3 Financial Statements That Will Help Get Your Small Business a Loan

Applying for a small business loan is one of your greatest alternatives if your company needs a financial infusion to expand. However, acquiring a small company loan might be challenging. Lenders try to reduce their exposure to default by checking their ability to pay back principal and interest.

Lenders will examine your small business’s track record, which may be best shown via financial records, to gauge how likely you are to repay their loan. Let’s examine lenders’ priorities and how to use credit reports to better your loan application for small SBA loans.

The Small Business Profit and Loss Report

Your company’s income and expenses may be tracked using this report.

The Functions of Your Profit and Loss Statement

Your P&L report uses invoices, bills, and charges to analyze your company’s finances. Your income, costs, and net gain (or loss) are all tallied up for you in an easy-to-read format.

How do Lenders Use It?

Lenders will look at your profit and loss statement to determine whether they will lend to your company based on the amount of “free” cash (profit) left over after all operating costs have been deducted.

Lenders want you to demonstrate monthly profits so that you can continue to make loan payments even if the business is slow. Lenders may also look at your profit and loss statement to see if there are any red flags, such as excessive spending categories or unusually high fixed expenditures.

The Small Business Balance Sheet

This report summarizes your company’s assets and liabilities on a specific date.

The Functions of Your Balance Sheet

The balance sheet is a “snapshot” of a company’s finances at the end of its fiscal year. There are three main parts to a balance sheet, and they are:

• Assets are the things that your company has, such as cash on hand, machinery, automobiles, accounts receivable, etc.
• Bills owed, payables, and other obligations owed by the business are all examples of liabilities.
• Equity refers to the ownership interest in a corporation held by shareholders such as yourself.

How do Lenders Use It?

Before lending you money, lenders will examine your balance sheet to discover how much cash you have and how much is invested in machines and other assets. You might expect them to investigate your debt and other responsibilities as well.

They will check your financial stability to make sure you can afford to make loan installments. They may even insist on tangible assets from your balance sheet as security for the loan.

The Small Business Cash Flow Statement

Your company’s financial health and its income and expenditures are detailed in this report, which goes beyond the P&L.

The Functions of Your Cash Flow Statement

The cash flow statement is a financial statement that summarizes the income and expenses of a firm in one place. It demonstrates how proficient you are with money management and the real amount of “free” money left over each month that may be used to loan repayments.

How do Lenders Use It?

How Lenders Use the Cash Flow Statement Lenders look for consistent positive cash flow in your firm at a level that allows you to make loan repayments without a hitch. Depreciation and other profits and losses that may not have been accounted for in previous reports are included here.