What are the warning signs that banks look for in distressed businesses?

Banks monitor clients closely for indicators of financial distress. Warning signs include frequent overdraft requests, missed loan repayments, falling account balances, and bounced payments. Banks also track declining sales trends, reduced margins, or reliance on short-term borrowing to cover daily operations. If these signs persist, lenders may tighten credit, demand repayment, or appoint investigating accountants to assess viability. For directors, understanding these red flags is important because proactive communication with banks can make the difference between continued support and withdrawal of facilities. By presenting clear forecasts, restructuring plans, and evidence of cost control, directors can reassure lenders that the business remains viable. Ignoring warning signs, on the other hand, may accelerate bank intervention and trigger insolvency proceedings. Awareness of lender expectations allows directors to address issues before confidence is lost.