Quarterly Financial Report for Bank?

22 Replies

I have a new(ish) commercial loan on a mini storage facility. I saw in my loan docs that I'm supposed to submit quarterly financial reports to them.

Can someone help me figure out how to structure my report or what they are looking for? I have been trying to Google it and there's so many different things, that I'm not sure what I'm supposed to be submitting or not. 

 I want to build a good relationship with them, so I don't want to ask them and seem like I don't know what I'm doing (fake it til you make it!). 

is it an SBA loan?

Commercial loans sometimes ask for annual reports. For SBA loans we always ask for annual reports, but I've not seen quarterly reports as a requirement before.

you'll most likely have to send in your annual T/R's but for quarterly's I'm sure they just want company prepared statement.

do you have an accountant? a quickbooks report will be fine.

And I do all of our “bookkeeping” and financial stuff so far (like i said learning as we go/fake it til we make it haha). We have a software program we use for managing the units that has all our numbers in it, but I haven’t utilized anything like quickbooks yet....

Originally posted by @Wendy Carpenter :

@Alexander Felice, it’s actually a portfolio loan. Does that change it at all?

 not really, but if it's a smaller bank then that explains why they are staying so tight.

I'm sure they will accept your financials if you do them on excel and not QuickBooks or equivalent, but I recommend making it look very nice and easy to read.

You'll likely only need to submit an income statement and a balance sheet.

It's worth hiring an accountant to have it all set up for you, you'll be able to maintain it pretty easily.

As your loan gets paid on time, and you show a positive trendline of increased DSCR I'm sure you can ask to remove this quartlerly requirement. For annuals you'll most likely only need an updated PFS (personal financial statement) and T/R

Balance sheet and income statement should be good. You may have something written in the loan documents about the minimum ratio (ie. debt service coverage ratio, times interest earned, etc) that you need to meet in order to comply with their terms, so make sure you have the line items in your financial reports needed to calculate them. Also, before you submit, you might want to review them to make sure you are in compliance. If you have some requirements to meet, it's a good practice to review your financials at least in the last month of every quarter when reports are due, to make sure the numbers are good.

Probably just a Quarterly Income Statement, Payables Aging, and Rent Roll.  I'd start with the IS and RR, and see if they ask for anything else.

Originally posted by @Wendy Carpenter :

Do you all think I would look inexperienced/naive if I did ask them what they wanted from me?

1. I guarantee the banks knows your level of experience through their underwriting.

2. who cares, ask to be sure. Better to know than guess

3. don't stress too much about this. I do financial analysis for commercial loans for a living, you know how many people DON'T send in financials? many! It's frustrating, but if you do the right thing you'll get better service in the long run  ;) ;)

@Wendy Carpenter I have a couple of loans that require some type of quarterly reporting like that. i would not sweat it too much. They care more that you are paying the loan on time. But it is a requirement and technically they can foreclose if you don't provide it.

I just provide a current rent roll and/or income statements as suggested above. If they want more, let them ask.

By the way, you should be keeping updated rent roll and income statements for your own use in managing the business even if they don't ask.

If you're at all uncomfortable doing that yourself you really should get an accountant and bookkeeper.

They're usually just looking for a profit and loss statement, rent roll and your tax returns. Maybe an update personal financial statement too.

@Wendy Carpenter

It's hard to give specifics without knowing the specifics but in general:  

It is advisable to ask them and be up front about the things you need to know.  Showing effort to get your banker the information they require in a timely manner will set you apart from the many other borrowers that do not.  Typically a quarterly requirement is considered stringent for loan reporting where annual requirements are the norm.  This could be due to various factors but most common would be tight underwriting or inexperience of the borrower (or both).  If you are proactive and transparent with your banker (and profitable) you may be able to get your requirements changed to annual after two years.  

Talk to them...bankers are people too!

Good luck!

Originally posted by @Wendy Carpenter :

Do you all think I would look inexperienced/naive if I did ask them what they wanted from me?

They probably just want an income statement (P&L) but may also want a balance sheet.  I assume they will accept un-audited (self reported without 3rd party verification) for quarterly.  

You may want to look into an accountant especially if your storage facility starts to hire employees or sell additional items like boxes and such. Depending on your involvement, you may be self employed and want to be sure you are recording this properly.  Accounting is not a great "fake it to you make it" endeavor.  Errors can get quite expensive.   

I do all my own bookkeeping.  I also was the company controller for a manufacturer for several years and have a degree in accounting.  My mother was a tax professional for years.  Still, I joked with my friend who is a CPA about when an accountant needs an accountant.    I may enlist his services in the coming year as I grow mostly for a 2nd set of eyes.

Your lawyer can often guide you when reviewing loan docs. I even remove them as a covenant or do not consider the failure to provide a material breach. 

IMO, without a CPA, lawyer or commercial broker you're faking too much.

I have an attorney and a CPA. This storage facility is on the smaller side and, in general, uncomplicated. This loan is only a few months old, and we will have almost doubled the NOI by year's end. I have chosen to manage and do the financials myself at this point, because I believe that you should know and experience the ins and outs of whatever you choose to invest in, in order to be able to identify when something isn't right or going wrong. I do have a software program that we use for the managing of the units that tracks all of our rent rolls, vacancies, income, etc. so that's all accounted for.

I’m going to contact the bank and ask they what they would like to see. If it’s anything that I feel is beyond my capabilities, I will be for sure contacting a bookkeeper to help. 

Thank you all for your insights and advice!

Basically small banks to medium size can be on a tight leash by the Fed regulators. So any type of questionable or marginal loan they like to CYA heavily. Too many loans go bad the VP's at the bank said multiple people can get fired at the banks. So they tend to worry about loans going bad a lot. I have seen when LTV's are at real low levels with a big down payment the underwriters tend to relax a little more. The higher the LTV for the loan the more strict they get on every little detail to try and curb risk.

You can do this in excel or using a software like QuickBooks. The only way you can have it accurate if you balance your books and reconcile your bank and credit card accounts. Including AND

  • Record the purchase, closing, settlement, loan cost
  • Any improvements 
  • Depreciation
  • Where did you get the money from to pay for it 
  • At the end what your equity is

AND it is pretty simple as long as you track your each and every penny:

  • money in
  • money out
  • the money you owe
  • money someone owes you
  • = equity

Only possible if you track all on Accrual Basis. 

Gita Faust