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Small Business and SBA Lending Blog
Last updated on Feb 19, 2023
3 min read

SBA 7(a) Paperwork Explained: Business and Affiliate Financial Statements

In addition to required forms that the SBA supplies, you and your business affiliates need to provide financial statements for your business. This helps demonstrate your ability to repay the loan. In your paperwork, you should include a current (dated within 90 days) financial overview statement, as

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In this article:
  1. What financial statements should I include? 
  2. What is a balance sheet?
  3. How should I set up the profit and loss statement?  
  4. How do I project my income?
  5. Related Questions
  6. Get Financing

In addition to required forms that the SBA supplies, you and your business affiliates need to provide financial statements for your business. This helps demonstrate your ability to repay the loan. In your paperwork, you should include a current (dated within 90 days) financial overview statement, as well as financial statements for the past three years. These financial statements are separate from the personal financial statement, which is outlined in SBA Form 413.

SCORE, an SBA partner, has templates and online tools to help small business owners set up each of these financial statement documents at score.org.

What financial statements should I include? 

You should include with your loan application paperwork:

  • A detailed, signed balance sheet

  • profit and loss statements

  • A one-year projection of income and explanation of how you intend to reach that income level

What is a balance sheet?

This is essentially an overview of your business. It’s a simple equation:

  • Liabilities + owner’s equity = assets

  • The two sides of this equation must balance.

There are two types of assets. Current assets include cash or assets (like accounts receivable) that can be quickly converted into cash. Fixed assets include things like equipment and land. Both types of assets should be factored into the balance sheet.

There are also two types of liabilities. Short-term liabilities include accounts payable and taxes. Long-term debt refers to liabilities such as bank loans. Factor both types of liabilities into your balance sheet.

The owner’s equity includes any invested capital or earnings.

How should I set up the profit and loss statement?  

The Profit & Loss sheet is also referred to as an income statement. These statements can also help business owners project future revenues. First, use this equation to determine net profit:

Gross profit – operating expenses = net profit

The gross profit should be calculated as total sales minus the cost of the goods (such as raw materials or inventory). Don’t forget to factor in overhead costs like utilities and insurance. 

Keep in mind that you’ll need profit and loss statements for the past three years to show that your business has a strong financial standing.

How do I project my income?

When you’re preparing a projection of income, it’s important to understand that it’s nearly impossible to project (especially a full year of income) accurately down to the dollar. Examining your profit and loss statements from the past three years, however, will give you a good idea about the range of income you might expect in the coming year.

To begin, think about the life cycle of your business. When do you have the most expenses? Which times of year tend to bring in the highest revenue? You can begin a simple spreadsheet broken out month-by-month with a sales forecast. Using your past sales numbers, and any revenue, product, or changes that could affect sales you already know about, you can make an educated guess about your sales revenue in the upcoming months.

Next, you should add columns to your spreadsheet that estimate expenses. You can again use your expenses from the past year to help you think about what your expenses might be in the months ahead. Don’t forget to factor in expenses such as salaries, equipment/supplies, rent, utilities, and marketing costs. 

Your projected sales and expenses will help you estimate your income for the year as accurately as possible. In addition to your spreadsheet, you should include a written explanation of how you arrived at your income estimate. 

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Related Questions

What documents are required for an SBA 7(a) loan application?

For an SBA 7(a) loan application, you will need to provide the following documents:

  • Agreement to purchase the business
  • Letter of intent to buy the business
  • Business tax returns for the past three years
  • Any outstanding business debt
  • Long-term business contracts
  • Documentation of business assets
  • Business lease agreement
  • Incorporation documents and/or business license
  • Business plan

In addition, the SBA will usually order an independent business appraisal to give lenders an idea of what the true value of the business is.

To complete your application package, you’ll be required to submit SBA-specific forms and documents. The forms and documents commonly required in the application package include:

  • SBA Form 1919 (borrower information form)
  • SBA Form 912 (statement of personal history)
  • SBA Form 413 (personal financial statement)
  • Financial statements, including a balance sheet, profit and loss, and income projection.

The SBA allows applicants to get help (for example, from a lawyer or a translator) filling out the application paperwork, but your lender will be required to submit information about who gave you help to the SBA, so you’ll need to document who this person is as well.

What is the difference between a business and affiliate financial statement?

Business financial statements are documents that provide information about a business's financial performance, such as income, expenses, and profits. They include a balance sheet, profit and loss statement, and a one-year projection of income. Affiliate financial statements are documents that provide information about an affiliate's financial performance, such as income, expenses, and profits. They include a balance sheet, profit and loss statement, and a one-year projection of income. The main difference between the two is that the business financial statement is for the business itself, while the affiliate financial statement is for the affiliate.

The Profit & Loss sheet is also referred to as an income statement. These statements can also help business owners project future revenues. First, use this equation to determine net profit:

Gross profit – operating expenses = net profit

The gross profit should be calculated as total sales minus the cost of the goods (such as raw materials or inventory). Don’t forget to factor in overhead costs like utilities and insurance.

Keep in mind that you’ll need profit and loss statements for the past three years to show that your business has a strong financial standing.

What information should be included in a business financial statement?

You should include with your loan application paperwork:

  • A detailed, signed balance sheet
  • Profit and loss statements
  • A one-year projection of income and explanation of how you intend to reach that income level

The Profit & Loss sheet is also referred to as an income statement. These statements can also help business owners project future revenues. First, use this equation to determine net profit:

Gross profit – operating expenses = net profit

The gross profit should be calculated as total sales minus the cost of the goods (such as raw materials or inventory). Don’t forget to factor in overhead costs like utilities and insurance.

Keep in mind that you’ll need profit and loss statements for the past three years to show that your business has a strong financial standing.

What information should be included in an affiliate financial statement?

An affiliate financial statement should include a detailed, signed balance sheet, profit and loss statements, and a one-year projection of income and explanation of how you intend to reach that income level. The Profit & Loss sheet is also referred to as an income statement. These statements can also help business owners project future revenues. First, use this equation to determine net profit:

Gross profit – operating expenses = net profit

The gross profit should be calculated as total sales minus the cost of the goods (such as raw materials or inventory). Don’t forget to factor in overhead costs like utilities and insurance.

Keep in mind that you’ll need profit and loss statements for the past three years to show that your business has a strong financial standing.

What are the consequences of submitting inaccurate financial statements for an SBA 7(a) loan application?

Submitting inaccurate financial statements for an SBA 7(a) loan application can have serious consequences. The SBA may deny the loan application, or if the loan is approved, the SBA may require additional collateral or impose other restrictions on the loan. Additionally, the SBA may require the borrower to pay a penalty or interest rate increase for submitting inaccurate financial statements.

It is important to make sure that all financial statements are accurate and up-to-date. The SBA requires that the current income statement and balance sheet be dated within 180 days of submission. Additionally, the SBA may require FYE income statements and balance sheets (or federal income tax returns for the most recent past three years). For new businesses, a month-by-month cash flow projection for one year is also required.

For more information, please visit www.sba7a.loans/sba-7a-loans-small-business-blog/how-to-fill-out-paperwork-for-the-sba-7a-loan and www.sba7a.loans/sba-7a-loans-small-business-blog/sba-loans-what-is-a-business-financial-statement.

In this article:
  1. What financial statements should I include? 
  2. What is a balance sheet?
  3. How should I set up the profit and loss statement?  
  4. How do I project my income?
  5. Related questions
  6. Get Financing
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