Personal net worth
What it means
Net worth is everything you personally own, minus everything you personally owe. It's kept separate from the business.
Why lenders ask
It shows a lender how much cushion you have of your own. Small business lenders often look at your personal finances because you're usually personally responsible for the loan.
How to work it out
List what you own at today's value: cash and bank accounts, investments and registered accounts like an RRSP or TFSA, your home and any other property, and vehicles or other things you could sell. Then list what you owe: your mortgage balance, credit cards and lines of credit, car loans, student loans and anything else.
Subtract the second total from the first. The Loan Ready calculator does this for you as you fill in each line.
What a lender reads into it
Personal net worth tells a lender two things. First, whether you have resources to fall back on if the business has a slow stretch, so the loan still gets paid. Second, whether there is something behind a personal guarantee if it is ever called on.
Many lenders will ask you to fill in a personal net worth statement as part of the application, so having these numbers ready saves time later.
Good to know
Don't worry about being exact. Honest, rounded numbers are fine.