As a small business owner, you or your accountant are completing your financial statements which includes your tax returns. Make sure some basic numbers are correct to look attractive to potential lenders and investors.
Showing net income on your financial Statements
Showing a net profit is important. Many lenders will decline your business loan request if you do not show a net income? Why? You do not have enough business income to make the payment on any new loan.
Proof of income
Having financial statements with net income also serves evidence of income. Other items that show as proof of income include:
- Business Tax Returns
- W-2 Statements or employment pay stubs
- Business bank statements
- Balance sheets, profit and loss statements and financial statements
Gross income and net income are not totally in your immediate control. An increasing gross receipts figure is a major number lenders look at . Are sales increasing? Increasing sales are extremely appealing to potential lenders and investors. The business is heading in the right direction.
Net income and taxable income: closely looked at figures
Is the business profitable? The lender will look closer when gross income is increasing but net income is still low. Sometimes amortization and depreciation are handled differently from one year to the next.
Officer salaries may have increased on the corporate return for accounting reasons which lowers the net income figure. However, if expense figures are handled the same from one year to the next, the lender will expect net income figures to at least remain the same or increase.
Many lenders will not intensely scrutinize requests under $100,000. other figures, such as retained earnings, cash on hand, or request a personal financial statement to review listed stock, stated value of business, real estate holdings, and other assets, nor itemization of debt that appear on a personal financial statement.