## Why Banks Need Personal Financial Statements for Business Loans
When you apply for a business loan, the lender will typically ask you to submit a personal financial statement (PFS). This document provides the lender with a snapshot of your personal finances, including your income, assets, and debts. The PFS helps the lender assess your ability to repay the loan and make a decision about whether or not to approve your application.
**What is a Personal Financial Statement?**
A personal financial statement is a financial document that outlines your personal income, assets, and debts. It is typically used to assess your creditworthiness and ability to repay a loan. PFSs are often used by banks and other lenders when considering a loan application.
**What’s Included in a Personal Financial Statement?**
A personal financial statement typically includes the following information:
*Your name, address, and social security number
*Your spouse’s name and social security number (if married)
*Your current income and sources of income
*Your assets and their values
*Your debts and their balances
*Your monthly expenses
*Your net worth
**Why Banks Need Personal Financial Statements**
Banks use personal financial statements to assess your creditworthiness and ability to repay a loan. The information in the PFS helps the lender determine your:
* **Income:** The lender wants to see that you have a stable income that is sufficient to cover your living expenses and repay the loan.
* **Assets:** The lender wants to see that you have sufficient assets to cover the loan in case you default.
* **Debts:** The lender wants to see that you have a manageable amount of debt and that you are able to make your payments on time.
* **Monthly expenses:** The lender wants to see that you have enough money left over after paying your living expenses to cover the loan payments.
* **Net worth:** The lender wants to see that you have a positive net worth, which means that your assets exceed your debts.
**How to Prepare a Personal Financial Statement**
You can prepare a personal financial statement yourself or you can use a financial advisor or software program to help you. If you are preparing the PFS yourself, be sure to be accurate and complete. The lender will use the information in the PFS to make a decision about your loan application, so it is important to provide accurate information.
**Tips for Preparing a Personal Financial Statement**
Here are some tips for preparing a personal financial statement:
* Be accurate and complete. The lender will use the information in the PFS to make a decision about your loan application, so it is important to provide accurate information.
* Include all of your income, assets, and debts. The lender needs to see a complete picture of your financial situation in order to make a decision about your loan application.
* Be organized. The lender will appreciate it if you organize the PFS in a way that is easy to read and understand.
* Get help from a financial advisor or software program. If you are not comfortable preparing a PFS yourself, you can get help from a financial advisor or software program.
**Submitting Your Personal Financial Statement**
Once you have prepared your PFS, you will need to submit it to the lender. The lender will typically request the PFS as part of the loan application process. You can submit the PFS online, by mail, or in person.
**Conclusion**
The personal financial statement is an important part of the loan application process. The information in the PFS helps the lender assess your creditworthiness and ability to repay the loan. By providing accurate and complete information on your PFS, you can increase your chances of getting approved for a loan.