Business Financing
Navigation Guide


Bank Statement Review

Business bank statements are typically requested for the current fiscal period.

Finance providers can request the last 3, 4, 6, 9, or even 12 months of financial statements depending how far you are into the current fiscal period and how complete the rest of your financial profile is.

When a financing provider reviews the past bank statements of a company applying for business financing, it is typically looking for several key indicators to assess the company's financial health and ability to repay debt. These indicators include:

1.            Cash Flow Stability: Banks want to see consistent and stable cash flows. Regular deposits and a history of maintaining positive balances indicate a steady income stream, which is crucial for loan repayment.

2.            Average Daily Balance: A consistently healthy balance suggests that the company is financially stable and can handle its current obligations without stress. Frequent low or negative balances might raise concerns about the company's ability to manage its finances.

3.            NSF (Non-Sufficient Funds) Incidents: Instances where the company's account lacked sufficient funds to cover transactions can be a red flag. Multiple NSF incidents might indicate poor cash management or financial instability.

4.            Recurring Income: Regular and consistent deposits (like payments from clients or customers) demonstrate a reliable source of income, which is a positive sign for loan repayment capability.

5.            Expenditure Patterns: Banks analyze outgoing payments to understand the company’s spending habits. High or unexplained expenditures, frequent large withdrawals, or payments to unknown parties might be scrutinized.

6.            Debt Repayments: If there are existing loans, the bank will look at how the company is managing these debts. Regular, on-time payments suggest good debt management, while missed or late payments are concerning.

7.            Length of Banking Relationship: A longer relationship with a bank can be beneficial as it provides more historical data to evaluate and may indicate a level of trust and stability.

8.            Seasonal Variations: For businesses with seasonal variations in cash flow, banks will look at how these are managed. They will assess if the business adequately prepares for lean periods and how it utilizes surplus during peak seasons.

9.            Deposits Origin: Understanding where the deposits are coming from (sales, investments, loans, etc.) helps the finance company assess the business’s revenue streams and sustainability.

10.         Unusual Transactions: Large, irregular transactions or patterns that don’t match the normal course of business might prompt further inquiry to understand their nature.

These factors are used to help better determine the credit risk associated with extending capital to a particular company.

It’s also important to provide all the bank statements that are utilized to manage the working capital.  Some businesses have several different banks accounts and may even utilize personal accounts in some situations to pay certain bills or receive certain payments. 

For the overall cash flow management to be properly understood, all bank accounts, credit card accounts, and line of credit accounts that provide working capital to the business need to be made able to the financing company if requested.

Contact Us