Why Do Lenders Need Your Bank Statements

When applying for a commercial loan, one of the things that you will have to submit is your bank statements. Why? Bank statements can reveal quite a bit about the state of your company and your ability to manage money.

Based on what they see when it comes to your bank statements, the lender will be able to make a more informed decision regarding whether or not to approve your application. Turning your statements over as part of the loan application packet can be nerve-wracking, however, the lender wants to get a general snapshot of the health of your small business and this is one way they can do that. Your bank statements can reveal:

Your average balance

Too low a daily balance may alert them that you do not have the ability to handle another debt. Understandably, the money will be going in and out of the account, but having a sufficient amount left in there on any given day is a good indicator that your company is adept at maintaining a positive cash flow.

Too many overdrafts.

This will most definitely serve as a red flag on any loan application. Remember, the lender wants to make sure you’re not a risk, and that you can pay back the loan. Having numerous overdrafts suggests that you don’t have the ability to keep a positive balance in your account.

How many recurring payments do you have?

If you have several debts that are daily, weekly, or monthly withdrawn from your account, then perhaps your business may not be in the best position to take on another. Many lenders do not want to be in the “second position.” This essentially means that if the company defaults, the second position lender has to wait for another lender to be paid first. Obviously, not the ideal situation for any lending institution.

Remember, lenders want to know that overall you’re in good financial health, and this will differ from lender to lender. So stay on top of your payments, manage your money by keeping a positive balance and you will help your chances of being approved for a small business loan.

First Union Lending is Here to Help!

We would love to see your business grow and help you get the best funding solution your business needs. At First Union Lending, we provide various different financial products to assist businesses at any stage of their journey. To get started, click here or call to speak with one of our Funding Specialists, to find the right loan to make your small business dreams come true.