North Texas Dentistry Volume 4 Issue 4 - Page 13

Why Financials? The bank’s loan officer (someone like me) has to prepare a “loan package” that tells your story to the “approvers” (usually a loan committee and chief credit officer). The loan package contains financial analysis, cash flow calculations, credit report discussions, and other details about the loan request. Regardless of the loan’s purpose, the following items are required: Personal financial statement. This document shows the bank what you own versus what you owe. The bottom line is your net worth (assets-liabilities). Important items on your personal financial statement are: liquid assets (cash, marketable securities, cash value of life insurance) and net worth. Liquid assets are important because if a disaster strikes, the bank likes to know that you can access assets quickly to carry you through. Three years of practice tax returns. Some dentists operate as Sole Proprietors. Therefore, the practice income statements are shown on Schedule C of their personal tax returns. Otherwise, corporate tax returns are needed from your practice or the practice you are looking to purchase. Banks enter the information from the tax returns into specialized software. The software aligns the numbers year by year and side by side so that bankers can easily identify trends and calculate cash flow. Ideal trends include increasing revenues, profits, margins, cash balances, and positive net worth to name a few. Interim year to date financials for the practice. These financials can be printed from QuickBooks and should be a year-to-date report for the most recent end of month. For example, a year-todate income statement and balance sheet as of June 30, 2014. 2-3 years of personal tax returns. The personal tax returns are used for cash flow calculations and to identify trends. Based on the loan’s purpose, there might be other documents requested. For instance, if the loan purpose is to purchase a dental practice, then the bank may ask for the practice appraisal. If the loan purpose is to purchase real estate or to build an office, then the bank will ask for the purchase contract or cost estimate. After your loan is approved, there might be other documents requested prior to closing. Those documents usually include entity documents, lease agreements, contracts, etc. and are also determined by the intention of the loan. Hopefully this helps clarify the importance of a borrower and a bank working together through the loan process. Having all the details provided in a timely manner lets the bank make a quick and confident decision about the loan. I promise that nobody is sitting in a room at the bank trying to think up more documents to request – even though it may seem like we want everything but your blood type. It’s just good business. Good for you and good for the bank. If you have any questions or need a little free advice, please don’t hesitate to contact me at (817) 426-7017 or Jared Treesh, proud Aggie and father of twin girls aged 4, definitely knows his way around a bank lobby. He started his banking career as a teller and worked his way up to Vice President Commercial Lending. Currently living in Cleburne, Texas, with his wife of 11 years, Dr. Abby Treesh, Jared enjoys helping people reach their financial goals as much as he likes helping create new business owners. “Seeing the look on someone’s face when they realize they are now their own ‘boss’ is fantastic,” Jared says. The entire family enjoys being outdoors, even in the Texas heat; but nothing beats watching baseball and football (and of course watching Johnny Football succeed in the NFL). | NORTH TEXAS DENTISTRY 13