Providing Information to the Bank May Not Be So Easy

By Dale K. Geeslin, CPA, CFE

You are applying for a loan and the banker requests some financial information which includes tax returns and personal financial statements. What if you are self-employed or part owner of a business that produces the majority of your income? You may be taking some of your income as a salary but some may be coming to you as a draw or distribution. You may also need some of the money in the business to use as a down payment. The banker may want to know if the business is financially solid, will it continue to generate the same level of profits and will the business’s ongoing stability be negatively affected by taking out the funds for the down payment. You assure him that everything will be fine but he wants more. The banker tells you that if your CPA will assure them on his letterhead that the business will continue prospering after the loan is granted, they will approve your loan request.

You have used the same CPA for years and you have a great working relationship. You call your CPA, tell him what you need and ask when you can come by to pick up the letter. He then informs you that it is not just a matter of writing a letter. Your banker wants the additional assurances to grant you the loan. However, if things turn sour, the bank can now go against you and your CPA because the bank relied on his opinion in granting the loan. The good news is that your CPA may be able to give these assurances within professional standards by completing additional procedures. First you and your CPA should talk to your banker and determine the minimum the bank really needs. Then allow your CPA to perform the necessary procedures in order to satisfy the request.