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A Guide to Preparing Your Business Financials for a Commercial Mortgage

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Securing a commercial mortgage is a significant step for any business looking to grow or expand its operations. Commercial mortgages can be used for purchasing new properties, refinancing existing mortgages, or funding property improvements. A well-prepared financial portfolio is essential for presenting your business as a reliable borrower to potential lenders. This guide will help you understand the critical steps to prepare your business financials, ensuring you are ready to secure a commercial property mortgage.

Key Financial Documents Needed for a Commercial Mortgage

Lenders will require several key financial documents to assess your business’s financial health and creditworthiness. These documents include:

  • Balance Sheets: A snapshot of your business’s assets, liabilities, and equity at a given point in time.
  • Profit and Loss Statements: A summary of your business’s revenues, costs, and expenses over a specific period.
  • Cash Flow Statements: A record of cash inflows and outflows, highlighting your business’s liquidity.
  • Business Tax Returns: Detailed records of your business’s tax filings, typically for the past two to three years.
  • Personal Financial Statements: Financial statements of business owners, including personal assets, liabilities, and income.

Preparing Your Balance Sheet

A balance sheet provides a snapshot of your business’s financial health by detailing its assets, liabilities, and equity. Here are some tips on preparing an accurate balance sheet:

  • List Assets Clearly: Include all current and non-current assets, such as cash, inventory, equipment, and property.
  • Detail Liabilities: Include both short-term and long-term liabilities, such as accounts payable, loans, and mortgages.
  • Showcase Equity: Clearly state the owner’s equity, including retained earnings and common stock.

Strong assets and manageable liabilities can significantly improve your application’s attractiveness to lenders.

Crafting a Comprehensive Profit and Loss Statement

The profit and loss statement, or income statement, shows your business’s profitability over a specific period. Here’s how to make sure they are accurate and comprehensive:

  • Accurate Income Recording: Ensure all revenue streams are accurately recorded.
  • Detailed Expenses: List all expenses, categorising them appropriately (e.g., operational costs, salaries, utilities).
  • Highlight Profitability: Clearly show net profit or loss for the period.

Lenders look for consistent revenue and controlled expenses, indicating stable business performance.

Managing Cash Flow Statements

A cash flow statement details the inflow and outflow of cash within your business, demonstrating liquidity and financial stability. To manage this statement:

  • Track all cash inflows from operations, investments, and financing.
  • Record all cash outflows, including expenses and capital expenditures.
  • Ensure you highlight positive cash flow and maintain cash reserves.

Presenting a healthy cash flow reassures lenders of your ability to meet repayment obligations.


Organising Business Tax Returns

Providing complete and accurate business tax returns is crucial. These returns offer a historical view of your business’s financial performance. When organising your tax returns:

  • Ensure consistency between tax returns and other financial statements.
  • Highlight any growth trends or significant financial improvements.
  • Address any discrepancies or red flags that may arise.

Accurate tax returns build lender confidence in your financial integrity.

Personal Financial Statements of Business Owners

Lenders often require personal financial statements from business owners to assess overall financial stability. Here’s what to include:

  • Personal Assets: List assets such as real estate, investments, and savings.
  • Personal Liabilities: Include liabilities such as mortgages, loans, and credit card debt.
  • Income: Detail all sources of personal income.

A strong personal financial position can positively influence your commercial mortgage application.

Crafting a Comprehensive Business Plan

A strong business plan is essential when applying for a commercial mortgage, as it demonstrates your business’s potential for growth and strategic use of funds. Your business plan should include an executive summary that provides an overview of your business and its goals, a market analysis that covers your industry, market size, and competition, and detailed financial projections that forecast income, expenses, and profitability. Additionally, it should clearly outline how the commercial mortgage will be utilised to achieve your business objectives, aligning these projections with your financial statements to present a cohesive and compelling case to lenders.

Preparing your business financials carefully is essential for securing a commercial mortgage. By understanding what lenders require and organising your financial documents you can improve your chances of approval and secure favourable loan terms. Additionally, seeking financial advice from professionals can provide valuable insights and assistance, ensuring that your financials are accurate and well-prepared.

Contact Funding Guru today for a free consultation and find out how we can help you secure the business funding you need to grow.


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Jeremy Baker

Expert in content, funding research & finance marketing. Jeremy has over 8 years of experience, providing finance firms with outstanding written content for UK audiences.

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