Please Send Four Months Bank Statements

At some point in time the industry decided that the most recent four months bank statements constituted a solid baseline to understand a business’ financial picture. So deeply rooted is this precise number of statements that certain states like California now require that underwriters collect a minimum of four months statements to calculate a business’ average monthly historical sales. Curiously, there’s also a maximum. California does not want funders using more than twelve months of historical data in their calculations.

“The current four bank statements just give us a general idea of how the current position and standing with the business is, if they’re paying their proper overheads and their expenses,” said Ken Tsang, the Head Underwriter and VP at Fundkite. “And more of a general idea of what revenue they’re making right now…”

For deeper underwriting, however, he said they may ask for more, a common trend in the industry.

Gary Jules, Underwriter at Power Capital, also asserted that they rely on four statements as a baseline.

“If it’s a seasonal business, we may ask for more [statements],” Jules said. “Basically, we just want to see get a general broad picture of how much the business is generating a month.”

For Jason Hausle, who does Sales and Business Development at Quikstone Capital Solutions, the requirement is only two months bank statements but they also need six months worth of merchant processing statements because they specialize in split-funding. Although the merchant processing statements give them a feel for historical revenue figures, they find value in the bank statements for other reasons.

“We like to use the bank statements,” said Hausle, “the two most recent just to make sure there’s no other positions or liens that would pose risk for underwriting.”

Requests for statements industry-wide generally seem to top out at twelve months. Indeed, states like California limit funding providers to using a maximum of twelve months data in their monthly historical average sale calculations.

Tsang at Fundkite expressed that a limit of twelve is generally enough anyway.

“I would say, to an extent, yes, anything exceeding 12 months might be an issue because after all, we have to keep our business relationship with our ISO partners and with the merchant in general,” said Tsang. “We don’t want to create any issue where it becomes excess–pretty much excessive, and it might create any issues with our relationships…”