Business

8a Certification Financial Statements: What are the requirements and how does the SBA review them?

8th Certification: the financial statements of your company?

What is required to send?

All companies requesting the 8a certification must submit the following:

to. A copy of the balance sheet and income statement for the current year to date. The date of these statements cannot be more than 90 days when they are sent to the SBA. We suggest that you provide the latest possible date.

B. If the financial statements of the company are prepared on an accrual basis and the balance sheet for the current year to date shows accounts payable or accounts receivable, you must provide the corresponding aging statements. If the company’s financial statements are prepared on a cash basis, it is not necessary to provide an aging statement of accounts payable or receivable.

vs. A copy of the last three complete balance sheets and year-end income statements for the company or all those who have been in business, if less than 3 years.

On what basis (cash or accrual) should the financial statements of the company be presented?

I suggest you file your balance sheet and income statements the same way you filed your company’s federal income tax returns on. If you prefer to provide your financial data on a different basis than what is reported on your federal income tax returns, be prepared to support any significant increases or decreases with supporting documentation if requested by the SBA.

Is it okay to use tax returns as financial statements?

No, you must provide a balance sheet and income statement prepared in accordance with generally accepted accounting principles or on an accepted cash basis. If you use QuickBooks, we suggest that you use the standard report as a copy to be sent.

What minimum requirements must the current year-to-date balance sheet and income statement be required to meet the basic 8a eligibility requirements?

The current year-to-date finances should exhibit positive net income, positive total equity, and positive working capital at a minimum.

What exactly is the SBA looking for when it reviews and filters current year-to-date financial statements?

to. Is the balance sheet and income statement for the current year to date no more than 90 days from the date of receipt?

B. Have balance sheets and income statements been prepared in accordance with generally accepted accounting principles or an accepted cash basis?

vs. If the company’s financial statements are prepared on an accrual basis, are the aging schedules of accounts payable and receivable consistent with the current year-to-date balance sheet?

D. Are there accounts payable or receivable that are more than 90 days old? If so, the SBA may discount these amounts and it could possibly negatively reflect on your companies’ potential for success criteria.

me. Does the company have fixed assets? If so, are these fixed assets recorded correctly? Are fixed assets reported with depreciation or at actual value?

F. Do the company’s fixed assets correspond to your type of business? For example, if the company does construction work, does it have construction equipment? If you are a general contractor and your balance sheet does not show fixed assets (hammers, drills, construction equipment, etc.), your income statement should show the leasing costs associated with renting the equipment needed to complete your projects.

gram. If the business is a merchant, wholesaler, or supplier, does the business keep any inventory and does it show on their balance sheets?

h. Are there loans or receivables from a shareholder, officer, or partner listed on the balance sheet? If so, has a copy of the loan or promissory note been provided within the application documentation? If the loan is from one of the applicants, has it been correctly reflected on their SBA 413, Personal Financial Statement?

I. Does the company have the ability to pay debts? (for example, minimum of 90 days of working capital)

j. Are there any loans that are questionable or that may raise control concerns? Does the business have non-disadvantaged funding that would be considered critical funding? Also, is the loan payable on demand? Do these loans reflect generally accepted payment terms? If not, is this item over-inflating the company’s assets?

k. Are reported retained earnings reconciled to previous financial statements?

l. Does the listed business capital match that on SBA Form 413, Applicant’s Personal Financial Statement?

Mister. Does the income statement show income from appropriate business activity (NAICS)?

not. Is “cost of goods sold” included?

or. Are the items recorded on the balance sheet and income statements consistent from year to year?

P. Does the income statement show an expense for employee salaries? Does it appear that the applicant is not the best compensated? Are there any signs of excessive withdrawals?

q. Does the income statement show an insurance expense and, if necessary, a worker’s compensation expense?

r. Are there large outsourcing expenses that seem questionable? A service-related business should not outsource more than 50% of the labor-charged portion of a contract. If you are a construction company this percentage is 85% and 75% for the construction trade (plumbing, electricity, etc.)

What exactly is the SBA looking for when it reviews and filters your year-end financial statements?

to. Are the year-end balance sheet and income statements provided from the beginning of the calendar or fiscal year to the ending date of the fiscal year?

B. Does the income reported in the income statements appear to be the same in the same line of business from year to year?

vs. What pattern do the income, gains, and losses show? Is it necessary to ask for clarification, such as an explanation of the reason for a downtrend or a sudden drop in income?

D. Are there discrepancies between the company’s tax returns and the financial statements? Are these discrepancies based on cash versus accumulation? If not, is reconciliation required? Does taking into account cash versus accrual reconcile the accounts?

me. Do the balances correspond to the tax filing programs? For example, are there shareholder loans in tax reporting programs that are not reflected in financial statements?

F. Do the financial statements and corresponding tax returns reflect any conversion from accrual to cash accounting?

Leave a Reply

Your email address will not be published. Required fields are marked *