Business Bank Statement – Beyond Average Balances

Definition of Business Bank Statement:

When lenders or any party requesting your Business bank statements reviews your last 3 – 6 months statements, the number of deposits per month, monthly loan or lease payments, and the itemized expenses should all be reviewed to most accurately assess where the company’s real time cash flow is, and also how they handle their cash on hand.

Number of Deposits per Month – In general, when a business has a larger number of deposits per month deposited to their account, the more likely they are to have more customers, which diversifies, and lowers risk.    If a company does have a larger number of customers, then the loss of any one customer may have less of an impact than for a business that has fewer customers.

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Also, more frequent deposits may allow a business to have a more flexible cash flow, as they will less often need to wait to pay various expenses.

Monthly Loan or Lease Payments – Loans, lease or advance payments should be looked for in a business bank statement.   If a bank statement reflects numerous month ACH payments for loan and leases, their monthly debt obligations and debt to income ratio may be called into question and reviewed more closely.

Itemized monthly expenses – Review the actual expenses that the company has.    Some expenses will clearly be necessary and business related, others maybe not be.     This review may shed light if the company is conservative with their funds or is too free spending.    Some common expenses to look for:

– Frequent and / or expensive restaurant outings
– Spa or Club treatments
– Golf Outings
– High end resort expenses

Some of these expenses may be related to clients.   Look closely at several months expenses to determine if there is a pattern.

Having tax returns and interim Profit & Loss Statements are critical, but they are a snapshot in time several months or years in the past.

Business checking account statements will shed light on the company’s cash flow at the present time, which may be the best barometer of their ability to service a new debt obligation.

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