Why Do PO Financing Companies Require Financial Statements?

Most (if not all) purchase order financing companies will ask that clients submit a set of recent financial statements with their application. For some reason, 20% to 30% of prospects always object to this request. I know I am not alone because I have heard many colleagues gripe about this issue.

The most common objections we hear are:

1. We are a startup - we don't have/need financial statements
2. My CPA handles those..... and he has not made them in a long while
3. Our accounting system is not up to date
4. We don't use financial statements - they are a pain to make

Now, look at this list. Imagine what's going through the mind of your business financing company representative when they hear any of these explanations. It's not good. I know that I always cringe and get a feeling that the company requesting po financing is not very well organized. It's probably being run by someone who is relying on their memory and some bank statements.

While not having financial statements may work for some small owner-operated-and-run businesses, it wont for larger companies. It won't cut it for your financing company either.

A well run company - even a small owner operated business - but use financial statements as a tool to determine important indicators:

1. Profits centers
2. Cost centers
3. Inefficiencies

Purchase order financing companies need to look at these statements to determine their risk and to make sure they invest their funds wisely.

Most modern small business accounting packages (like QuickBooks or Peachtree) are simple to use and can generate good financial statements with a few simple keystrokes. If you don't know how to use them, consult a CPA. Most will help you for a modest fee.


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