whether the trading position has held
Turnover, margin and the low points in the account, compared against where they were at the last review. A business that has grown into its limit is a candidate for an increase; one that has weakened into it is a candidate for a reduction.
03
Whether anything was surprising
Excesses, dishonours, undisclosed facilities and late information all weigh more than their size suggests, because a lender with no schedule to rely on is relying on conduct instead. A clean year is worth more here than on almost any other product.
The uncomfortable part
A limit is most likely to be reduced in the year it is most needed.
Reductions follow deterioration, and deterioration is exactly when a business wants the facility available. This is not a criticism of lenders, who are managing an open-ended exposure with no amortisation, and it is a reason to be clear-eyed about what a limit is worth. A facility is a good first line of defence and a poor only one, and the businesses that discover the difference are generally the ones that needed it most.
Preparation
What is worth having ready.
Assembling this before applying turns a week of back and forth into a single submission, and a complete file is the largest single influence on how quickly an application moves.
01
The trading picture
Bank statements covering enough months to show the shape of the year, financial statements where the business has them, and management accounts if they are current.
Documents commonly required
- Bank statements
- Financial statements
- Management accounts
02
The cycle, calculated
Days inventory, days sales and days payables outstanding, and the capital that ties up. This is the argument for the limit and it takes an hour to produce from the accounts.
03
Every existing commitment
Each facility with its balance, repayment and security position, including anything a related entity is servicing. Completeness matters more than presentation, and omission is the worst failure mode available.
Documents commonly required
- Existing facility schedule
- Details of any security registered
04
The two answers
What the limit is for, and what the pattern of use will look like across a year. A business that can describe when it expects to draw and when it expects to clear is describing a facility a lender can size.
No timings appear here. They vary by lender, by amount, by whether security is taken and by how complete the file is, and a page naming a number would be describing a promise nobody made.
Common outcomes
Three things that go wrong, and what causes them.
General patterns rather than rules. A lender’s actual criteria are its own and vary considerably.
A smaller limit than requested
The trading position supports less than the amount asked for, or the request came without an arithmetic basis the lender could check.
What happens:A facility that will constrain the business at the point it is most needed, and one that could have been avoided with an hour of preparation.
A reduction at review
The facility has hardened, the trading position has weakened, or both. The lender reduces the limit toward what it now considers appropriate.
What happens:A funding gap created by the review, arriving with whatever notice the agreement requires.
A decline on an undisclosed facility
Payments to another lender appear in the statements that were not mentioned in the application.
What happens:The file is reassessed on reliability rather than on affordability, which is a worse position than the extra facility alone would have created.
All three are addressable before applying. Calculating the cycle, listing every commitment and being honest about the usage pattern takes an afternoon and prevents most of what causes an avoidable outcome.
Between reviews
What to do in the eleven months nobody thinks about.
The most useful thing a business can do for its next review is keep the facility moving. A limit drawn and cleared across the year demonstrates that it is funding a cycle, which is the thing the lender wants to see and the thing a hardened balance disproves.
The second is to tell the lender about a problem before it appears in the statements. A month that will be tight, a large customer that has gone quiet, a delayed project: raised early each of those is a conversation, and discovered later each is a credit event. Lenders deal with the first constantly.
The third is to tell them about good news too. A contract won, a shortened cycle or a stronger margin gives a lender a reason to consider an increase at review, and one that hears nothing between reviews has no reason to change anything.
Method
How this guide was written, and its limits.
This describes how revolving credit assessment generally works. It does not reproduce any lender’s criteria, thresholds or scorecards, because those are commercially confidential, they differ substantially between lenders, and a page stating them would be describing a policy nobody published. No approval times, approval rates or eligibility thresholds appear here for the same reason.
Nothing here is financial advice and nothing here indicates that any particular application would be approved. This site is not a lender, a broker or a registered financial adviser, and the only party who can say what a lender will decide is that lender.
The incumbent advantage
Why the bank holding the account starts ahead.
A lender that already holds the transaction account has years of behaviour to assess rather than three months of statements. It can see the seasonality, the customer concentration in the receipts, the conduct on existing facilities and the low points across several cycles, and it can size a limit with more confidence as a result.
That is a real advantage to the business as well as to the bank, and it is the reason the incumbent is usually worth asking first even where a better rate might exist elsewhere. The answer costs nothing and it establishes the floor the business is negotiating from.
The counterweight is concentration. A business whose account, facility, term debt and security all sit with one institution has limited room to move if that institution changes its appetite, and the alternatives it might approach are starting without the history. Holding something elsewhere, even modest, keeps a door open.
Presenting a request
What a good application actually contains.
A page rather than a conversation. The limit sought, the cash cycle it is sized against with the arithmetic shown, the expected usage pattern across a year, every existing commitment, and what security is available. That fits on a single page and it answers most of what a credit assessor would otherwise have to ask.
The usage pattern is the part almost nobody includes and the part a revolving lender most wants. A business that can say it expects to draw from March, peak around $90,000 in August and clear by November is describing a facility that can be sized, and it is demonstrating that it understands its own year.
It also sets up the review. A business that predicted its own pattern and then followed it has a considerably easier conversation twelve months later than one that presented nothing and simply used the limit.
A note on brokers
What to ask before a file is placed.
A broker with a genuine panel and a considered view on which lender fits a revolving requirement is useful, particularly to a business that does not know which institutions write the kind of limit it needs. A broker who submits the same file to everyone is spending the business’s credit enquiries rather than their own effort.
The questions that separate them are simple. How many lenders will see this file, in what order, and why those. How is the broker paid, and by whom. Whether the fee changes depending on which lender funds it. All three have straightforward answers and the willingness to give them is itself informative.
This site is not a broker and does not place applications. It carries one disclosed referral to Prospa on the calculator, and the partner page sets out what that relationship is and where it fits.
Sizing the request
What the expected drawn balance costs.
A limit sized from the cash cycle produces an expected average drawn balance, which is both the number to ask a lender to price and the number that determines what the facility costs. Indicative only, and not a quote or offer of credit.
Indicative interest cost
Weekly
$150/week
$650 /month $7,800 a year while drawn
$150,000
$5,000 $500,000
$60,000
Nothing drawn Fully drawn
13.00% p.a.
8% (secured) 30% (unsecured)
Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.
Sending to Prospa
Your $150,000 scenario
$60,000 drawn at 13.00% . Prospa will ask a few quick questions, then provide a firm quote and funding if eligible.
Redirecting…
References
Sources
- Financial Service Providers Register
Where a New Zealand lender’s registration can be confirmed before an application is made.
- Companies Office
The register used to confirm entity and director details during assessment.
- Personal Property Securities Register
Where existing security positions over a business can be seen, including ones an application did not mention.
- Commerce Commission
The regulator whose guidance covers lender conduct and disclosure obligations.
- Financial Markets Authority, financial advice
Backs the distinction between general information of this kind and regulated financial advice.
FAQ
Questions, answered
What do lenders look at first on a revolving application?
Bank statements, particularly the low points and how often they are reached. A lender sizing a limit is asking how deep the business goes in an ordinary bad month rather than whether a single repayment is affordable.
How should a limit be justified?
With arithmetic. A cash cycle in days multiplied by daily cost of sales gives the capital tied up, and a limit sized to that with a margin for the worst month is a request a lender can check in minutes.
Why is a revolving facility assessed differently from a loan?
Because the exposure is to the whole limit on any day, for an indefinite period, with no amortisation reducing it. That is a materially different commitment and it produces a closer, more continuous assessment.
What does a review look at?
Whether the facility moves, whether the trading position has held, and whether anything was surprising. The first is the one businesses least expect and it carries the most weight.
Why would a limit be reduced?
Because the facility has hardened, the trading position has weakened, or both. Reductions follow deterioration, which means they are most likely in the year the facility is most needed.
Does a facility that is never used review well?
Not necessarily. A dormant limit is capital held available for no return beyond the line fee, and lenders reduce dormant facilities. Occasional drawing and clearing demonstrates the facility is part of how the business operates.
Should existing facilities be disclosed?
Always. Payments to other lenders are visible in the bank statements whether or not they were mentioned, so omitting them hides nothing and converts a neutral fact into a question about reliability.
What is worth doing between reviews?
Keeping the facility moving, telling the lender about a problem before it appears in the statements, and telling them about good news too. A lender that hears nothing has no reason to change anything at review.
Does security change the assessment?
It changes what the lender can retreat to, which produces a larger limit and a lower rate. It does not remove the serviceability question, because no lender writes a facility hoping to exercise security.
Can a lender reduce a limit without notice?
What is required is set out in the agreement, and most small business facilities are uncommitted. Reading the review and variation terms before relying on a limit is worth the ten minutes it takes.
How long does an application take?
It varies by lender, by amount, by whether security is taken and by how complete the file is, and this site does not publish timings. A lender will state its own, and that is the figure worth relying on.
Is this guide financial advice?
No. It describes how assessment generally works. This site is not a lender, a broker or a registered financial adviser, and it cannot indicate whether a particular application would be approved.
Related
Keep reading
How a line of credit works
The mechanism a limit sits inside.
Read onSecured line of credit
What security does to a limit and a rate.
Read onSmoothing seasonal cash flow
Why the timing of an application matters.
Read onOur finance partner
Where the referral goes, and what it does and does not suit.
Read onAll eight facilities
Every revolving arrangement compared in the same shape.
Read on