Improve your Odds of Getting a Loan with a Bulletproof P&L Statement

BY ON October 31, 2017

One of the most important financial statements your small business has is a profit and loss statement. As a start-up, your P&L statement is critical for analytical reasons, but it can also be used to assist you in getting the loan you need to finance your idea. It gives investors a clear overview of your company and what they can expect from you.

When applying for a small business loan, however, your P&L statement will contain important information like forwarding projections. As investors see all small businesses as a higher risk investment, it is up to you to convince them that your business has what it takes to make it. Proving your business’ viability is the only route to go.

Besides exceptional credit, your business plan, and a personal resume that speaks volumes about you, your P&L statement is one of the most important requirements for business loans. This begs the question; how can you ramp up your statement to secure the financing needed?

To answer that question, we’ve listed five helpful tips to help you make your small business loan statement bulletproof.

Tip #1. Familiarize yourself with helpful tools

Curating a P&L statement is far from simple. That’s why you should take advantage of all available tools and resources to make your’s ironclad. To make things easy, invest in cloud accounting software like Xero to streamline the process. This guarantees your data is always up to date and makes it easy to input information from extra reports, and reduces any hassle over maintenance data entry or other challenges.

Tip #2. Get clear about your goals

What do you expect in terms of profitability each quarter? One of the most important elements in your P&L statement is the recognition of your performance. Use it to narrow down how your previous productivity compares to the goals you set. Isolate data points that you can use to prove your case. Be sure to understand why and how you’ve been profitable in the past so you can provide a clear picture for any finance option that might present itself.

Tip #3. Acknowledge what your P&L statement can do for you.

In a nutshell, your P&L statement should summarize your profit and losses as a business within a designated time. It should cover any revenue you’ve incurred and that which you’ve lost or spent on goods or depreciation. The statement should also provide an overview of what money you currently have as a business to be used on debts, salary, or to fund growth. What it will not do is tell you if you have enough money to pay bills. Start-ups are in particular need of a good accounting systems which includes the P&L statement as they often rely on seed funding to scale.

Tip #4. Look into the future.

Any small business loan provider will want to see your finance predictions. They need to know what you expect in way of profits and losses, and how you plan to get from point A to point B. Make a point to project your numbers for at least one year into your business. If you can, however, try to shoot for three-year predictions as that will give lenders a better look at where your business will be during repayment. Set yourself clear monthly projections so that you convince a lender you’re a good investment.

Tip #5. Review and refine.

Each month make it a point to review your P&L statement. If possible, try to check in on it every week to see that you’re on track for your projections or to make adjustments as needed. Another good idea is to connect with an accountant who can do this for you. Business is, well, busy, but an accountant can help you meet your projections without adding to the hassle of day-to-day life. A few pointers to keep an eye out for include increased sales with declining profits, stagnant sales numbers, overhead expenses, and costlier goods.

Getting a business loan shouldn’t be overwhelming. With the help of experts like those on our team here at GCT, and a well thought out plan, you can get the finance option that works best for your start-up.