The CFO for Small BusinessThe personal financial statement for a business loan, and what goes on it
You're looking for a personal financial statement for a business loan, because the bank handed you a form and you're not sure what goes on it. Tax CFO Steven Palmieri deals with this form often, along with the questions owners ask about it, and Steven and his team know where each number comes from. It's less frightening than it looks.
Bring the lender's form
What the form is
The most common version is the SBA's Form 413, called the Personal Financial Statement. The SBA uses it to assess an applicant's financial situation, including their ability to repay and their creditworthiness, for programs such as 7(a) and 504 loans, disaster loans and surety bond programs. Many banks use their own form, or the same sort of layout.
It lists what you own, what you owe, your income and the value of your share of the business. It's a snapshot of you on a given day, so the date at the top matters, and so does using balances from that same day.
Why a lender reads you before your revenue
In a small business, the owner and the company are tied together. The owner often stands behind the loan personally, so if the business struggles, the owner's finances matter. A lender therefore wants to see the person behind the company, and the form is how it does that.
That isn't a judgment of you. It's the way lending to small businesses works.
Where each number comes from
Assets come from your statements. Cash comes from bank statements. Investments and retirement accounts come from their own statements. Property comes from what you know it to be worth and what you owe on it.
Liabilities come from loan and card statements, showing the current balance on each, not last year's memory.
Income comes from your last return and from what you actually pay yourself.
The value of your share of the business comes from the business's closed books. This is where clean records pay off. A balance sheet that's up to date and ties to the bank makes that line easy to support.
The three things should agree
A lender will look at the form, the business statements and your personal return together. If they tell different stories, the lender notices. Suppose the form lists income the return doesn't show, or the business statements claim assets the form leaves out. Those gaps raise questions. When the numbers come from the same closed books and the same records, they line up without effort. Keeping business and personal money apart is a big part of that.
We prepare it with you, and you sign it
The statement is yours. We prepare it from your records and walk through it with you, and you review and sign it. It isn't a report on your finances by an outside examiner, and it isn't a statement of our opinion. It's your own statement, put together carefully.
What a lender does with it
The lender reads the form for repayment ability. Do you have assets beyond the business? Are your own debts manageable? Is your income steady enough to support what you're asking for? A form that answers those clearly makes the rest of the conversation shorter. A form that raises questions slows everything down, even when the business itself is sound.
It also helps to know that the form is read together with the loan request. A modest request supported by a clear personal picture usually goes more smoothly than a large one with a thin form.
What the form doesn't cover
A full lender package, with projections, covenants and the rest, is a different, larger piece of work. This page is only about the personal form. If your lender wants more, tell us and we'll talk about what they've asked for.
A few practical tips
Date the form on the day you complete it and use balances as of that day. Don't leave blanks, because a blank looks like something hidden. Where you aren't sure of a value, say how you got your estimate, such as a recent appraisal, a listing price or a statement balance. And keep a copy of what you submitted, with the backup, so the next lender's form starts from the same numbers. Five numbers worth knowing will help you read yours.
Both sides. This page's subject is the one place where your own finances and the company's sit on a single page. A lender reads one against the other, so a form filled in from the same closed books makes both sides tell the same story.
The bank handed you a form. Now what?
You will be talking to the Steven Palmieri practice.