Commercial bank statements have been around since the Middle Ages, with the earliest known examples dating back to 14th-century Italy.
Today, business bank statements are an essential tool for any company, large or small. While the format has changed significantly over the centuries, the purpose remains the same: to help you stay on top of your business finances.
What is a business bank statement?
A business bank statement is a summary of all of your business transactions for a specified statement period. It includes an account summary and information about your bank, business, and bank account. A business bank statement includes an account summary, also known as a transaction history, which includes the following:
- Your beginning balance
- Your ending balance
- Every withdrawal
- Every deposit
- Total withdrawals
- Total deposits
You can obtain a business bank statement for your business checking account, business credit card account, business debit card, and business savings account. You can’t get a business bank statement for your personal accounts.
When are business bank statements used?
There are several instances in which a business bank statement can come in handy, particularly during the following scenarios:
- Reconciling the account and accounting for transactions. Your account summary includes your banking activity over the specified period, including all deposits, withdrawals, your beginning balance, and your end balance. You can compare these numbers to your accounting books to spot any inconsistencies or issues.
- Applying for a loan. Most businesses need to take out loans to finance growth or manage cash flow. When applying for a loan, business bank statements are a critical piece of information that lenders request in order to gain a snapshot of your company’s financial health and gauge your ability to repay your loan.
- Filing taxes. Businesses use bank statements during tax season to track expenses and income. This information is essential in determining how much tax your business owes and can be used to verify deductions claimed on your tax return.
- Budgeting and planning. Whether making your first business plan or setting goals for the upcoming quarter, you can pull up a business bank statement when deciding where to allocate resources moving forward.
3 advantages of business bank statements
- Keeping track of income and expenses
- Spotting irregularities or discrepancies
- Securing a business loan
Consulting your business bank statements can help you keep track of your company’s financial health. Here’s why many successful business owners stay on top of their business bank statements:
1. Keeping track of income and expenses
Business bank statements help you keep track of your income and expenses.
They can provide valuable insights into your spending habits. By looking at where business funds are spent, you can identify areas where you can cut costs, which can be especially helpful for small businesses trying to keep their expenses down.
Business bank statements can also help you track your progress over time, which can be handy for expanding your operations. A clear picture of your income and expenses can give you a better idea of whether you’re on track to meet your goals. Knowing your business’s financial standing is also crucial for doing things like preparing your taxes or creating a budget.
2. Spotting irregularities and discrepancies
Bank statements can help you spot any irregularities in your account, such as fraudulent activity or identity theft. If you find suspicious activity—like a purchase or payment that you didn’t make—you can take action to prevent further damage.
3. Securing a business loan
A business bank statement is one of the most important documents you can show a lender when securing a loan. It provides a snapshot of your company’s financial health, including information on deposits, withdrawals, and balances, which helps lenders assess lending risks.
Lenders look at several factors when reviewing your bank statements, including:
- Your average monthly balance. How much cash does your business have on hand, on average?
- Your average monthly deposits. How much revenue does your business bring in each month?
- Your average monthly withdrawals. How much does your business spend each month?
- Your total outstanding debt. How much debt does your business carry?
Business bank statements FAQ
How do I get bank statements for my business?
Most financial institutions provide monthly bank statements that show every recent transaction that’s taken place in your account. You can usually find all of your electronic statements in the “Documents” section of online banking. You can also call your bank directly and ask to be sent a paper statement or set up regular mail delivery of paper statements.
What do lenders look for on business bank statements?
Lenders look at many factors when reviewing your bank statements, including your average monthly balance, average monthly deposits, average monthly withdrawals, and total outstanding debt.
Why do lenders ask for three months of bank statements?
Lenders typically ask for three months of bank statements to assess your financial history and to confirm you can repay your loan. Three months is considered a sufficient amount of time for lenders to glean your company’s financial situation.
Can I get a business loan without bank statements?
It’s possible to obtain a business loan without bank statements, but it can be challenging. Lenders want proof of income to assess your ability to repay the loan. There are a few ways to get around this, such as providing alternative forms of documentation (like W-2s or pay stubs) or by providing collateral.
Join 446,005 entrepreneurs who already have a head start.
Get free online marketing tips and resources delivered directly to your inbox.
No charge. Unsubscribe anytime.
Thanks for subscribing.
You’ll start receiving free tips and resources soon. In the meantime, start building your store with a free 3-day trial of Shopify.
As an expert in finance and business operations, I have had hands-on experience working with various financial tools and statements, including business bank statements. I've advised multiple businesses on financial management, budgeting, loan applications, and reconciliations. My expertise extends to understanding the nuances of financial documentation, its significance in different business scenarios, and its implications for decision-making.
Now, let's delve into the concepts mentioned in the article:
Business Bank Statements:
-
Definition: A business bank statement is a detailed record summarizing all transactions of a business account over a specific period.
-
Components:
- Beginning Balance: The starting amount in the account for the period.
- Ending Balance: The closing amount in the account for the period.
- Withdrawals & Deposits: Detailed records of money going out and coming into the account.
- Total Withdrawals & Deposits: Summaries of the total amounts involved.
-
Account Types: Available for business checking, credit card, debit card, and savings accounts but not for personal accounts.
Uses of Business Bank Statements:
-
Reconciliation: Helps in matching and verifying transactions against a company's accounting records.
-
Loan Applications: Crucial for lenders to evaluate a company's financial health and repayment capability.
-
Tax Filing: Essential for tracking business-related income and expenses for tax purposes.
-
Budgeting & Planning: Provides insights into spending patterns and helps in strategic financial planning.
Advantages:
-
Tracking Income & Expenses: Offers insights into financial habits, facilitates cost-cutting, and aids in monitoring progress.
-
Identifying Irregularities: Helps in detecting fraudulent activities or errors, ensuring financial security.
-
Securing Loans: Provides lenders with a comprehensive view of a company's financial status, aiding in loan approval processes.
Factors Evaluated by Lenders:
-
Average Monthly Balance: Indicates liquidity and financial stability.
-
Average Monthly Deposits: Reflects revenue streams and business growth.
-
Average Monthly Withdrawals: Highlights expenditure patterns and operational costs.
-
Total Outstanding Debt: Indicates the company's debt burden and repayment capabilities.
Business Bank Statements FAQ:
-
Acquisition: Obtainable from financial institutions through online banking portals or by requesting paper statements.
-
Lender Requirements: Lenders typically seek three months of bank statements to assess financial history and repayment capacity.
-
Alternative Documentation: While challenging, it's possible to secure a business loan without bank statements by providing alternative proofs of income or collateral.
In summary, business bank statements serve as vital financial documents that provide a comprehensive overview of a company's financial activities. They are instrumental in various business operations, including financial management, planning, and securing external financing. Understanding and effectively utilizing these statements are essential for maintaining healthy financial practices and fostering business growth.
