Financial Statement Reviews for Bank Loans: What MA Business Owners Need to Know

Your bank just told you they need a financial statement review before they will approve your loan. If you have never been through this process before, it can feel like a roadblock. It is not. It is a standard step that many Massachusetts business owners go through when financing equipment, real estate, expansion, or working capital. Understanding what is involved makes the process faster and a lot less stressful.

What Is a Financial Statement Review?

A financial statement review is a service performed by a licensed CPA in which your financial statements are examined and assessed for accuracy and completeness. It sits between a compilation and a full audit in terms of scope and cost. The CPA performs analytical procedures and asks questions about your accounting policies and practices. The result is a report that provides limited assurance to your lender that nothing in your financials appears to be materially misstated. For many bank loan requirements, a review is exactly what is needed. It gives your lender confidence in the numbers without requiring the time and cost of a full audit.

Why Lenders Require Reviewed Financial Statements

Banks and other lenders need to assess risk before they extend credit. Your financial statements tell them how your business is performing, what your assets and liabilities look like, and whether you have the capacity to service the debt. When a lender asks for reviewed financials specifically, they are asking for a level of independent verification that goes beyond what you or your bookkeeper prepared internally. They want a licensed CPA to stand behind those numbers in a formal report. Common situations where lenders require reviewed financial statements include:

• Commercial real estate loans
• Equipment financing above a certain threshold
• Business acquisition financing
• Lines of credit for growing businesses
• SBA loans and other government-backed financing programs

The specific requirement depends on the lender, the loan size, and the nature of your business.

Review vs. Compilation vs. Audit: Understanding the Difference

These three terms come up often in the context of bank financing and it is worth understanding what separates them. A compilation is the most basic level. Your CPA helps organize and present your financial information but provides no assurance that the numbers are accurate. A review provides limited assurance. The CPA performs analytical procedures, asks questions, and issues a report confirming nothing came to their attention that would suggest the financials are materially incorrect. A full audit provides the highest level of assurance. The CPA independently verifies your financial information through testing and confirmation procedures. Audits take more time and cost more than reviews. Most bank loan requirements at the small and mid-market business level call for a review, not a full audit. Your lender will tell you exactly what they need. If you are not sure, your CPA can help you interpret the requirement and make sure you are not over-preparing or under-preparing for what is being asked.

What the Review Process Looks Like

When you engage ADC CPA for a financial statement review, the process is structured and straightforward. The team works to minimize disruption to your day-to-day operations while gathering what they need to complete the engagement on time. The process generally involves:

• Gathering your financial statements, general ledger, and supporting documentation
• Reviewing your accounting policies and asking targeted questions about significant balances
• Performing analytical procedures to identify anything that warrants a closer look
• Issuing a formal review report that can be provided directly to your lender

Timing matters when you are in the middle of a financing process. ADC CPA understands that lenders have deadlines and works with clients to meet them without sacrificing accuracy.

How Clean Books Make the Process Easier

The single biggest factor that slows down a financial statement review is disorganized or incomplete accounting records. If your books are behind, reconciliations are missing, or transactions are miscategorized, the CPA has to spend time resolving those issues before the review can move forward. Businesses that maintain accurate, up to date records through consistent bookkeeping services move through the review process faster and with fewer complications. If your books are not where they need to be, ADC CPA can help you get them there.

Working with a CPA Who Knows Massachusetts Lending

Lender requirements vary. A regional bank in Essex County may have different documentation expectations than a national lender or an SBA preferred lender. Working with a CPA firm that has deep roots in the Massachusetts business community means you are working with a team that has navigated these situations many times before. ADC CPA has been serving business owners across the North Shore since 1974. The audit and assurance team prepares compiled, reviewed, and audited financial statements for businesses across a wide range of industries. Whether you are going through your first bank loan or your tenth, the team brings the experience to get it done right. If you are also thinking ahead to tax planning during or after the financing process, the firm’s business tax services ensure that your overall financial strategy stays aligned as your business grows. Contact ADC CPA today to schedule a consultation and find out how our team can prepare the financial statement review your lender requires.