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Why Your Financial Statements Are Important

Guest post by: Karlene Sinclair-Robinson

Article Overview: In today's business financial market, it is important to understand what bankers and other financial sources require of business owners. When accessing capital through traditional sources such as banking institutions, they must have specific financial documents from the party seeking to borrow their funds. Alternative Sources require said documentation but can take a different approach based on the borrower's situation.

Why Your Financial Statements Are Important

When a lender is faced with a prospect who is not prepared, they are wasting their time. Lenders are in the business of lending money to qualified candidates. To qualify, you must present the required information and documentation that will make that lender comfortable in approving your loan. Not having these required documents will delay the processing, have the lending thinking you don't know how to operate your business, or even worst, due to the delay in funding, could put you risk of having to close your business.

If these financial documents are not in place, then there really is no way to access the financing you need for your business. Imagine what will happen if you cannot access the money you need to grow your business or for survival. What would you have to do? Lay off employees? Cancel a prominent client? Close your business? These are important questions to consider, so get it together.

You must have some of the following documents on hand to present to the funding source:

• Current Cash Flow Statement
• Current Balance Sheet
• Current Profit and Loss Statement
• Tax Returns - Business and Individual
• Current Accounts Receivable Aging Report
• Current Accounts Payable Aging Report
• Bank Statements
• Merchant Processing Statements
• Current Client List

The above list is just a few of the applicable financial documents that a financing source can ask for. If you are unable to present them, this will certainly create a problem for you accessing capital. This is the case whether you are seeking traditional financing or using alternative funding or other private sources. These lenders have the right to ask for any documentation they feel necessary to make the transaction viable for them.

Remember, it is not “What’s in it for me”; it is “What’s in it for them”. You are the one seeking their money and though they might be more than willing to finance you, they are not willing to risk their capital when they know from the get go that you are not up to speed with your documentation.

So, for those business owners who think you can access capital by the seat of your pants that is not going to work. Make sure to have your documents in order to present when you decide to borrow other people’s money. Remember, it is their money and they are the one taking on the risk to fund you. Be sure to get it together.

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Article Tags: banking institutions, borrowers, business owners, financial documents, financial sources, financial statements, small business, traditional sources



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