Banks need to review financial information to understand the history of results and get a snapshot of how your business is trending. If you own a start-up or newer business, we will rely more heavily on strong personal credit, management experience and collateral to underwrite and review your request. So let's get started with what you will need to prepare:
Brief history of company, ownership and management
We're interested in not only the financials but also the story of your business. It's one of the best parts of being a relationship bank. This allows us to provide customized and creative solutions to meet your needs. The business's history, the management experience, and the breakdown of ownership allow us to better understand the character of the business.
Three years business and personal tax returns
At Flagship Bank, we use your business and personal tax returns to gauge your capacity to repay the loan requested. Net income, depreciation, interest, liquidity and capital are all used to understand the numbers behind the request. A great tip when providing your information is to note any one-time items that may have affected your results both positively or negatively. Examples could be a customer charge off or alternatively a major non-recurring sale. Our goal is to understand the stability of the cash flow so we can accurately forecast cash flows on a going forward basis.
A current personal financial statement of the primary principals and/or guarantors
It's common for Flagship Bank to get asked why do we need a personal financial statement for a business loan? We do because it allows us to better understand the overall financial profile of the business and its principals. We like to see both financial profiles are stable and cash flow positive. Furthermore, it is more often than not a guaranty from the principals is required.
A current income statement and balance sheet
We understand your business is operating in a dynamic market and has a changing customer base. We also notice that often tax returns are completed months subsequent the end of year. A current income statement and balance sheet allow Flagship Bank insight into how the business is operating today. Did you sign a material new customer or lose an existing customer? What's the current sales activity? Have you acquired any new business equipment or do you have depreciated equipment that could be used as collateral? Be honest and as complete as you can. Providing incomplete data only delays the decision and hurts everyone's ability to get a quick, reliable proposal.
Sales, accounts receivable and accounts payable concentrations
A common risk with any business is concentration in sales. At Flagship Bank, we are most interested in any of your sales concentrations above 10% of your gross sales and concentrations in your accounts receivable. Likewise, we want to understand how the company is sitting with their accounts payable and will generally look closely at your accounts payable report as part of the underwriting process to review the amount of accounts owed and any concentrations. As a result, it's good practice to have a sales concentration report prepared along with aging accounts receivable and accounts payable reports.
Providing the purchase agreement or invoice to Flagship Bank as part of acquisition financing of the equipment and/or real estate allows Flagship to understand what exactly is being acquired and at what terms. We request the purchase agreement to verify the purchase but also because there are soft costs that are sometimes not financeable with debt proceeds. These are usually costs such as legal, commissions, etc… that don't provide tangible value to the item being purchased and are more transactional in nature.
Click here for a complete copy of our commercial loan applicant checklist.
After reviewing the deliverables, it's easy to understand why preparation speeds the loan application process. Organized information allows for streamlined processing and more in-depth discussions to help both you and the bank structure a valued partnership.