Banks review company financial statements to comply with regulations and safeguard themselves from bad credits. So providing accurate, integrated reports is the key to obtaining requested funds. Unless the company is new and has no operating history, banks look at statements covering on average the last three years. In addition, lenders inspect projected financial statements covering the life of the loan to make sure businesses have forward-looking plans.

Company Report Card

Income Statement, Balance Sheet, and Statement of Cash Flows all make up an industry-standard company “report card”. The balance sheet provides a snapshot of a company’s financial health on a certain date. It tells how much debt the company is carrying, how much it owes in trade obligations and how much it needs to collect from customers. The income statement shows a company’s financial performance over a period of time. It gives the company’s revenues (sales) over the period, minus expenses. The types of expenses are the cost of goods sold and selling, general and administrative (SG&A). Operating profit, widely considered a company’s true profit, is calculated as revenue minus cost of goods sold and SG&A. Net income, also known as the “bottom line,” is the amount of revenue remaining after all expenses, including taxes, have been paid. Profit margins can be compared with other companies in the loan applicant’s industry. The cash flow statement shows how much cash moves in and out of a company over a given period. It shows exactly how much cash the company has generated and how the company is able to pay for operations and future growth. Bank credit analysts look for indications of a company’s ability to service debt payments of principal and interest in a timely fashion.