Most business owners approach the annual accounts as a compliance exercise: something that needs to be filed, signed off, and sent to the bank because the bank asked for it. The bank, meanwhile, is running a structured analysis of those accounts that will determine the risk rating applied to your credit relationship, the terms of any new financing, and whether a covenant review produces a comfortable or an uncomfortable conversation.
Understanding what the bank is actually looking at, and how it interprets what it finds, allows the finance function to prepare the accounts presentation in a way that tells a clear and accurate story rather than leaving the interpretation entirely to the credit analyst.
The Kreditprüfung: What Happens on the Bank’s Side
When a Swiss bank receives your annual accounts, the relationship manager passes them to a credit analyst whose job is to complete a structured risk assessment, typically called a Kreditprüfung (credit review). The analyst is not looking for a reason to maintain the relationship. They are assessing whether the risk profile justifies the current terms, whether any existing covenants have been breached, and whether any developments in the accounts warrant a management conversation.
The Kreditprüfung typically covers five areas: profitability analysis, liquidity analysis, leverage and debt service, asset quality, and trend analysis. Each area produces a set of ratios that are compared to prior year figures, to industry benchmarks, and to the covenants in the credit agreement.
Understanding these five areas before you submit the accounts allows the finance team to prepare a commentary that addresses the questions the analyst will ask, rather than leaving them to draw their own conclusions from the numbers alone.
Profitability: What They Read First
The analyst’s first pass is through the P&L. The primary metrics they calculate are gross margin, EBITDA margin, and net profit margin, each compared to prior year and to the original projections if those were provided.
A declining gross margin is the most concerning signal at the P&L level, because it indicates a structural change in the business model: either pricing is under pressure, input costs are rising faster than prices, or the revenue mix is shifting toward lower-margin activities. Declines in EBITDA margin that are not accompanied by a gross margin decline are easier to explain (usually fixed cost increases or one-time items) and easier for the bank to accept.
The quality of earnings is also assessed at this stage. Earnings that are driven by revaluation gains, one-time contract completions, or asset disposals are treated differently from earnings generated by the ongoing business. A commentary that distinguishes recurring from non-recurring items in the P&L helps the analyst identify the sustainable earnings power of the business without having to make their own judgment calls about what is one-time.
Liquidity: The Ratios They Calculate
The standard Swiss banking liquidity ratios are the current ratio and the quick ratio.
The current ratio (current assets divided by current liabilities) measures whether the business has enough short-term assets to cover its short-term obligations. A ratio above 1.2x is generally comfortable. Between 1.0x and 1.2x warrants examination. Below 1.0x means current liabilities exceed current assets, which is a signal of liquidity stress that the bank will want to understand.
The quick ratio excludes inventory from current assets (on the basis that inventory is less quickly convertible to cash than receivables). For businesses with significant inventory, the quick ratio is more conservative than the current ratio and is the relevant metric for the bank’s liquidity assessment.
A commentary that explains any deterioration in these ratios, with reference to the specific items driving the movement, prevents the bank from assuming the worst. A seasonal business whose current ratio falls below 1.0x at year-end because the credit line was drawn and inventory is at its seasonal peak is a very different risk than a business with a structural liquidity shortfall. But the number alone does not communicate that distinction.
Leverage and Debt Service
The two ratios the bank focuses on most intensively are net debt to EBITDA and the debt service coverage ratio.
Net debt to EBITDA (total financial debt minus cash, divided by EBITDA) is the primary leverage metric. For most Swiss SME lending, a ratio below 3.0x is generally acceptable. Between 3.0x and 4.0x requires explanation and is typically subject to covenant monitoring. Above 4.0x triggers a formal review of the credit relationship.
The debt service coverage ratio (EBITDA divided by total annual debt service, where debt service equals interest plus principal repayments) measures whether the business generates enough operating earnings to service its debt. A DSCR below 1.25x indicates that debt service is consuming more than 80 percent of EBITDA, leaving minimal buffer for unexpected events. Most Swiss banks use 1.25x as the minimum acceptable covenant level.
If either of these ratios has moved in an adverse direction during the year, a written explanation in the accounts commentary, covering the cause, whether it is temporary or structural, and the management response, demonstrates that the management team understands its own financial position and has a plan. Silence on a deteriorating ratio is interpreted as ignorance or avoidance.
Asset Quality and the Balance Sheet Story
Beyond the ratios, the analyst reviews the balance sheet for asset quality signals.
Receivables ageing is examined if visible. A year-end receivables balance that is significantly higher than prior year without a corresponding revenue increase suggests either a collections deterioration or aggressive revenue recognition. Both attract scrutiny.
Inventory write-downs or provisions that appear for the first time in a year where profit is under pressure are a signal that management may be managing the timing of impairment recognition to smooth earnings. Swiss banks are experienced in reading these patterns.
Intangible assets that have grown significantly, whether through capitalised development costs, goodwill from acquisitions, or other intangible additions, will be discounted heavily or excluded entirely from the bank’s assessment of net asset value. The bank’s view of the equity base is often more conservative than the statutory accounts, because intangibles and deferred tax assets are typically excluded from the calculation.
The Management Commentary: Adding Value to the Numbers
Many Swiss companies submit their Jahresrechnung to the bank with no accompanying commentary. The numbers stand alone. This is a missed opportunity.
A two to three page management commentary attached to the annual accounts that covers the following serves the credit analysis well and positions the finance team as professionally organised: a brief summary of the year’s performance in plain language, an explanation of the key variances from prior year for each of the main ratios, the outlook for the current year with the assumptions behind the revenue and EBITDA guidance, and any specific risks or opportunities that the bank should be aware of in the context of the credit relationship.
This commentary does not need to be a marketing document. It needs to be honest, specific, and forward-looking. A bank that receives well-prepared accounts with a clear management commentary will process the annual review faster, ask fewer questions, and maintain a more constructive relationship than one that has to work through the numbers without context.
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Alessandro Ratzenberger is a fractional CFO and business controller based in Zurich, with 15 years of operational finance experience at Dufry Group and Bomi (UPS Group).
