In brief: A bank reviewing a loan application starts from your financial statements (états de synthèse: balance sheet, income statement and, above 10 million DH of turnover, ESG, statement of changes in financial position and ETIC: Art. 9 and 21 of Law 9-88), your tax return and a forecast. It first reads four things in them: the balance between working capital and the working capital requirement, net cash, the weight of debt relative to cash flow from operations, and the level of equity. Accounts prepared on time, consistent with the tax return and, where applicable, certified, make this reading easier.
A loan application is first and foremost an accounting file. Before discussing rates or collateral, the analyst reconstructs the company’s financial position from the documents provided. This article describes those documents, the indicators drawn from them and the signals that cause concern, with a worked example presented as an assumption.
The documents usually requested
Each bank has its own list, which must contain the minimum information that Bank Al-Maghrib requires it to request according to the company’s legal form, its turnover and the total of its loans from that bank (directive No. 1/G/2005 of 1 April 2005). The documents below come up in most applications; the first three stem from the company’s legal obligations (the statutory auditor’s report where the company has one).
| Document | What it contains | Point to watch |
|---|---|---|
| Financial statements for the last closed financial years | Balance sheet, income statement (CPC), statement of management balances (ESG), statement of changes in financial position and additional information statement (ETIC) (Art. 9 of Law 9-88) | Up to 10 million DH of annual turnover inclusive, only the balance sheet and the CPC are mandatory, possibly in simplified form (Art. 21) |
| Tax return and its appendices (the “liasse fiscale”) | Taxable income and appendices set by regulation, filed within three months of the year end (Art. 20-I of the CGI) | The figures must agree with the financial statements given to the bank |
| Statutory auditor’s report, if there is one | Certification, qualified certification or refusal to certify (Art. 175 of Law 17-95) | The report accompanies the financial statements filed with the court registry (Art. 158 of Law 17-95, Art. 95 of Law 5-96) |
| Certificate of tax compliance | Certificate attesting to tax compliance with the obligations to file and pay taxes, duties and levies, issued by the tax administration (wording of Art. 117-IV of the CGI) | Request it early: it is issued only if filings and payments are up to date |
| Recent interim accounts | Interim balance sheet and CPC for the current financial year | Without a full close, state the estimates used (inventories, provisions) |
| Forecast | Forecast income statement, financing plan and cash flow for the project | The assumptions must start from the latest actual accounts |
The financial statements “form an indivisible whole” (Art. 9 of Law 9-88). Providing a balance sheet without the ETIC, when the company is required to prepare it, deprives the analyst of the explanations on methods, commitments and significant events. Each statement is detailed in our article on financial statements in Morocco, and the content of the tax return in the one on the corporate income tax return and the liasse fiscale.
The forecast
The forecast answers the only question that matters to a lender: will the company be able to repay? It must show expected turnover, additional costs, the project’s effect on the working capital requirement and the instalments of the loan requested. The method is detailed in the article how to write a business plan.
What the bank reads in the balance sheet
The balance sheet sets out the company’s assets and liabilities separately (Art. 10 of Law 9-88). The analyst groups it into broad categories to answer three questions: are investments financed by long-term resources, does operations absorb a lot of cash, and what is left in the bank?
Working capital
Functional working capital equals permanent financing (equity, quasi-equity, long-term financing debt, long-term provisions for risks and charges and translation differences on the liabilities side excluding current items) minus fixed assets. When positive, it shows that fixed assets are covered by stable resources and that a surplus finances part of the operating cycle. When negative, it signals that investments are financed by short-term debt, which the bank generally looks at closely.
Working capital requirement
The working capital requirement (WCR, called the overall financing requirement in the CGNC statement of changes in financial position) equals current assets excluding cash (inventories, trade receivables, other receivables) minus current liabilities excluding cash (trade payables, tax and social security liabilities, other payables). It measures the money tied up in the operating cycle. It depends on three periods: inventory turnover, customer collection period and supplier payment period.
Net cash
Net cash equals working capital minus the WCR. It can be checked directly on the balance sheet: cash assets minus cash liabilities (overdrafts, short-term cash loans). When negative, it shows that the operating cycle is partly financed by short-term bank facilities. This is not an anomaly in itself, but a dependence that the analyst measures.
Debt and equity
Two ratios often come up in an analysis: equity relative to total assets (financial independence) and net financial debt relative to equity. They show who finances the company, its shareholders or its lenders.
Equity is also compared with share capital. If, as a result of losses shown in the financial statements, net assets fall below one quarter of the share capital, the rule differs according to the company’s legal form. In the SA, the board of directors or the management board must, within three months of the approval of the accounts showing the loss, convene the extraordinary general meeting, which decides whether the company should be dissolved early (Art. 357 of Law 17-95). In the SARL, the partners decide, within three months of that approval and by the majority required to amend the articles of association, whether the company should be dissolved early (Art. 86 of Law 5-96). An application submitted in this situation must explain the decision taken and the planned regularisation. Deadlines and ways of regularising are detailed in the article on equity below one quarter of the share capital.
What the bank reads in the CPC and the ESG
The income statement summarises the income and expenses of the financial year, regardless of when they are received or paid (Art. 10 of Law 9-88). The statement of management balances describes how net income and self-financing are formed (same article). These two statements are where repayment capacity can be read.
- Gross operating surplus (EBE, similar to EBITDA). It measures what the business generates before depreciation, finance costs and tax. Compared with interest expense, it shows whether the company can bear the cost of its debt.
- Cash flow from operations (CAF, self-financing capacity). Using the additive method, it starts from net income, adds back depreciation and provisions, deducts reversals and neutralises gains and losses on disposals. It is the internal resource with which the company repays the principal on its loans and finances part of its investments.
- Net financial debt relative to CAF. Expressed in years, this ratio gives a theoretical repayment period if all of the CAF were used for it.
- CAF relative to principal repayments. It shows whether the year’s repayments can be covered without taking on new loans.
- Trends over several financial years. A margin that falls while turnover rises, or personnel costs that grow faster than activity, count as much as the level in any one year.
None of these ratios has a threshold set by the texts reviewed for this article. Each bank applies its own criteria, which take account of the sector, the collateral and the term of the loan.
Worked example (company X, SARL, assumption)
Company X, an SARL with share capital of 2,000,000 DH, closes its accounts on 31 December. It wants to borrow 2,000,000 DH over five years for a new production line. All amounts are assumptions.
Simplified balance sheet at 31/12/2025 (in DH)
| Assets | Amount | Liabilities and equity | Amount |
|---|---|---|---|
| Net fixed assets | 6,000,000 | Share capital | 2,000,000 |
| Inventories | 2,500,000 | Reserves and retained earnings | 1,820,000 |
| Trade receivables | 3,500,000 | Net income for the year | 680,000 |
| Other receivables | 500,000 | Equity | 4,500,000 |
| Cash assets | 300,000 | Long-term financing debt | 3,000,000 |
| Trade payables | 3,200,000 | ||
| Other current liabilities | 900,000 | ||
| Cash liabilities | 1,200,000 | ||
| Total | 12,800,000 | Total | 12,800,000 |
Simplified CPC for the 2025 financial year (in DH)
| Item | Amount |
|---|---|
| Turnover excluding taxes | 18,000,000 |
| Purchases consumed | − 11,500,000 |
| Other external expenses | − 1,800,000 |
| Taxes and duties | − 100,000 |
| Personnel costs | − 2,900,000 |
| Gross operating surplus | 1,700,000 |
| Operating depreciation and provisions | − 600,000 |
| Operating income | 1,100,000 |
| Interest expense | − 250,000 |
| Income before tax | 850,000 |
| Income tax (amount used for the example) | − 170,000 |
| Net income | 680,000 |
Principal repayments on existing loans for 2026 amount to 600,000 DH (assumption).
The calculations
| Indicator | Calculation | Result |
|---|---|---|
| Permanent financing | 4,500,000 + 3,000,000 | 7,500,000 DH |
| Working capital | 7,500,000 − 6,000,000 | 1,500,000 DH |
| WCR | (2,500,000 + 3,500,000 + 500,000) − (3,200,000 + 900,000) | 2,400,000 DH |
| Net cash | 1,500,000 − 2,400,000 (check: 300,000 − 1,200,000) | − 900,000 DH |
| CAF (no reversals or disposals) | 680,000 + 600,000 | 1,280,000 DH |
| Financial independence | 4,500,000 / 12,800,000 | 35.2% |
| Net financial debt | 3,000,000 + 1,200,000 − 300,000 | 3,900,000 DH |
| Net financial debt / equity | 3,900,000 / 4,500,000 | 0.87 |
| Net financial debt / CAF | 3,900,000 / 1,280,000 | 3.0 years |
| EBE / interest expense | 1,700,000 / 250,000 | 6.8 |
| CAF / 2026 principal repayments | 1,280,000 / 600,000 | 2.1 |
| Customer collection period (simplified, without VAT adjustment) | 3,500,000 / 18,000,000 × 360 | 70 days |
| Supplier payment period (on purchases consumed) | 3,200,000 / 11,500,000 × 360 | 100 days |
| Inventory turnover (on purchases consumed) | 2,500,000 / 11,500,000 × 360 | 78 days |
| WCR in days of turnover | 2,400,000 / 18,000,000 × 360 | 48 days |
The reading
- The top of the balance sheet is balanced. Working capital is positive: fixed assets are covered by stable resources.
- The operating cycle costs more than is financed. The WCR (2,400,000 DH) exceeds working capital (1,500,000 DH). The 900,000 DH gap is carried by short-term bank facilities. This is the point the analyst will dig into: customer payment times, age of receivables, inventory levels.
- Supplier credit is too long to be healthy. An average supplier payment period of 100 days exceeds the 60-day term that applies in the absence of an agreement and approaches the 120-day ceiling that an agreed term cannot exceed, both counted in principle from the invoice issue date (Art. 78-2 of the Commercial Code, as worded by Law 69-21, which also allows a term of up to 180 days to be set by decree for certain sectors). These terms are assessed invoice by invoice: an average is not enough to establish a late payment, but it leads the analyst to check the agreed terms and the age of trade payables. Invoices not paid on time expose the company to the fine provided for by that law, and such late payments are not a lasting resource in the bank’s eyes (see the guide to payment terms in Morocco).
- Profitability covers existing debt. The EBE represents 6.8 times interest and the CAF covers 2026 principal repayments 2.1 times.
- Equity is solid relative to capital. One quarter of the capital is 500,000 DH; equity amounts to 4,500,000 DH. The Art. 86 test of Law 5-96 does not apply.
The effect of the new loan
A 2,000,000 DH loan repaid in five equal annual principal instalments adds 400,000 DH of repayments per year. Principal repayments rise to 1,000,000 DH and the CAF / repayments ratio falls to 1,280,000 / 1,000,000 = 1.28, before additional interest and before the gains expected from the new line. Net financial debt rises to 5,900,000 DH, i.e. 4.6 years of CAF.
This is where the forecast makes the difference: it must quantify the additional margin generated by the investment and show the CAF for the following financial years. The WCR also offers a lever: each day of customer payment time gained represents 18,000,000 / 360 = 50,000 DH. Bringing the customer collection period down from 70 to 60 days would release 500,000 DH of cash, more than half of the negative net cash of 900,000 DH.
The signals that cause concern
These signals are not rules, but common findings of financial analysis.
- Negative net cash that deepens from one financial year to the next while turnover grows: growth consumes more cash than it generates.
- Negative working capital: investments financed by short-term debt.
- Repeated losses or equity below one quarter of the capital without a decision of the general meeting (Art. 357 of Law 17-95; Art. 86 of Law 5-96).
- Tax and social security liabilities that swell within current liabilities: they may reveal late payments and make it harder to obtain the certificate of tax compliance.
- Old trade receivables not written down or inventories rising out of line with activity.
- Differences between the accounts given to the bank and the tax return, or figures that change between two versions of the file.
- Accounts prepared late. The financial statements must be prepared no later than three months after the year end, except in exceptional circumstances justified in the ETIC (Art. 18 of Law 9-88).
- An unexplained change of method. Presentation and valuation methods cannot be changed from one financial year to the next; if they are, the change is described and justified in the ETIC (Art. 13 of Law 9-88).
- A qualified or refused certification. The statutory auditor states the reasons (Art. 175 of Law 17-95); the analyst will read them. The consequences of such a report are set out in the article on the qualified statutory auditor’s report.
The SME Audit Standards Manual also lists “the availability of financing”, including the case of banks that stop supporting the entity, among the factors that may cast doubt on going concern (§ 3.4.4). The banking relationship and the reading of the accounts are linked in both directions.
What audited accounts bring
A statutory auditor (commissaire aux comptes, CAC) is mandatory in every SA (Art. 159 of Law 17-95) and in an SARL whose turnover, at the end of a financial year, exceeds 50 million DH excluding taxes (Art. 80 of Law 5-96). Below that, the partners may appoint one. The appointment rules are described in the article on the statutory auditor threshold for an SARL.
Bank Al-Maghrib requires the bank to demand the report of the statutory auditor or auditors in the loan application file of an SA, whatever its turnover, and in that of an SARL whose turnover for the financial year exceeds 50 million DH excluding taxes (directive No. 1/G/2005 of 1 April 2005, Art. 1). For any company, certification provides something that unaudited accounts lack: an opinion from an independent professional that the financial statements “are regular and sincere and give a true and fair view of the results of the past financial year and of the financial position and assets of the company” (Art. 175 of Law 17-95). Audit standards specify that this is reasonable assurance, “a high, but not absolute, level of assurance” (SME Audit Standards Manual, § 3).
The report is filed with the court registry together with the financial statements, within two months of approval for the SA (Art. 158 of Law 17-95) and within thirty days for the SARL (Art. 95 of Law 5-96). The role and course of the engagement are presented in our guide to statutory audit in Morocco and on the page dedicated to audit and statutory audit.
A company that is not required to appoint a statutory auditor can also improve the reliability of its figures through its own procedures: monthly bank reconciliations, physical inventory counts, monitoring of the age of receivables. The key controls by cycle are described in the article on internal control in SMEs.
Points to watch
- Close on time: financial statements prepared within three months (Art. 18 of Law 9-88). The annual accounting close is prepared from the last quarter onwards.
- A single version of the figures: statements given to the bank, the tax return and the accounts filed with the court registry must agree; every difference is explained before sending.
- Calculate the indicators in the example yourself over several financial years and prepare an explanation for each significant change.
- Build the forecast on actual accounts, with the project’s effect on the WCR and the repayment schedule.
- Deal with net assets below one quarter of the capital before applying (Art. 357 of Law 17-95; Art. 86 of Law 5-96) and request the certificate of tax compliance early.
- No ratio decides on its own: the analyst reads a trend, a sector and a project.
READ ALSO:
- Equity below one quarter of the share capital: deadlines, decisions and regularisation
- Financial statements in Morocco: balance sheet, CPC, ESG, statement of changes in financial position and ETIC
- Internal control in Moroccan SMEs and mid-sized companies: key controls by cycle
Frequently asked questions
What accounting documents should be prepared for a loan application?
The financial statements for the last closed financial years (balance sheet, income statement and, above 10 million DH of turnover, statement of management balances, statement of changes in financial position and additional information statement, Art. 9 and 21 of Law 9-88), the tax return and its appendices, recent interim accounts, the certificate of tax compliance and a forecast that quantifies the project and its repayment.
Can the bank require accounts certified by a statutory auditor?
For some companies, it is even required to demand the report of the statutory auditor or auditors. The loan application file of an SA, whatever its turnover, or of an SARL whose turnover for the financial year exceeds 50 million DH excluding taxes must contain at least the annual financial statements, the report of the statutory auditor or auditors, a copy of the minutes of the general meeting that ruled on the accounts and a copy of the receipt for the filing of the financial statements and of the statutory auditor's or auditors' report with the registry of the commercial court (Bank Al-Maghrib directive No. 1/G/2005 of 1 April 2005, Art. 1). These companies are also required to appoint a statutory auditor (Art. 159 of Law 17-95; Art. 80 of Law 5-96). When the auditor certifies the accounts, the report states that the financial statements are regular and sincere and give a true and fair view (Art. 175 of Law 17-95), which adds credibility to the figures presented.
Does negative net cash prevent a company from obtaining a loan?
Not in itself. It means that the working capital requirement exceeds working capital and is financed by short-term bank facilities. The bank generally looks at whether this situation is lasting, whether it is worsening from one financial year to the next and whether the company has a plan to reduce its customer payment times or its inventories.
What happens if equity falls below one quarter of the share capital?
In the SA, the board of directors or the management board must, within three months of the approval of the accounts showing the loss, convene the extraordinary general meeting, which decides whether the company should be dissolved early (Art. 357 of Law 17-95); in the SARL, the partners decide, within the same three-month period and by the majority required to amend the articles of association, whether the company should be dissolved early (Art. 86 of Law 5-96). If dissolution is not decided, the company must regularise the situation within the legal deadline. A loan application submitted in this situation should explain the decision taken and the plan to restore equity.
By when must the accounts be ready?
The financial statements must be prepared no later than three months after the year end, except in exceptional circumstances justified in the additional information statement (Art. 18 of Law 9-88). The tax return follows the same three-month deadline (Art. 20-I of the CGI).
