Financial statements
What it means
These are the official numbers for your business. Usually that means a balance sheet (what the business owns and owes) and an income statement (what it earned and spent over a period). An accountant or bookkeeper normally prepares them.
Why lenders ask
Lenders use them to check what you tell them against real figures. If you don't have them, that's okay. We'll leave business net worth out and score you on the rest.
What a lender usually asks for
For an established business, expect to be asked for the last two or three years of year-end statements, plus recent figures for the current year. Statements prepared by an accountant carry more weight than ones you put together yourself, and many lenders will also ask for your business tax returns so they can compare the two.
For a new business, the forecast takes the place of history: a projected income statement and cash flow for the first one to three years, with the assumptions behind each number written down. A lender will test those assumptions, so be ready to explain where your sales estimate comes from.
Balance sheet vs. income statement
The balance sheet is a snapshot on one date: what the business owns (assets), what it owes (liabilities), and the difference (equity). It's where business tangible net worth comes from.
The income statement covers a period, usually a year: revenue, minus expenses, equals profit. It's the starting point for the cash flow a lender uses to judge whether the business can carry a new loan payment.
Good to know
Just starting out? Lenders will usually ask for a forecast of your first few years instead.