Step-by-step guide to creating accurate financial statements that lenders want to see.
To prepare financial statements for a loan, create: (1) Profit & Loss (P&L) Statement — shows revenue, expenses, and profit over time period (monthly, quarterly, or annual), (2) Balance Sheet — shows assets, liabilities, and equity at specific date, (3) Cash Flow Statement — shows cash inflows and outflows (optional but helpful). Use accounting software (QuickBooks, Xero) or spreadsheet. Include year-to-date and prior year for comparison. Ensure accuracy—lenders verify against bank statements and tax returns. CPA-prepared statements preferred for larger loans ($250k+).
Shows revenue, expenses, and profit over a period (monthly, quarterly, or annual). Lenders use this to assess profitability and cash flow.
Tip: Include year-to-date and prior year for comparison.
Shows assets, liabilities, and equity at a specific date. Lenders use this to assess financial position and debt levels.
Tip: Include most recent month-end balance sheet.
Shows cash inflows and outflows over a period. Helpful for larger loans but not always required.
Collect all financial records: bank statements, invoices, receipts, payroll records, tax returns. Organize by category (revenue, expenses, assets, liabilities).
Use accounting software (QuickBooks, Xero, FreshBooks) or Excel/Google Sheets. Software automates calculations and reduces errors. Templates available online.
Enter revenue and expenses for the period. Include year-to-date and prior year for comparison. Ensure all income and expenses are categorized correctly.
List all assets (current and fixed), liabilities (current and long-term), and equity. Ensure balance sheet balances (Assets = Liabilities + Equity).
Cross-reference statements with bank statements and tax returns. Ensure numbers match. Lenders verify accuracy, so errors delay approval.
For loans $250k+, consider CPA-prepared statements. Lenders trust CPA statements more and may require them. Worth the cost for better approval odds.
Positive net income or improving trend. Lenders want to see ability to generate profit and repay loan.
Positive cash flow or improving trend. Shows ability to cover expenses and loan payments.
Reasonable debt levels. Too much debt relative to equity raises risk.
Consistent revenue and expenses. Erratic financials raise concerns.
Numbers match bank statements and tax returns. Errors delay approval or cause denial.
Learn more about what lenders look for in loan applications.
Usually only for larger loans ($250k+) or SBA loans. Smaller loans typically accept internally prepared statements. Check with your lender.
Typically within 90 days of application. Some lenders require statements dated within 30-60 days. Use most recent month-end statements.
Explain losses in application. Show improving trend or one-time expenses. Lenders may still approve if other factors strong (revenue, assets, credit).
Tax returns required for larger loans but don't replace financial statements. Statements show current financial position, tax returns show historical. Provide both.
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