ACCESS TO BUSINESS CAPITAL

Dec 1st 2020

Correctly filing your company taxes is a vital part of ensuring the growth of your business. In the first place, if you’re a business owner, you’re obligated to file corporate and personal income taxes. By doing so, you’ll know you’re compliant with government regulations so you can rest easy. The last thing you want is to be audited and for the government to find out that you owe them thousands of dollars. In the second place, if you need to grow or expand your business, banks and other lenders will generally request copies of your federal tax returns to verify your business income and ensure that you’re current on your taxes. If you don’t have your tax returns or if they weren’t filed correctly, there’s no doubt that your loan application will be denied.

Access to business capital through your federal income tax returns. Corporate and personal income tax returns are a basic requirement for securing a business loan from the vast majority of lending institutions. It’s an extremely important requirement because these forms demonstrate that you’re a person of good moral character (that you fulfill your obligations) and they provide proof of your income.

Remember that the basic formula for determining whether or not you qualify for a business loan relies heavily on your income. In other words, the thing the bank is most interested in is reducing the risks associated with the loan (and a business loan is risky by nature). The best way for the bank to do this is to make sure that you’ll have enough money available to make the payments. Your capacity to pay is determined by your income, minus your debts and other liabilities. The crux of the matter is that the bank isn’t going to believe you without corroboration. If you tell the bank that you make $60,000 in income, the bank is definitely going to ask for proof. Your federal tax returns offer the most irrefutable proof.

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The six C’s that banks review to approve or deny a loan

  1. CHARACTER
  2. CAPACITY TO PAY 
  3. (BASED ON TAX RETURNS)
  4. CAPITAL
  5. COLLATERAL
  6. CONDITIONS
  7. CONFIDENCE

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