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Accounting Outsourcing | Do Large Loans Require Audited Financial Statements

When business owners are approaching financial institutions in order to secure loans, they often have to repair financial statements is accounting outsourcing. While many banks are relaxing their positions on what type of financial statement they need to provide, many entrepreneurs believe that size of the loan has something to do with what type of financial statement they provide their bank.

The reason why banks would require financial statement, is in order to verify the health of the business there loaning money to says accounting outsourcing. There is the notice to reader financial statement, the reviewed financial statement in the audited financial statement. Each one taking more testing and verification to ensure its accuracy, the notice to reader financial statement being the statement that required the least amount of verification, and is most common for business owners to get.

Banks used to require business owners get an audited financial statement in order to determine the accuracy of the numbers in order to loan that business significant sums of money, but banks and financial institutions are often finding that itís a much better gauge of how the business is doing to get good interim financial statements rather than verifying that the previous years financial statements are accurate. Accounting outsourcing says that because of this change, banks are no longer requesting businesses prepare audited financial statements as long as there providing good interim statements as well.

Many business owners think that the more money that they are borrowing from their financial institution the higher degree of financial statements they must provide. Accounting outsourcing says that this is not necessarily true, and that as banks relax their position, and are getting good interim statements from their business owners, large loans even several million dollars worth of loans are being granted to entrepreneurs based on the notice to reader financial statements. This is great news for business owners who would like to apply for loans in order to buy assets or do leaseholder improvements in their business, without having to go to the expense of creating audited or reviewed financial statements.

As financial institutions blacks their position, not all banks are on board with requiring businesses to get notice to reader statements as well as interim statements, and are still requesting business owners get audited financial statements says accounting outsourcing. Business owners should verify with their bank, and then also check with their chartered professional accountant. Often, CPAs can go to the bank to determine if this is absolutely necessary. It can often be counterproductive for business owners have to provide audited financial statements as well as interim statements, because the accountant that is working on the audited statements are not allowed to work on the interim statements as well so that they can remain objective on their audit. Banks recognize this, can work with the chartered professional accountant to get great notice to reader statements as well as good interim statements and doing away with needing to put the business owner through an audit.

Many entrepreneurs each year apply for loans for a variety of reasons says accounting outsourcing. Since 29% entrepreneurs who fail report running out of money as the reason for their businesses fail, therefore making being able to apply for and secure loans significantly important to a lot of business owners. Banks used to acquire business owners get audited financial statements and orders to secure loans which would come at a significant cost both in time and money to entrepreneurs. Financial institutions are starting to relax their requirements in favour of getting good interim statements as well.

Banks are recognizing that if they are requesting good interim financial statements from a businesses accountant, they no longer need audited financial statements, and are accepting notice to reader financial statements instead. This is often because banks recognize that accountants that are going through creating audited financial statements for the client, are not able to create good interim financial statements, so that they can remain unbiased. This means that if a bank requires a business owner to get both audited financial statements and interim statements, that often forces them into finding a new accountant.

Itís often more important for a financial institution to get the interim statement of the business owner, because this is often a much better gauge of the financial health of the business then the statements from the previous year. Accounting outsourcing says because of this, business owners are required notice to reader statements instead of audited ones. Even if a business owner is applying for very large loans, even up to $1 million, banks are still just requiring the notice to reader financial statements as well as interim statements.

Accounting outsourcing says that if a bank does require to have audited financial statements as well as interim statements, a business owner should approach their chartered professional accountant to ask them if they have an accountant that they work closely with that would be able to provide them with the interim statements while there accountant works on their audited financial statements. This may help a business owner get the financial statements that they need, without having to shop around and find an accountant who is willing to take them on for a one-off job.

By clearly understanding what the different financial statements are in business, and why each one is needed, business owners can work with their charted professional accountant to get great financial statements in order to qualify for loans that they need to grow their business. If business owners make the assumption that they need audited financial statements, they may create a more difficult situation for themselves than is necessary, so before business owners talk to their accountant about what they think they need, they should verify that with their financial institution and not too far more work than is absolutely necessary to secure their loan says Accounting Outsourcing.