The bank asked for financial statements and you have two weeks

A bank, a surety or an equipment lender has asked for financial statements, and there is a date attached. This is the moment the way you have kept your books stops being an internal matter.

The good news is that lenders want a small, specific set of things, and they are the same set every time.

What they are actually asking for

"Financial statements" usually means:

• A profit and loss for the most recent complete year, and year-to-date for the current one
• A balance sheet as at the same dates
• The prior year or two for comparison
• Business tax returns, usually two or three years
• Recent business bank statements, often three to six months
• An aged receivables and aged payables listing
• A debt schedule — every loan, lease and line, with balances, rates, payments and maturity
• For bonding or larger facilities, sometimes a work-in-progress schedule

If you are not sure which of these they want, ask. Sending the wrong thing costs a week; asking costs an email.

The balance sheet is the document that decides it

Most contractors think the P&L is the important one because it shows whether the business made money. Lenders look at the balance sheet harder, for a reason that is entirely rational: the P&L tells them how last year went, and the balance sheet tells them whether you can survive next year.

Specifically they are reading:

• Working capital — current assets against current liabilities. Whether you can meet what falls due in the next twelve months.
• Leverage — how much debt sits against how much equity.
• Receivables quality — how much is owed to you, how old it is, and how concentrated in one customer.
• Whether it balances and ties. A balance sheet with a plug figure, a negative account that should never be negative, or a shareholder loan account nobody can explain is read as a signal about the whole file.

That last point is the one worth sitting with. A lender is not only pricing your business. They are deciding how much to trust the numbers, and therefore how much to trust the person who produced them.

What gets a contractor declined on paper

In roughly the order we see them:

Personal and business mixed together. Truck payments, family phone bills and a holiday in the same accounts as job costs. It makes every ratio meaningless and it invites the question of what else is not what it appears to be.

Inconsistent categorisation. The same cost in materials one year and subcontractors the next makes a trend impossible to read. A lender comparing three years of a moving target usually stops comparing.

Cash-basis books presented for an accrual question. If you bill in arrears and get paid in sixty days, cash-basis statements will systematically understate what the business is actually doing and misstate when. The difference is worth understanding before the meeting.

Receivables nobody has aged. A large receivable balance with no ageing invites the assumption that some of it is uncollectible. An ageing showing most of it inside sixty days answers the question before it is asked.

A balance sheet that has not been looked at in years. Old uncleared items, a suspense account with a balance, negative inventory, payroll liabilities that never clear. Each one individually is small. Together they say nobody is closing the books.

If your books are not ready

Be straight about it. Lenders deal with contractors constantly and are not surprised that a nine-truck plumbing business does not have audited statements. What ends a conversation is discovering later that you presented something you knew was wrong.

The practical sequence in two weeks:

1. Reconcile every bank and card account through the most recent complete month. Non-negotiable — nothing else is meaningful until the cash ties.
2. Clean the balance sheet. Clear old uncleared items, empty the suspense account, resolve anything negative that should not be.
3. Age the receivables and payables properly, and be ready to talk about anything past ninety days.
4. Build the debt schedule. Lenders ask for it, most contractors do not have it, and having one ready is disproportionately reassuring.
5. Make the categorisation consistent across the periods you are presenting, even if that means restating the earlier one.
6. Have someone qualified review it before it goes.

If a genuinely reliable set cannot be produced in the window, ask for a short extension and say why. A two-week delay with a reason lands better than an on-time submission that falls apart under questions.

The questions to be ready for

Whatever the statements say, expect to be asked:

• Why did revenue move the way it did between these two years?
• What is the biggest customer as a share of revenue?
• What is in this account, and why is the balance that size?
• What is the shareholder loan account, and is it coming back?
• What does the work in hand look like for the next six months?

You do not need a polished answer. You need an answer that matches the numbers in front of them, which is a different and easier thing — as long as the numbers came out of books you actually understand.

Related

• Getting a line of credit as a contractor
• Getting bonded: what a surety looks at
• Cash basis or accrual: which one your books should be on

This is general information about what lenders commonly request. Requirements vary by lender, facility type and size — confirm the specifics with the institution asking.