What type of reporting is needed with a small business loan
You may think that once you get the equipment loan and sign the agreement for your small business loan the paperwork is over and you can wait until the loan is repaid. Nothing is further from the truth. You will need to provide various reports over the life of your loan to your lender to be in compliance with your loan agreement. What type of reporting is needed with a small business loan will be the focus of this article.
Many small business loans require reviewed or audited financial statements. These can be submitted either quarterly or annually based on the terms of the loan. If these aren’t generally requested or the loan amount is small, compiled statements or even a tax return are sometimes accepted. Getting an audit can be an involved process and the auditor also will generally provide a list of management comments that show the internal control weaknesses that arose in the financial statements. Many lenders will want to see a file that shows these comments so that a lender can work with a company to remedy some of these items.
Some loans require that your small business submit a debt covenant statement along with your financial statements to show that your company is in compliance with the debt covenants in the agreement. A file with the definition of the loan covenant as well as the calculation of it is included for each of the financial covenants and then sign-offs by management and/or ownership regarding the validity of the statements made on the debt covenant file are typically provided.
Another form of paperwork common with some small business loans is a borrowing base certificate. These borrowing base certificates are filed generally with asset based loans that have loan limits that fluctuate based upon the amount of assets such as receivables or inventory that a company is holding. The borrowing base certificate is commonly signed off by members of management who attest to the figures.
Getting a lender to provide you with a small business loan can seem like an arduous process for many companies. A lot of paperwork is completed during the process that needs to be reviewed and eventually signed. As noted above, this will only be the start of the paperwork needed as regular financial statements, loan compliance forms and calculations, and other paperwork needs to be regularly submitted as per the terms of the loan agreement. While this may seem like a large burden there are many positives to this paperwork and once available these statements can be a tool used by management to help to run the business in a more efficient manner.