Quick answer
Explain a bad month in four short parts: what happened, how long it lasted, what you did about it and what the months since show. Keep it to three or four sentences, attach evidence if it exists, and put it in your cover note before the assessor finds it. A dip that is named, bounded and followed by recovery reads as resilience, not weakness.
Key points
- Four parts: what happened, how long, what you did, what followed.
- Three or four sentences, not a page.
- Attach evidence where it exists: a letter, an invoice, a roster.
- Say it before the assessor finds it.
- Structure
- What, how long, what you did, what followed
- Length
- Three or four sentences
- Where
- Cover note, referenced to the month
Why does one bad month need a note?
Because assessors read statements for patterns, and a bad month breaks the pattern. When it does, the reader has to supply their own explanation, and the explanations people supply to themselves on a lender’s desk are rarely the kind ones. A late customer becomes a lost customer; a quiet fortnight becomes a trading problem.
A note takes the guessing away. It is not an apology. It is a piece of information the assessor can use, offered by the person who knows the answer.
What is the four-part structure?
| Part | What to say | Example wording |
|---|---|---|
| 1. What | Name the event in plain terms | “In March, our largest customer paid 30 days late.” |
| 2. How long | Say when it began and ended | “Cash was tight for about five weeks.” |
| 3. What you did | The action, not the feeling | “We moved to fortnightly invoicing and added a deposit.” |
| 4. What followed | Point to the later months | “April to August deposits were steady.” |
Four parts, three or four sentences. It reads like an owner in command.
What does good wording sound like?
Specific, calm and bounded. Contrast two versions of the same event.
Weak: “We had a really tough few months due to the economy and things were hard but we are doing much better now and expect a great year.”
Stronger: “In June and July, two councils delayed their contract payments to August. We covered wages from savings, then added a payment-terms clause to new contracts. Deposits since August are back to the earlier level.”
The second names the cause, the duration, the action and the recovery. It does not predict a great year, because predictions are not evidence.
Illustrative example. A cabinet-maker’s January deposits are half the usual amount. The cover note says: “January: workshop closed for two weeks for a planned equipment install and the usual builders’ holiday; no jobs were delivered. February and March are back at normal levels (see statements).” The assessor now sees two reasons, both ordinary, and moves on.
What evidence can I attach?
Anything that proves the claim without extra effort:
- A letter or email from the customer who paid late.
- An invoice showing the due and paid dates.
- A roster or booking sheet showing a closure.
- A supplier notice about a delay.
- The later months themselves, which are the strongest evidence of all.
Attach only what supports the story. Ten pages for a one-line event is noise. One page that proves the point is enough.
What are the common mistakes?
- Over-explaining. Three paragraphs about one slow month sounds like a larger problem.
- Blaming. “The market” or “my accountant” shifts the story to someone else. Own the timeline and the fix.
- Hiding. Omitting the note and hoping the assessor skips the page. They will not.
- Forecasting rescue. Saying business will be great next quarter without anything to support it.
- Editing the statement. Never alter a statement. An edited document destroys trust in all the others.
What about a pattern, not a single month?
Seasonal patterns that repeat year to year are not bad months; they are the shape of the business. Show two years if you have them, and say so in a sentence: “Revenue dips each winter and recovers by September; last year’s statements show the same pattern.” For businesses where income arrives in lumps, the serviceability page explains why assessors prefer to look at the average.
If a run of weak months is real and recent, the plain path is the one in thin trading history: add forward evidence, tidy habits, and consider waiting.
Where does the note go?
In the cover note or one-page summary, referenced to the month: “see March”. Keep the same wording ready for the call. The page on answering assessor questions shows how to deliver it live without rambling.
What if the bad month was caused by a customer?
Customer problems are among the most common reasons for a dip: a late payer, a lost contract, a dispute. The note works best when it shows what you have done to reduce the risk of recurrence. Shorter payment terms, deposits, tighter credit checks on new customers and spreading work across more clients are all changes an assessor can understand.
Be careful about concentration. If one customer accounts for most of your revenue, an assessor will notice, and a dip tied to that customer is exactly the risk they are thinking about. If that is your situation, say so, and describe what you are doing to widen the base. A business that sees its own concentration risk reads as more robust than one that has not noticed.
What if the bad month was a one-off event?
Weather, a fire, a flood, a supplier failure and a key person being unavailable are all legitimate reasons. Name the event and the dates, attach any documentation such as an insurance claim or a closure notice, and show the recovery in later months. For natural disasters, official sources such as disaster assistance pages describe the events and dates, which can support your note. Keep the tone matter-of-fact. Events happen to well-run businesses; what an assessor wants to see is a business that carried on.
Ready to lodge?
If your note is written, lodge a free enquiry. It takes about a minute, involves no credit check at this stage, and goes to a real person who will read what you say instead of to a crowd of lenders.
Mention the soft patch on the form if it is relevant, and give accurate figures for recent months. Telling the specialist up front means the first call can address it, and the explanation you have just written is ready to attach.
Frequently asked questions
Do I have to explain every dip?
No. Seasonal patterns that repeat, or small month-to-month variation, do not need captions. Explain the dips that stand out against the rest: the cliff, the gap, the month that looks like a different business.
What if I do not know why the month was bad?
Then work it out before you lodge. Look at invoices, customers and costs for that month. If you still cannot tell, say what you know and what you are watching; an honest 'we're investigating' is better than a guess.
Should I mention something personal, like illness?
You can, briefly and factually, if it affected the business. Keep it short and focus on the business effect and the recovery. Share only what you are comfortable sharing.
What if the months since are also weak?
Then the note has to be about what is changing and what evidence there is, such as new contracts. If recovery is not visible yet, a few more months before lodging may help.
Can I explain verbally on the call?
You should be ready to, but a written note in the pack goes first and stays on file. It protects you from being quoted back inaccurately.