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The financial statement is one of the most important documents in the commercial lending world and the sooner you put your statement together the better.
Both individuals and companies can have a financial statement, and it's main role is to list your assets and liabilities, which reconcile to show net worth. Net worth demonstrates to lenders your financial backing and wherewithal. Some lenders will limit the maximum loan amount to your net worth, ensuring they have sufficient collateral to take from you in the event of a default.
Banks, in particular, look for clients with high net worth. Knowing that the client has reserves to fall back on lowers the risk in lending, and allows banks to pass on to the client the best rates and programs available.
Businesses with high net worth will always be able to obtain larger lines of credit, and often without personal guaranty from the business owners. This allows the business to hold assets on its own, without the owners having to risk losing personal property or pledging collateral like stock or cash.
You should update your financial statement at least once a year, though many people choose to do it each quarter. At the very least, you should update your statement when there is a drastic change in your asset or liability values, as these will affect your overall net worth.
Cornerstone has created a universal financial statement template in spreadsheet form, which can be easily filled out, updated, and saved in several formats. We have used this form with lenders across the country for personal and business loans as well as government sponsored loans.
You can purchase and download the template from the Cornerstone Online Store here.
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