What Is A Bank Pro Forma Statement & Why Do Banks Require Them?

What is a pro forma statement and why are pro forma statements required at banks? A pro forma bank statement is a financial statement that serves as a prediction tool used to help companies make future business plans and conduct comparisons between strategies.

When you apply for a small business administration (SBA) loan or other commercial loan you are often required to provide financial projections. In fact, the SBA requires a 1 year pro forma income statement and narrative explanation of how you will reach your projections with an application for the following loans:

• SBA 7(a) Loans
• SBA 504 Loans
• SBA Express Loans

Why do banks require pro forma financial statements? There are two core reasons why banks require pro forma statements in addition to the fact that the SBA requires it.

1. Have A Pro Forma Bank Statement History Based on Cash Flow

The bank does not want you to have to borrow additional funds from another source in order to make your loan payment each month.  Your pro forma bank statement history should demonstrate that you have sufficient cash flow from operations to make your loan payment.  Your pro forma financial projections should also show 2 scenarios.  The first scenario is your business without the loan, while the second scenario shows how your numbers change when you do take out a loan.  The idea is to show positive cash flow and profits due to the use of the loan.

2. Demonstrate Competence In Your Pro Forma Bank Statement Data

Your pro forma bank statement data should demonstrate to the lender that you know what you are talking about.  If your projections are completely unrealistic and out of line with the industry, the bank is going to slap a denial on your application immediately.  Do some research.  If you are opening a coffee shop, and the average coffee shop has profit margins of 3%, then your projected  profit margins shouldn’t be 30%.

Check out ProjectionHub’s services or choose an excel financial projection template to prepare the necessary materials for your pro forma bank statement and get ahead of the game.