Why Do Lenders Ask to See Your Bank Statements?Jon Steiert
In most cases, we don’t ask to see much in the way of documents when you are seeking capital for your business. One of the things we do ask for, however, is your bank statements.
Why Lenders Need to See Your Statements
One of the things lenders are looking for is your business’ registered name or your DBA (Doing Business As) name. This rules out that you are not using your personal bank account to fund your business.
You will also be asked to provide every bank statement from the last four months, as well as your current Month-to-Date.
Lenders want to see everything – yes, even the last page that reads “left blank intentionally”.
What they’re looking for initially is to see that your account is from a real bank. Having every page also shows any loan payments or deposits made to the account. In addition, having every page ensures that there was no tampering with the statements in an effort to hide activity. Very few people do this, but the small percentage of people that do make it a requirement in order to protect the lender.
What Else is Evaluated?
Your average daily balance is something underwriters take into consideration when applicants are looking to borrow money. When low balances appear (roughly below $1000), this alerts funders that applicants may not be able to handle payments. Ample deposits each month don’t necessarily mean good money management. You may also have “more month than money”, meaning you have more cash flow going out than coming in.
Bank statements show lenders recurring payments as well as deposits made by another funding company. Occasionally, a business owner is not transparent with the funder they’re applying to and may have loans they opt not to tell the prospective lender about. In the interest of avoiding a default from a merchant, lenders need to be aware of any additional funding or loans that have been taken by a business owner.
This isn’t to say that if you have other balances with another funding facility, that you can’t receive additional capital. This practice is simply meant to protect you and the lender.
Another consideration, when looking at statements, is negative daily balances and non-sufficient funds. Like the low daily balances, this indicates to a lender that a business does not have enough capacity or the money management skills need to handle an additional payment.
At Fast Capital, we pride ourselves on our integrity. We never want to put a business in a precarious position so we exhaust every option before making a final decision. Examining bank statements helps us to provide the best service to your business. Our main goal is to help your business – not hurt it.
If you’d like to learn more about receiving working capital for your business, give us a call at 800-735-6107.