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
[email protected].
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).
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