Financial Statements to Obtain Financing

Financial Statement requirements for financing

Creditors such as banks will want 3rd party company financial statements

The process of issuing 3rd party financial statements is generally required for financing.  Banks will look for financial statements provided by a public accounting firm as they will want to see professional statements to facility the lending approval process.

Most banks want notice to reader at a minimum for financing below $1 million

Most banks at a minimum, will want to see a company’s financial statements with a notice to reader from an accounting firm.  This means that the financials have been compiled by an accounting firm and adjustments have been made for tax purposes.  With a notice to reader the accounting firm does not issue an assurance opinion on whether the financials materially free from misstatements, however they do have the responsibility to ensure that the financials are not false or misleading.  There is a standard process for compiling the financial statements.  It is for this reason that most bankers will want to see 3rd party notice to reader financial statements.  Reviewing the financials is the first step in the process of assessing whether the company can make principal and interest payments on the financing in question.

Review & Audit opinions are generally required for borrowing capacities above $1 million

Banks will require your company financials to be issued by a 3rd party accounting firm with a high level of assurance.  Either a review or audit opinion, please see below for the differences:

Review Engagement:

This offers a moderate degree of assurance that the financial statements are not materially misstated and are in accordance with accounting standards ( ASPE, IFRS, or NPOs).  Review engagement fees are generally less costly the audits, since the degree of work and level of assurance is lower, however still higher than notice to reader financial statements.

Audit Engagement:

This offers the highest degree of assurance that the financial statements are presented in all material respects and are in accordance with accounting standards (ASPE, IFRS, or NPOs).  Audit engagement fees are more costly then reviews, since the degree of work and level of assurance is higher.

Which financial statements are best for your business?

Be sure to speak with your accountant, business advisor and banker to get an understanding of what type of financial statements your business requires.

Should you have any questions, please contact a MP Group Partner below.

Looking for strategic advice?

Contact Us