The bank asks you for financial statements of your company …
Why are financial statements important to lenders?
Financial statements are important to lenders because they provide an overview of a borrower's financial position and creditworthiness. The statements provide lenders with information on a borrower's assets, liabilities, income, and expenses, which helps lenders assess the borrower's ability to repay the loan. Additionally, the statements can provide lenders with an indication of the borrower's liquidity and solvency. Financial statements also provide lenders with insight into the borrower's financial history, which can help them make informed decisions about whether or not to extend financing.
How can I make my company financial statements meaningful to lenders?
This is key to remember: a borrower’s access to the credit group at the lender is virtually non-existent. As bank customers, we correspond with the relationship manager as opposed to the credit adjudicators.
Here are seven key principles to keep in mind when presenting financial statements to a bank and the credit adjudicators:
- Use financial statements to provide a comprehensive overview of your business. Include information about your assets, liabilities, income and expenses, cash flow, and other key financial metrics.
- Show how your performance has improved over time by including historical data and trends in your financial statements.
- Break down the financials into easily digestible chunks, such as by month or quarter, particularly if the trends are all going up.
- Include a narrative of your key successes and challenges, as well as any additional context that can help lenders understand your business better.
- Make sure that all of your figures are accurate and up to date.
- Provide lenders with information about your industry, competitors, and market conditions so they can understand the context of your financial statements.
- Provide additional information, such as business plans, financial projections, and management team biographies, to help lenders accurately assess your business.
