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Of the many forms you can expect to complete for your SBA loan application, SBA Form 413—which you may also know as the SBA financial statement—is one of the most essential: This personal financial statement factors into how the SBA determines your ability to repay an additional debt and, by extension, your eligibility for an SBA loan.
SBA Form 413 is made up of eight sections. First, you’ll provide dollar values of your personal assets and liabilities, and in subsequent sections, you’ll provide detailed explanations of each of those assets and debts. It may take you a few hours to fill out the form itself, but you’ll also need to take additional time to gather supplementary documentation beforehand.
It’s best to prepare (or prepare to prepare) SBA Form 413 as far in advance as possible. To start, here’s what you need to understand about SBA Form 413, exactly what to expect from the form, and the documents you’ll need to gather to fill it out.
If you’re applying for an SBA loan, you’re going to encounter paperwork (and a lot of it). But that paperwork serves a purpose: Through their lending program, the U.S. Small Business Administration facilitates and guarantees small business loans into the millions of dollars with years-long terms. Both the government agency and the partner lender that disburses these loans need to be certain that the applicant is fiscally solvent enough to handle a debt of that size and import.
SBA Form 413 is crucial in that decision—it’s how the SBA and your lender evaluate your personal income and debts and, by extension, your overall cash flow. (If you’re married and file a joint tax return, you’ll need to include all the assets and liabilities you and your spouse share.)
But why does the SBA—a business lender—care about your personal finances?
According to Alex Goldklang, a senior loan specialist at Fundera, “The SBA needs to look at your business’s debt service coverage ratio (DSCR) as well as your global DSCR, and your personal finances factor into your global DSCR. To be approved for an SBA loan, you need to pass both.”
Put simply, these metrics indicate how well a business owner can service their debt. Goldklang says that the best way for the SBA to calculate that ability is by evaluating an applicant’s monthly debt obligations. So while it’s important to accurately report all your liabilities and assets on your personal financial statement, take special care in providing information on any installment accounts that you pay monthly, like car loans, student debt, and your rent or mortgage payments.
Most SBA loan programs—including the SBA 7(a) loan, the agency’s most popular loan program—require that the applicant fulfills SBA Form 413 as part of their application. But depending on your business entity, the following people will also need to fill out and submit their own versions of the SBA financial statement:
Also note that these applicants’ spouses need to sign off on Form 413.
The first section of SBA Form 413 is the most straightforward; you’ll just need to provide your personal contact information. If you’re married and will be providing information about your spouse’s personal financial information, be sure to include their name in this field, too.
In the top right-hand corner, you’ll notice a field called “As of.” This is not necessarily today’s date—rather, this conveys to the SBA the date up to which your provided information is accurate. This is especially important in regards to valuations, which need to be as current as possible.
It’s best practice to enter the last day of the month preceding the month in which you’re applying (e.g. September 30 if you’re applying in October). Also keep in mind that your SBA Form 413 needs to be dated within 90 days of your loan application.
Remember, too, that you may need to set aside time before you complete SBA Form 413 to gather supplementary documentation. The SBA won’t necessarily request photocopies of these documents, but you can consult these documents to accurately provide current valuations and additional details about all your relevant assets and liabilities. Any documents you consult (and will potentially need to provide) should be within 30 days of your listed “As of” date.
Remember that SBA Form 413 is integral in determining your global cash flow, but this isn’t the only document that indicates your cash flow eligibility for the loan. That’s the job of all of the following documents combined:
…and, finally, your personal financial statement.
For the SBA Form 413 itself, you might need to consult at least the following documents to report requested information:
It’s a good idea to take a look at the SBA financial statement even before you start filling it out. That way, you’ll know exactly what information you’ll need to provide, and the supporting documents you might need to consult.
Nervous about completing your SBA financial statement? Don’t be. Here’s a breakdown of the information you’ll need to provide on the form.
Round up your valuations the nearest dollar amount.
Same rules apply here as they do for your assets: List the liabilities on your books as an individual (separate from your business’s), and if you’re married, include the liabilities you hold jointly with your spouse. Round up to the nearest dollar amount.
Contingent liabilities refer to the debts you’re responsible for if certain conditions occur. You’ll estimate the amounts of your contingent liabilities if those conditions are likely to occur.
In this section, you’ll further explain all the debts listed as your Notes Payable, as entered in the Liabilities column. Use the table provided, and include a separate sheet if you need more space.
Include the following details per debt:
Just as you did for your Notes Payable, in Section 3 you’ll provide more detail on every stock and bond you and your spouse own, as listed in the Assets column. Again, you can attach as many additional sheets as you need.
Include the following details for every stock and bond you own:
Explain in greater detail all the property you own, as listed in your Assets and Liabilities.
Here, you have the opportunity to go into greater detail about the “Other Personal Property” and “Other Assets” you listed in the Assets column, which will include the value of your stake in the business.
Provide as much detail as possible about these items, and also be prepared to provide documentation to prove their value, if possible. That said, you may not have a receipt for your grandmother’s diamond necklace, and that’s okay, too. Just try to make an educated guess as to how much you’d get if you sold your valuables, and don’t intentionally undervalue or overvalue anything.
If you’ve pledged any of these assets as collateral to secure another type of loan, you’ll need to provide details about that loan, as well. You can use the Notes Payable section as a guide as to what information to include. And if there’s a lien on any of these assets, you’ll need to provide the name and address of the lien holder, the amount of the lien, and the terms and payment. If the loan is delinquent, explain the circumstances of that delinquency.
If you still owe taxes to your state or local government, you can still be eligible for an SBA loan—you just need to prove that you’re on a repayment plan. Here, you’ll also explain to whom you owe taxes, when they’re due, the amount you owe, and whether any of your assets have a tax lien attached.
This is your chance to better explain any “Other Liabilities” you listed in the Liabilities column, if you have them. These are the liabilities that don’t fit neatly into the provided categories, such as debts owed to foreign governments or as a result of private agreements. Provide details like the type of debt it is, to whom you owe payments, how much you owe, and your repayment plan.
Explain all life insurance policies you hold, including the death benefit, cash surrender value (if applicable), the names of your beneficiaries, and the name of your life insurance company.
Many business owners are intimidated by the prospect of filling out their SBA personal financial statements. It can be hard to know which of your assets and debts you should include, which you should leave out, how best to reach their values, and exactly how granular to get in your descriptions.
But Goldklang insists that the process isn’t as intense as it might seem:
“I tell people not to drive themselves crazy here. A lot of people think of their businesses as an extension of themselves, or vice versa, and I admire that. But what I tell business owners when I hear their anxiety about the PFS is that this is your opportunity to tell us about your personal assets and liabilities—not your business’s. So, that car you told me about—is the business paying that off, or are you? Put simply, that’s how you should fill out this form. If you think about it as your item, then put it on the form. If you think of it as the business’s debt, then leave it off.”
And when in doubt, be transparent. Ultimately, the SBA needs accurate information to make an informed lending decision. If you’re concerned about a particular debt, try to provide as many details as possible to back up the numbers.
But that’s one of the greatest advantages to working with a loan specialist on your SBA application: They can advocate for you and help your lender look past those cut-and-dried numbers to understand aspects of your application that need additional explanation. And if that doesn’t work, then your loan expert can help you come up with a game plan if excessive personal debts are precluding your loan eligibility right now, so you can increase your chances of approval in the future.
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