Short answer
A Canadian commercial lender will ask for two to three years of financial statements, current interim results, two years of T2 corporate tax returns and six months of business bank statements. It will also want receivable and payable ageings, a schedule of existing debt, corporate records, a personal net worth statement, photo identification and a written use of funds. Anything secured needs an appraisal or an asset listing as well.
The list below is not a formality. Each document answers a specific question in the credit memo, and a file missing three of them will sit in a queue while an adjudicator waits, which is how a four week approval becomes a twelve week one.
The core financial package
- Two to three years of year end financial statements, notice to reader at minimum, review engagement or audited where they exist.
- Current year to date interim statements, no more than ninety days old at submission.
- Two years of T2 corporate income tax returns with the notices of assessment.
- Six months of business bank statements, all operating accounts, as PDF from the bank rather than as a screenshot.
- Accounts receivable ageing and accounts payable ageing, dated the same day as the interim statements.
- A schedule of every existing loan, lease and advance: lender, original amount, current balance, rate, payment, frequency and maturity.
The single most common gap is the ageing report. Owners send statements and forget the ageing, and the ageing is what tells a lender whether the receivable balance is real.
The corporate file
- Articles of incorporation and any amendments.
- A current corporate profile report showing directors and officers.
- The shareholder register, and a shareholders agreement where one exists.
- Business licences and any sector specific permits.
- The premises lease, including the assignment clause.
The people behind it
- A personal net worth statement for each guarantor, with supporting values rather than estimates.
- Two years of T1 personal returns and notices of assessment for each guarantor.
- Government issued photo identification for each signatory.
- A short operating history for the principals where the request is an acquisition.
The request itself
This is the document most files do not have, and the one that changes the outcome most. It is one to two pages and it states the amount, the purpose, the use of funds line by line, the source of repayment, the security on offer, and the timing.
- Amount requested, and why that number rather than a rounder one.
- Use of funds, itemised, adding up to the amount requested.
- Source of repayment, with the cash flow that supports it.
- Security offered, and what is already registered against it.
- Timing, and what happens if it slips.
Security and asset documents
- Vendor quote or invoice for equipment being purchased.
- An equipment listing with age, serial numbers, hours or mileage and condition for a leaseback.
- A current appraisal where property or specialised equipment is involved.
- For property: rent roll, leases, operating statements, property tax status and any environmental report.
- A PPSA registration summary for the corporation, so everyone can see the existing charges.
What tends to be missing
- CRA account balances. If there are arrears, say so and bring the payment arrangement. A lender will find it anyway and finding it late is far worse.
- An explanation for owner draws or management bonuses that move reported earnings.
- Anything that explains a bad year. One weak period with a reason attached is normal. One with no explanation is a decline.
- The existing debt schedule, complete. Daily and weekly remittance facilities are the ones owners forget to list.
Assemble it in this order
- Write the request first. It tells you what evidence you actually need.
- Pull the financial package and check the interim statements are current.
- Build the debt schedule and pull the PPSA summary.
- Collect the corporate and personal documents.
- Assemble the security evidence.
- Read the whole package as a stranger would, and fix what does not answer itself.
Questions
- How current do the interim financial statements have to be?
- Within ninety days at submission for most lenders, and within sixty for a bank on a larger request. Anything older and you will be asked to update mid review.
- Do I need audited statements?
- Rarely below $1,000,000. Notice to reader statements are accepted by most lenders at that level, and a review engagement helps on larger requests.
- What if my bookkeeping is behind?
- Fix it before you apply. A lender reading inconsistent numbers assumes the worst version is the true one.
Where this shows up in practice
- Advisory and deal preparationThe work that happens before a lender sees anything: the request, the evidence, the repayment logic and the lender list.
- Term loansA fixed sum advanced at closing and repaid over a set schedule, for growth, refinancing or a single large investment.