Why do banks turn down professional services firms for loans?

Bank lending is built around security. An agency, consultancy or accounting practice has laptops and a lease, and neither is collateral in any meaningful sense.

The value of the firm walks out at six o'clock. Underwriters know it, and a model built on recoverable assets has nowhere to put a business whose assets are people.

Payment terms are the practical squeeze. You carry salaries for thirty, sixty or ninety days before a client pays, so the borrowing need is structural rather than occasional.

Recurring billings are among the most predictable revenue an underwriter sees. Retainers and repeat engagements produce a deposit pattern that is easy to verify and hard to fake.

Client concentration is the thing that will actually be examined. One client at sixty per cent of revenue is a genuine risk, and it changes the offer more than the absence of collateral does.

A line of credit generally fits better than a lump sum, because the need is a gap between payroll and payment rather than a one-off purchase.

A line of credit suits a firm whose billings are steady but whose clients pay on terms, because it is drawn against the gap and repaid when the invoices clear.

Short-term working capital underwritten on recurring billings fits a one-off need, such as a hire made ahead of a signed engagement. Neither asks for collateral a firm of people does not have.

Six months of business bank statements.

Roughly what share of revenue your largest client represents. It will come up.

Whether billings are retainer or project — recurring revenue is priced better.