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Personal Financial Statement

Tags: buying a business, financing, non SBA loans, SBA loans

Comments & Replies: 8     Views:     Post ID:     Comments About This Glossary Term

The Personal Financial Statement is basically a resume of ones ability to repay a loan or lease obligation. The importance of the thorough submission and quality of the information provided can make the difference between a successful or failed acquisition. As a business owner you should prepare this document with the same enthusiastic apprehension you would use on preparing your Resume for Employment.

Too often the business buyer reluctantly fills out this document, often forgetting to include certain assets. This is the one time you can be certain of getting your lender or landlords attention.

Landlords and lenders want quality tenants and preferred borrowers. Remember, the best terms are available to the best candidates. Use this document to sell yourself well.

This is a spreadsheet detailing an individual's (or married couples's) financial situation at a given point in time. Typically it will include general information, such as name and address, and a detailed listing of all their assets and liabilities.

Assets include cash balances in checking or savings accounts, retirement account funds, stocks and bonds, artwork, vehicles, real estate, and any other significant tangible assets. Liabilities include as credit card balances, loan balances, mortgage, and any other financial obligation such as judgments and liens. The result of subtracting Total Liabilities from Total Assets is the Net Worth.

There are simple forms and Excel templates to simplify the process of preparing a personal financial statement. Both sellers and financial institutions will require a personal financial statement from the buyer to assure them that the prospective buyer is qualified to make the deal.

Anyone interested in buying a small or mid-sized business is well advised to prepare a personal financial statement. It's a tool as important as a resume for someone seeking a job. The purchaser who believes a seller is required to reveal financial details about the business, but a buyer has the option of when, and if, to disclose personal financial information, is not likely to succeed at buying a good business. If that attitude worked in the past, when sellers felt they were competing in a "buyer's market," it no longer makes sense.

One reason to have a personal financial statement prepared when hunting for a business is that most effective professional business intermediaries - business brokers and agents--are much more likely to work with a prospective buyer if they know his or her financial capabilities. And most sellers cooperate only with buyer candidates who can document their financial ability to make the purchase. The third important use of the personal financial statement is when applying for a business purchase loan.

A complete personal financial statement lists all assets and liabilities. Included in the asset column are the totals for cash in checking and savings accounts, investments in the stock market through personal portfolios and mutual funds, and the value of personal property and real estate owned. All liabilities should be shown on the statement. That includes personal financial obligations, amounts due on loans taken out to purchase vehicles, appliances and other personal property, as well as balances still owing on mortgages - first mortgages along with home improvement and cash advance loans secured by a home or any other properties.

A smart buyer includes a letter from a bank officer confirming the amount of money he or she has on deposit with the financial institution as of a certain date, and from a stock broker or financial advisor, stating the value of stocks and bonds in the individual's accounts.

It also is a good idea to make sure all debts are paid up to date, so that any credit reports will show that the buyer is a good risk, should he or she want to borrow purchase funds from a financial institution or a seller, or both.

Of course, it's a good idea to be careful about sharing personal financial information, showing the statement only to those who have a legitimate right to know.

A complete personal financial statement will list an individuals assets, liabilities and net worth. Net worth being the balance left after subtracting the liabilities from the assets.

You may also look at it as a personal "Balance Sheet"

A good statement will break down the asset and liability classes:


Cash in Banks (list the accounts separately and the specific bank names)

Real Estate Owned: As a minimum list the address, market value, mortgage balance, mortgage payment, and equity on each property.

Stocks and Investment Accounts: Fund name, amount of shares, current share value, and total balance.

Autos: List year, brand and values.

Other: any other assets, business, gold, boats, personal property, life insurance surrender value.


Mortgage on property

Credit Card debt

Loans on autos, boats, on life policy, against stock or IRA account. etc.

List all debt.

Net Worth:

It is a single line item with a dollar value.

Subtract the liability total from the asset total and that is the number going into the "Net Worth" line.

Contributor: Transactional Attorney
A personal financial statement provides an overview of everything an individual owns (assets) and what they owe (liabilities). Assets include real property, personal property, savings, accounts or notes receivable (money owed to you), and investments. Liabilities include any outstanding debt or financial obligations including loans, credit card balances, and unpaid taxes. In a business purchase a buyer will typically present a personal financial statement to a seller, broker, or lender to allow them to determine the buyer's financial ability to purchase and operate a given business.

A document or spreadsheet outlining an individual's financial position at a given point in time. A personal financial statement will typically include general information about the individual, such as name and address, along with a breakdown of their total assets and liabilities. Assets would include any account balances in checking or savings accounts, retirement account balances, trading accounts and real estate. Liabilities would cover items such as credit card balances, loans and mortgages.

Contributor: Business Broker - Preschool Specialist
This type of documentation is especially helpful in business purchases, where a landlord, or someone selling a business wants some idea of the financial status of the buyer/new tenant. The landlord wants to make sure the buyer/new tenant has the backing to sustain the rental payments if the business takes a down-turn, and the business seller may want the information if he/she is carrying a note to finance the purchase of the business to determine if the prospective buyer is going to be a good risk.

The statement basically shows assets, income, and liabilities. It will also usually contain personal information like addresses, Social Security #, marital status, etc. If a bank is making the request that the statement be completed there are usually several questions about other financial details; taxes, trusts, immigration status, credit issues. If you find yourself needing one of these, there are dozens of templates available on the internet, try to find one that fits your situation. Most banks have personal financial statements that they give to their clients as part of a loan package, if you don't mind having a bank's letterhead on it, you could probably get one over the counter.

Contributor: Business Appraisals, Valuations Advisor
Basically a list of all your personal assets and liabilities, showing your net worth. If married it may cover both partners. It usually is required for the personal purchase of any large ticket items such as a car, home or business. Financing companies such as banks or the SBA require a personal financial statement and usually provide the form to complete the statement.

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