Personal Financial Statement

As a start up business, lenders will usually ask for collateral for a loan. Lenders will more than likely ask for a personal guarantee to secure the loan. To be sure your personal guarantee is of value, the lender will ask to see your:

• personal financial statement
• personal tax returns (past 3 years)
• credit report (bank will obtain this)

A lender will be looking for the assets you will be able to rely on if your business does not fair as well as projected. Each partner with 20% or more interest in your organization should provide a financial statement.

The form on the following page is recommended for banks and required to obtain a Small Business Administration Loan.

Notes:

• The lender will require your personal tax returns to get an idea of what you have been doing, how you earned money, and in the case of joint returns, what spouses have earned and whether it can support you while the business gets started. (One should not feel intimidated or offended by the bank's intrusion into your personal finances. They are doing all of this in your best interest so that you do not get in over your head.)
• Remember, the lender comes into a project asking for a limited return, that is the interest rate charged. Therefore, the lender is looking for a limited risk. The assets purchased with a loan and the personal guarantees of the stockholders are the sources of funds that limit the lender's risk.
• Before you apply for a loan you should check your credit ratings. Mistakes in these records can seriously reduce your ability to acquire loans and credit. Letters of explanation may be necessary.