11 – Business Financials (Profit and Loss Statements, Balance Sheets And Bank Statements)
With profit and loss statements, lenders are able to see how well your business is doing, or conversely, how much you may be in the red. Having these on hand is essential—not just for a loan application either. Maintaining updated and accurate income statements is crucial for any type of organization. Most often, the lender will ask to see year-to-date as well as statements dating back as far as two years.
Whether or not you have actually been making a profit can impact your ability to secure a loan—depending on the type of lender you are approaching. With more traditional banks and SBA loans, they generally want to see that you have been profitable. There are also some lenders who may not require profitability but do have minimums when it comes to revenues. And then there are alternative lenders who look at the entire picture, and not just the requisite minimums.
Basically, a balance sheet gives the lender an overall look at how healthy your business is. It is a more current snapshot demonstrating your assets versus your liabilities. By using this, the lender can see if you can cover your expenses and still continue to operate smoothly on a day-to-day basis, thus giving you the ability to pay back any loan you might get. Again, they will probably ask for year-to-date as well as the past 2 years worth.
As far as bank statements, these are almost always a must when applying for any type of business loan. Yet another indication of whether or not you have the capacity to pay back a loan, your bank statements can weigh quite heavily depending on the institution. These also show that you are able to manage the cash that is coming in. Making money is certainly great, but managing it for some, can be a bit trickier. The lender will want to see evidence that you are able to handle and manage money efficiently. Generally, they will ask for four months worth; traditional lenders could very well ask for even more.
At First Union, we would love to discuss your financial plans. Do you need money for growth opportunities, more personal, to get through tougher times—we are here to help! Call today and see what we can do for you.
You’re reading Part 11 in our 18 part series – 18 Business Loan Requirements