Ask the Experts: 504 Q&A

Q - What financial statements are required when processing an SBA 504 loan?

Business Financial Statements

All SBA loan applications require tax returns or financial statements on the applicant firm, including the balance sheets, reconciliation of net worth, and profit and loss statements for the two (2) most recently completed fiscal years.

In addition, the financial statements or tax returns need to be current to within 120 days of the date of application. Therefore, if the most recent fiscal year end is more than 120 days from SBA's application receipt date, interim statements have to be prepared.

A business that has not commenced operations is exempt from this requirement.

Other Financial Statements

In addition, a debt schedule and an aging of accounts receivable and accounts payable must accompany the application. Agings are summaries of the status of the accounts rather than a detailed status of each individual account.

Note: In order for the loan specialist to properly analyze this data, the SBA requires that all of the financial statements must be as of the same date as the balance sheet(s) used to perform the financial analysis and to develop the pro forma balance sheet. All current financial data should also be as of the same date.

Seller Financial Statements:

For a “Change in Ownership,” selected financial statements (two (2) years of corporate tax returns and interim financial statements (balance sheet and profit and loss statements – dated the same date) on these operations while under the control of the seller) are also required from the seller of assets or a business to the applicant when the analysis of repayment is dependent on how well these assets or this business preformed for the seller.

If a business is expanding its operations through the purchase of additional assets and there will be no transfer of the operation associated with the assets or business, financial statements from the seller may not required. The analysis of repayment for the proposed loan must show that the expanding business operation is not dependent on the seller’s historical performance.

Q- Does the SBA require that the borrower provide CPA prepared or audited financial statements?

No. However, upon receipt of a loan package, the loan specialist must evaluate the quality of the financial statements. The SBA requires that the loan specialist must not rely on poor quality statements (such as statements with inaccuracies or that appear to be unreliable), especially when the loan request is large (which the SBA defines as more than $150,000).

.