18 Business Loan Requirements - Business Financials
In terms of qualifying for a business loan, there are three types of business financial statements you need to show lenders. This article will help walk you through each one and explain what the key features are for profit and loss statements, balance sheets, and bank statements.
Profit and Loss 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 financials 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 figures 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 your company's financial health. It is a more current snapshot demonstrating your assets versus your liabilities. By studying this sheet, 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 repay your loan. Again, they will probably ask for year-to-date statements as well as the past two 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 how well you manage your cash flow.
Making money is certainly great, but managing it can be a bit trickier for some business owners. The lender will want to see proof that you are able to manage money efficiently. Generally, they will ask for four months' worth of records; traditional lenders could very well ask for even more.
At First Union, we would love to discuss your financial plans. Do you need capital for growth opportunities, hiring more personnel, or getting through tougher times? We are here to help! Call today and see what we can do for you.