There are times when a business must use borrowed funds to meet its operating needs. Whether your business is a Corporation, Limited Liability Company, Partnership or a Sole Proprietor, when approaching a lender and asking to have your project funded by that lender, one would have to demonstrate that there is a track record showing the ability to repay the funds from the business activities.
Positioning your business for borrowing will require that the business provide information that can be verified. One should be prepared to provide the following to the lender so that reasonable underwriting can be completed by the decision maker.
• Two years business tax returns including all schedules
• Business financial statements (Profit and Loss Report - Balance Sheet – Statement of Cashflow)
• Two years personal tax returns including all schedules
• Personal financial statement (Profit and Loss Report - Balance Sheet -Statement of Cashflow) if you are a sole proprietor
• Be sure that you understand your business financials, many business owners do not fully understand their tax returns and the financial reports that are used to create their returns. The better your understanding of the financial reports and tax returns, the greater your chances of obtaining the financing you need to fund your business which equates to increased profits.
Ask yourself, am I treating my business fair, did I build in reserves for a rainy day, have I prepared for another disaster such as Covid -19, do I have a succession plan in place?
Get you know your bankers. They are there to help you grow your business and build a stronger business community.
This brief piece on preparing for borrowing is the results of my many years of working as a financial professional. I am hopeful that it will serve as a guide as we present new and innovative lending programs that are being developed at this time.
Florida SBDC at Indian River State College