Lenders and partners generally need a Financial Statement when working to raise equity or financing/loans. The financial statement consists of two primary sections: 1) the Net Worth, and 2) the Cash Flow/Income. Often the Net Worth is more important for private/hard money lenders but for banks/institutions both sections are important.
Regarding Net Worth: This is a statement showing the sum of your assets at current value, less the sum of your liabilities and obligations/loans, etc. The resulting amount is your Net Worth (NW). Lender’s and partners want to see the overall NW statement, but are mostly concerned with liquidity (cash or cash equivalent) and overall hard equity in hard assets. Hard assets are real estate and business/valuable equipment. Good will, business equity, etc are still viable to insert if you feel they are real, but the hard asset equity is the most important.
Although the focus is the above factors, when doing your NW statement, add in all the assets/liabilities you have. This includes at least cash, cash equivalent (assets you can turn to cash within 1-7 days), stocks/bonds, retirement accounts (which are vested or yours no matter what), homes you own/live in (primary home, 2nd home, cabin, etc), investment property (incl land), receivables (money owed to you), payables, credit card/installment debt, businesses owned-current equity value, etc.
If you have a retirement account which pays you a monthly amount for as long as you live, add that up using an estimate, and note that. This is both an asset and a cash flow source. Other retirement accounts you add in based on their current valuations as if you liquidated them today. These include 401k, RothIRA, etc. Since you are not actually withdrawing, you do not deduct penalties or taxes.
Lenders and partners generally need a Financial Statement when working to raise equity or financing/loans. The financial statement consists of two primary sections: 1) the Net Worth, and 2) the Cash Flow/Income. Often the Net Worth is more important for private/hard money lenders but for banks/institutions both sections are important.
Regarding Net Worth: This is a statement showing the sum of your assets at current value, less the sum of your liabilities and obligations/loans, etc. The resulting amount is your Net Worth (NW). Lender’s and partners want to see the overall NW statement, but are mostly concerned with liquidity (cash or cash equivalent) and overall hard equity in hard assets. Hard assets are real estate and business/valuable equipment. Good will, business equity, etc are still viable to insert if you feel they are real, but the hard asset equity is the most important.
Although the focus is the above factors, when doing your NW statement, add in all the assets/liabilities you have. This includes at least cash, cash equivalent (assets you can turn to cash within 1-7 days), stocks/bonds, retirement accounts (which are vested or yours no matter what), homes you own/live in (primary home, 2nd home, cabin, etc), investment property (incl land), receivables (money owed to you), payables, credit card/installment debt, businesses owned-current equity value, etc.
If you have a retirement account which pays you a monthly amount for as long as you live, add that up using an estimate, and note that. This is both an asset and a cash flow source. Other retirement accounts you add in based on their current valuations as if you liquidated them today. These include 401k, RothIRA, etc. Since you are not actually withdrawing, you do not deduct penalties or taxes.