The small businessman and his bank

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Title:
The small businessman and his bank
Series Title:
Economic (small business) series
Physical Description:
v, 13 p. : ; 24 cm.
Language:
English
Creator:
Francis, Gerald McFadden, 1898-
Publisher:
U.S. govt. Print. Off.
Place of Publication:
Washington
Publication Date:

Subjects

Subjects / Keywords:
Credit   ( lcsh )
Genre:
fiction   ( marcgt )

Notes

General Note:
Copy 2 With : Merchandise display for simplified service in department and specialty stores ... / by E. R. Hawkins and Carl E. Wolf, jr. Washington, D.C. : Marketing Division, Office of Domestic Commerce, 1946. Bound together subsequent to publication.

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Source Institution:
University of Florida
Rights Management:
All applicable rights reserved by the source institution and holding location.
Resource Identifier:
aleph - 004819992
oclc - 01693188
lccn - 47046581
System ID:
AA00012188:00001


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UNITED STATES DEPARTMENT OF COMMERCE
W. AVERELL HARRIMAN, Secretary




The Small Businessman

and


HIS BANK



By
GERALD M. FRANCIS
Office of Small Business




Economic (Small Business) Series No. 64




UNIV. OF FL LIS.





I_ U.S. DEPOITORY









UNITED STATES
GOVERNMENT PRINTING OFFICE
WASHINGTON a 1947


For sale by the Superintendent of Documents, U. S. Government Printing Office
Washington 25, D. C. Price 10 cents


(V2;f

















oreworal
This booklet is designed to provide information and suggestions to
small businessmen on bank loans-an important phase of their opera-
tions. It should be particularly useful to individuals who are planning
to enter new businesses or have just established them.
Care has been taken to verify the contents with a number of represent.
ative bankers in order to ensure an accurate picture of bank lending as
an aid to small business.
The Department of Commerce, through its Office of Small Business,
expresses its appreciation to the individuals and banks that assisted by
giving their advice and suggestions on the manuscript.
This publication was prepared in the Finance and Tax Division with
the collaboration of J. C. Dockeray, Assistant Chief, and the general
supervision of J. M. Rountree, Chief.
JAMES L. KELLY, Director,
Office of Small Business.
OCTOBER 1947.












ummary

When planning to start your own business, one of your first considera-
tions should be its financial requirements and possible sources of capital.
Business capital may be derived either from your own savings or in part
from loans secured by a mortgage on assets or unsecured except by your
own signature.
If yours is a new or recently established concern you will need to rely
mainly upon your own capital contribution and on your personal relia-
bility and business ability as bases for credit. This is because most
commercial bankers are reluctant to make unsecured loans to new busi-
nesses in which a proprietor has placed little or no capital of his own.
If, however, you have operated for a period of years you may cite earn-
ings records, sales growth, and the favorable position of the industry, in
addition to any collateral you may possess, as evidence of security for
repayment.
In general, banks require small business applicants for loans to show
evidence of:
(1) Good personal character and reliability;
(2) Sound business ability and judgment;
(3) Success in past undertakings;
(4) Some property or assets not already mortgaged and available as
security:
(5) Working capital sufficient for minimum needs;
(6) Intention to use a loan productively.
If you, as an applicant, can show reasonable soundness on the above
points, your bank will probably make a loan commitment. Bank lending
ranges widely from about $1 for every $4 the enterpriser has invested,
to as much as $2 for each $1 of proprietor's equity. In normal cases, if
a projected enterprise is sound and the owner has an acceptable record,
many banks will advance without security other than a personal note on
either a 1 to 3 or 1 to 4 ratio to the equity capital in the business. This
is provided the majority of the equity is in the form of safe current assets
such as inventory and receivables. When the bank takes a lien on con-
servatively valued assets belonging to the borrower the ratio of loan to
the equity is usually higher.
Persons, like yourself, who desire to apply for business loans should
have definite ideas of how much money is required, the specific purposes
of its use, and how the earning power of the business will be increased by
reason of the loan.. Moreover, you should present complete and intelli-






gible statements showing your existing financial condition. If the business
has not had satisfactory accounting service and its records are in a neg-
lected state, it is advisable to have an accountant prepare formal state-
ments summarizing the past operations.
If your business is new, there is usually no need for special financial
statements other than the data required by the lending bank's forms.
Since new businesses obtain credit consideration mainly on the basis of
soundness of the projected enterprise, reputation of the promoter, and
the amount of his investment in relation to the amount of loan requested,
it is wise for new enterprisers to submit full information on these points.
Whatever the character or degree of your need for credit, you as a new
small businessman will benefit from acquaintance with your local banker.
His institution specializes in financing plans and methods. Its officers
have usually had wide experience over many years with varieties of con-
cerns. Any beginning or experienced businessman cannot fail to benefit
from the habit of regular consultation with his bank.


















Contents
Page
Foreword' ................................................ I1I
Summary ................................................ III
The Small Businessman and His Bank....................... 1
Desirable Characteristics of a Credit-Worthy Business ...... 1
Typical Business Situations Requiring Credit.............. 2
Banks' Requirements for Prospective Borrowers........... 3
Types of Financial Data and Forms Required by Lenders... 4
Your Obligation to Your Bank.......................... 6
Principal Types of Loans Available from Banks............ 7
Short-term loans................................... 7
Term lending...................................... 8
Types of short-term loans ........................... 8
A General Credit Basis for Small Business Loans........... 9
Exhibits:
Form 1-Sample Form of Balance Sheet.................. 10
Form 2-Sample Form of Profit and Loss Statement....... 11
Form 3-Sample Loan Application Form. ................ 11












































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The Small Businessman and

His Bank

Small businessmen generally are not as familiar as they should be with
the opportunities for borrowing needed funds which are available to
them through the business loan policies, programs, and requirements of
banks in their localities. This statement is especially true of individuals
just starting their own businesses. Such a situation is detrimental to
the best interests of both bankers and businessmen.
Banks ordinarily are interested in making as many business loans as
they safely can. This is one of their long-time functions and a potential
source of their income. However, in order to make loans with a high
degree of safety and protection for the depositors who supply the bulk
of bank funds, bankers need clear and dependable facts concerning the
businesses which ask for loans.
The proprietor of a small business with a well-organized set of books
and financial statements based on a practical system of accounts will
usually have little difficulty in providing his banker with concise and
understandable statements of condition. Such a system of accounts is
not found in many small concerns, even in those which have been operating
for some time. Its absence is usually the first and basic evidence not
only of a weakness in financial policy but also in over-all management
skill.

Desirable Characteristics of a Credit-Worthy Business
When you start your business you should, in the interest of maximum
success, formulate in your mind the indispensable steps which will lead
to your eventual growth rather than to failure. When you have done
this preliminary planning you will not only have improved your survival
chances but also have established foundations for favorable bank consid-
eration when a loan is needed.
There are at least three requisites for your business if it is to become,
and remain, successful. First, you should analyze the market in which
you plan to operate in order to assure attainment of a sales volume suffi-
cient to produce a net return on the funds and effort to be applied. This
step involves planning your operations in a field and on a basis that will
permit sufficient gross margin to cover all costs, including taxes, and
leave a net profit. Under present tax levels, every businessman should






inform himself regarding the extent to which taxes, both State and Fed-
eral, will consume any profit from operations. Since taxes accrue and
become liabilities upon a business even before their due date, it is also
important for a business to know at any particular time the types and
amounts of its tax liability.
Second, your enterprise must have some basic, long-term or risk capital
supplied and controlled by you as its proprietor. This is desirable so
that you may have a sufficient financial stake to retain control over your
business and its policy.'
Third, all your decisions on matters of organization and policy affecting
management and all records of past operations should be kept in such
form as to be presentable to financial institutions when requests for loans
are submitted. Most businesses at some time in their operations need
to obtain loans for long or short periods. At such times clear records of
officially approved policies and of operating results are essential to favor-
able credit action by banks. Businesses that maintain adequate records
frequently are found also to operate more effectively and therefore to
need fewer loans, particularly for emergency purposes.
Typical Business Situations Requiring Credit
Many situations arise which cause individuals and concerns to need
business credit. Some principal ones are: (1) Increasing working cap-
ital funds; (2) expanding or revitalizing a business already owned; (3)
buying out an established concern; and (4) entry into a new business.
Examples of specific purposes for which small businesses may need
loans are:
Building up inventory
Adding new lines
Expanding production
Buying an interest in another business
Buying out a partner
Effecting operating economies
Financing new equipment
Making repairs and modernization
Some of the above purposes requiring bank credit call for longer term
loans than many commercial banks customarily make. For example,
expanding fixed facilities or buying out an established concern necessi-
tates a commitment running more than a year. When you as an enter-
priser must borrow for such purpose to supplement risk capital, your
demand is for a term loan running usually 2 to 3 years. An increasing
number of banks are attempting to accommodate such longer term loans
where adequate security and prompt curtailment payments can be
assured.

I For the benefit of individuals who are planning, or in the early stages of, small business operations,. the
Office of Small Business has in preparation a circular on financial considerations in establishing a new small
business.






Shorter term loans ranging from 60 to 180 days and designed for oper-
ating purposes are directly in the special field of commercial banks and
are desired by them. Small businessmen may depend on their bankers'
interest in making such loans wherever the risk is not too great. Natu.
rally the banker must be the judge of the degree of risk and consequent
chance of repayment of the loan.

Banks' Requirements for Prospective Borrowers
Credit standards and requirements of banks vary with the type, condi.
tion, and size of borrowers. One of the principal requisites of credit to
small businesses is the personal and moral character of borrowers. The
character factor is given more emphasis on small business loans than on
loans to large businesses. This is because the smaller enterprises are
frequently weaker in liquid assets and, at the same time, more dependent
upon the character and reliability of one or two key individuals.
According to published statements of bankers, their standards for
business credit to smaller enterprises are generally the following:
(1) The borrower must be an excellent moral risk.
(2) There must be evidence that he has the ability to operate his
business on a sound basis.
(3) The past record of the business and its prospects must indicate
sufficient probable income to enable the borrower to repay
the loan out of future income from or realizable assets in his
business.
(4) While a normal risk may be assumed on loans of this type, neces-
sary steps must be taken to insure the bank against losses
greater than can be absorbed profitably in the usual course
of business.
In making certain of the factual information on the above points, a
bank will thoroughly examine you and your business statements.
First, a personal inquiry is made to reveal complete information about
you as an individual. This is done through reference to your private
life, mode of living, associations, and family and community interests and
responsibilities, as well as your business reputation.
Second, the bank estimates your business ability and record by means
of both a personal interview with the loan officer and a study of your
financial and operating data submitted on bank forms. An appraisal of
your past business operations will include, among other factors, analysis
of the efficiency of various operations under your direction, the care with
which you watched output and operating margins, and the performance
of the various departments of your organizations. A further point of
interest will be the extent to which you have withdrawn profits from the
business for personal use, thus reducing the capital available for expan-
sion.
If you desire to obtain a small loan of $1,000 to $5.000. for example,
to be repaid in monthly or other regular installments. you will need to


38336-4 --2






demonstrate past success in realizing net profit from your business. In
looking at the loan proposal, the banker will analyze it in terms of en-
abling your business to sell more merchandise, render more services, or
otherwise increase its income. Your business ability will thus be analyzed
by the banker through personal appraisal and statement analysis in the
process of determining prospects for repayment of the loan.
If you are borrowing some funds to assist in starting a new business,
the lending institution may rely more on your character and personal
standing in your community. In addition, the economic status of the
business line which you propose to enter and profit possibilities for a new
enterprise will be considered in arriving at a decision on the loan appli-
cation.
In thus appraising repayment prospects of your loan, the banker is
vitally concerned with your success as a borrower. The bank's interest,
accordingly, leads in many instances to detailed familiarity with borrow-
ing concerns and ability to advise on their special problems. This ad
vantage to small businesses, growing out of bank borrowing, is extremely
worthwhile. It is a type of contact and benefit which is found more
commonly among large businesses than among small ones. The sooner
small concerns, or individuals just entering business, can establish
banking relationships with their local banks regarding their financial
needs and problems, so much earlier in their careers may they avoid serious
errors and obtain sound and experienced advice. In making this contact
the businessman should aim to deal with a bank which specializes in
commercial and industrial loans.

Types of Data and Forms Required by Lenders
Banks considering applications for loans require submission of state-
ments showing basic condition of the applying business. Information
requested consists, in most instances, of a statement of assets and liabil-
ities, at least a skeleton statement of profit and loss for the latest com-
pleted fiscal year, and certain other information obtainable by means of
specific questions on a loan application form.
One of the first statements which a small business should be prepared
to make up and submit is its statement of assets, liabilities, and proprie-
torship. This statement preferably should show the financial position
of the business at the latest year end compared with the previous 12-
month year end. Such a statement is presented in Form 1. (See p. 10.)
It shows in compact and simple form the main items and subdivisions
of a standard balance sheet. For those businessmen unfamiliar with
such statements, notice should be taken of the following features:
(1) Assets are listed before liabilities and proprietorship.
(2) Current assets (those representing cash or items which normally
will convert to cash in a period of 60 to 90 days) are itemized
first and a total of them is entered.





(3) Fixed assets are listed by major types as shown and any reduc-
tion in valuation through depreciation should be reflected in
a net figure after depreciation. In this connection, deprecia-
tion is the extent to which fixed assets have declined in value
below the cost figure Depreciation is customarily figured
annually at the end of the fiscal year and is shown as a ded uc
tion from the original cost.
(4) Other assets refer to various properties which differ to some ex-
tent with type of business. Slow receivables represent those
accounts which have run beyond the normal period without
being collected, thus losing their current character. Prepay-
ments are assets acquired through advance payments of ex-
penses thus representing claims upon goods or services for the
future.
(5) Liabilities, like a-.,ets, are classified into current ami long-term
or fixed. Current liabilities consist of debts running for
periods up to one year and are usually comprised of notes
pay able and accounts payable. They are shown both itemized
and in total so that, by quick inspection and comparison with
current assets, the current position or ratio of the business can
be known. The standard of current position has generally
been stated as :2 of current assets to each $1 of current liabili-
ties, but it varies considerably from this figure for businesses
of various types and sizes. Fixed liabilities are debts incurred
and running for periods longer than 1 year.
(6) Proprietorship is the ownership by the proprietor, or enterpriser,
and is customarily measured by the amount of unassigned
asset values in the business after claims of creditors are satis-
fied. This ownership may apply to one proprietor, to two or
more partners, or it may consist of capital stock shares held
by numerous individuals who comprise the stockholders of a
corporation.
(7) The total of all liabilities of a business plus the proprietorship
represents in dollars the exact value of all assets. This is
because the liability and proprietary items comprise the total
property claims to total assets.
The balance sheet, when properly prepared, presents essential informa-
tion to show the true financial condition at a particular date. This
means that the balance sheet reflects the results of past periods of opera.
tion, but it does not show the specific gain or loss of a particular period
except, perhaps, for the latest completed fiscal period. It is customary
to show in each year-end balance sheet the amount of new increase or
decrease in proprietary ownership resulting from operations of the last
fiscal periods. This is done by listing the net income or loss as a sub-
item to the previous year-end propriet ,rslhiP, figures. (See Form 1.)






A standard form of profit and loss statement is shown in Form 2. (See
p. 11.) This statement provides a summary of the operations of a busi-
ness for a given period, either a fiscal year. or a fraction of a year. Prin-
cipal information provided on a profit and loss statement includes the
sales volume, gross and net, cost of goods sold, gross profit from sales-
which comprises the excess of the sales receipts over the costs of goods
sold-and the expenses incurred in operating. The balance left after
deducting expenses from gross profit is the net operating profit. Addi-
tions to and deductions from net operating profit are made to reflect
other income and expense. The result is the final or net income.
The profit and loss statement reflects the success of a business in terms
of earning capacity. A comparative statement of profit and loss for the
last 2 or 3 years is usually desired by a bank which is considering a loan
to an established business. (See Form 2.) New businesses, of course,
have no operating record and can submit only data on general plans and
capital committed to the enterprise.
Form 3 (see p. 11) is a sample loan application form of the general type
used by commercial banks in accepting requests for business loans. This
blank calls for three types of information: (1) General facts about the
business; (2) financial and operating data from records of the business;
and (3) personal data regarding the proprietor, manager or officers who
are responsible for policies and management.
Form 3 does not call for as detailed information as some banks require
for loans to businesses, especially if the loan exceeds a nominal amount of
about $1,000. Many small banks, however, consider and extend small
loans on the basis of much less information than is called for in the sample
loan application. For larger loans, banks usually require more complete
financial and operating statements as illustrated in Forms 1 and 2.

Your Obligation to Your Bank
When your business needs a loan you should supply the bank with as
complete information as your records will permit. This step is pre-
requisite to the more complete investigation to be made by the bank.
The bank will survey the general condition of the business as shown by
a preliminary interview with you and by your written application; it will
then complete a more thorough investigation of the business if your
application appears attractive. This will result in a detailed verification
of the data you recorded in your loan application.
Businesses which require financial assistance through loans will do well
to establish banking connections well in advance of that need. It will
be to your benefit to become acquainted with the forms and procedures
required by your own bank. If you do not already have a business
banking connection, you should investigate the loan policies and practices
of more than one bank. When you have decided which bank is best
suited to your requirements, you may find it most advantageous to deal
solely with it.





Each commercial bank has certain routine procedures for handling
loan applications and these usually follow a standard pattern in most
banks. It is important, however, that borrowers keep informed of the
special loan requirements and standards of their own bankers and con-
form to them in submitting loan applications. One of the most commonly
mentioned causes for refusal by banks of loan applications is the income.
pleteness and lack of clarity in presentation.
Banks desire to develop their volume of loans whenever the funds so
loaned can be used for productive purposes. During this current period
of postwar prosperity, bank loan publicity has included proposals for
developing new or better loan processes and services, as well as other
improvements, for businessmen who require funds. The individual
businessman must be the judge of whether a bank loan to finance new
equipment or fixtures, to renovate a store building, or to facilitate pur-
chase of merchandise on a cash discount basis will be justified by the
increased income to be expected therefrom. You may usually obtain
sound advice on such subjects from an experienced local banker familiar
with the business community in which you are operating or plan to
operate.
Principal Types of Loans Available From Banks
Since the end of the war in 1945, the commercial banks in the United
States have undertaken a broad program of making their loan services
easily available to businesses which need them. The over-all promotion
work incidental to this credit program has been done by the Small Business
Credit Commission of the American Bankers Association. It is the aim
of this group to help commercial banks to provide a complete line of
major types of loans that may be needed by various classes and conditions
of business.
Short-term loans.-The usual field of bank credit has been that of short-
term loans running for periods up to about 1 year. Banks make these
short-term loans for working capital purposes. These include funds for
meeting pay rolls, for financing inventory purchases, or for acquisitions
of new equipment which can be paid for within about 1 year. The banks
normally exercise extreme care in granting loans on inventories in order
to avoid losses either to themselves or to the borrowers through excessive
inventory acquisitions in periods of high or rising prices.
The short-term lending policy of banks also is always closely dependent
upon regular receipts of liquid assets by a borrower through his normal
business operation. This means that a business must show that its sales
of merchandise, or its collection of receivables and other productive
activities resulting in its receipt of liquid assets, will put it in possession
of funds sufficient to pay its loans within their maturity periods.
When banks extend short-term loans to small businesses they ordinarily
require collateral of various types. The loans may be secured by real
estate or other fixed assets, by materials or inventory in warehouse, by






notes endorsed by responsible persons, or by sales contracts which require
cash receipts to be allocated to the servicing of specific loans. Banks
also use credit agreements that limit withdrawals and salaries of pro-
prietors in order to enforce the security behind their loans. Such require-
ments usually benefit the borrowing business as well as the creditor and
should be carefully observed.
Term lending.-Term lending, as contrasted with short-term loans,
designates the field of longer-period credit. Commercial banks have
entered this field increasingly since the early 1930's. This type of credit
extension traditionally embraces all loans having final maturity exceeding
1 year and ranging, in a few exceptional cases, as high as 10 years. Term
lending is probably one of the most important newer credit devices intro.
duced into commercial banking practice during the past 15 to 20 years.
Term loans by banks arose mainly from the disappearance of the market
for longer term securities of small businesses. Obtaining a term loan from
a bank often involves tying up both the fixed assets, and, in many cases,
liquid assets otherwise not pledged or later acquired. For this reason,
a business needs to be in excellent financial condition in respect to liquid
or working assets in order to qualify for a commercial bank loan on a
term basis as long as 3 years or more.
The outstanding characteristic of such term loans is the fact that the
lender places more emphasis upon the prospective and sustained earning
power of the applicant and less upon any specific collateral security for
the loan than is the case with other types of bank credit. Thus far,
however, private term loans have been largely limited to gilt-edged in-
vestments and relatively few have been granted to smaller firms.
A type of loan which classifies as term is installment equipment financ-
ing conducted by both commercial banks and commercial finance com-
panies. These loans are for the purpose of financing purchases of income-
producing machinery and equipment and are amortized by regular in-
stallment payments, usually over a period of 24 to 36 months or, in the
case of expensive machinery, 48 to 60 months. More and more commer-
cial banks are engaging in installment financing of fixed equipment.
Small businessmen should consult their own bankers when interested.
Types of short-term loans.-Among the types of short-term loans now
available at many commercial banks are those secured by accounts re-
ceivable and those for which warehouse receipts are used as collateral.
Each of these has its own advantages to different types of borrowers.
Accounts receivable financing, until recent years, has not been impor-
tant in commercial banking. It was developed by the type of commercial
financing companies known as factors, who purchase or take over receiv-
ables on a nonrecourse basis. More recently, some commercial banks
have expanded their activities in the field of accounts receivable financing.
These activities are usually restricted to loans collateralizedd" by high-
grade receivables.






Cost of this type of credit to borrowers obviously varies with the quality
of accounts pledged and whether the lender has recourse to the borrower
for uncollectible accounts. Financing of accounts receivable by finance
companies has been provided, for the most part, to larger manufacturers
and processors of goods on their customers' accounts. The smallest
enterprises have not been important in the development of accounts
receivable financing. However, with the increase of interest of commer-
cial banks in developing this type of loan on a secured basis, small con-
cerns having bankable accounts receivable should consult their bankers.
Financing by means of pledging warehousing receipts is a convenient
method of obtaining working capital in certain lines of business. Wher-
ever small concerns are dealing, or expect to deal, in commodities which
can readily be warehoused for periods of 6 months to 3 years, they will
find warehouse receipts a useful means of obtaining working capital.
The average life of field warehousing agreements has been estimated at
from a few months to a year or more. Duration of these agreements
depends, obviously, upon the type of commodity, price trends, and other
similar market factors.
The duration of loans made by commercial banks on the security of
field warehouse receipts is definitely limited. This is because the banks
in this as in other lines of credit, aim to keep their extensions maturing
in relatively short periods. Since there is a certain minimum outlay
required to set up a field warehousing system, usually a borrower must
offer a sufficient volume of business in order to obtain commercial bank
consideration. It has been found that loans of less than '$10,000 to
$15,000 are not generally practicable. Accordingly, there is a distinct
limit on the extent of use of this type of financing by smaller concerns.
It has been estimated that about 15 percent of the insured commercial
banks in the country now regularly extend credit through loans on ware-
house receipts. Most of the firms making use of this type of credit have
total assets ranging between $25,000 and $200,000. Thus they are small
firms but not the smallest. The aggregate cost of this type of financing
varies from 5 to 10 percent, annually, depending upon the market for the
commodity warehoused, the prospect of price fluctuation, risk of com-
modity deterioration, and the credit standing of the borrower. Producers
and distributors of commodities readily warehoused may rely upon this
source of funds for working capital when it is needed.
A General Credit Basis for Small Business Loans
Aside from the special types of credit discussed immediately above,
proprietors of commercial and industrial businesses, both new and already
established, must depend upon the basic soundness of their whole business
undertaking and their record of past earnings as their most important
claim for credit consideration. If your business is already well estab-
lished and has adequate financing of its own for its fixed or long-term
capital, and in addition has shown a regular expansion in its volume of







operation and in earnings, normally you should have no great difficulty
obtaining short-term bank credit for its seasonal capital needs. However,
if yours is a newer concern whose working funds are not yet abundant,
it will be necessary to pledge certain of the assets of the type already
discussed in order to obtain short or longer-term finances.
As stated earlier, the ability of businesses to supplement financial
resources depends to a considerable degree upon the extent and character
of the capital invested by the proprietor. Where this basic capital is
adequate at the start to provide the basic fixed assets of the business or
the working capital-in a concern that does not require its own fixed
assets-and where your management demonstrates its capacity in pro-
ducing satisfactory earnings, you will ordinarily find it possible to obtain
bank financing on some one of the methods outlined in this bulletin.

Form 1.-(Sample form of balance sheet)
BLANK WHOLESALE GROCERY CO.
COMPARATIVE BALANCE SHEET


Assets


At close
De


Current assets: 19-
Cash ............................................... $XXX
Accounts receivable ................................... XXX
Inventory............................................. XXX

Total current assets ................................. XXX
Fixed assets:.
Equipment (after depreciation).......................... XXX
Real estate (after depreciation)......................... XXX

Total fixed assets .................................... XXX
Other assets:
Slow receivables ....................................... XXX
Prepayments.......................................... XXX
Total assets ........................................ XXX


of business
c. 31,
19-
$XXX
XXX
XXX

XXX


XXX
XXX

XXX

XXX
XXX
XXX


Liabilities and proprietorship
Current liabilities:
Notes payable.........................................
Accounts payable......................................

Total current liabilities...............................
M mortgage payable ................................... ..


XXX
XXX

XXX
XXX


XXX
XXX

XXX
XXX


Proprietorship:
Proprietor's capital 1 .................................... XXX XXX
Profit for year......................................... XXX XXX
Total liabilities and capital............................ XXX XXX
1 This item shows the equity claim of the proprietor of a single enterprise over assets after allowance for
creditors' claims. In an incorporated business the proprietary claim is shown in the form of issued common
and/or preferred stock and surplus.






Form 2.-(Sample form of profit and loss statement)

BLANK WHOLESALE GROCERY CO.

COMPARATIVE PROFIT AND LOSS STATEMENT FOR YEARS ENDING DEC. 31, 19- and 19-


Gross sales......... .. .......................
Less sales returns and allowances................

N et sales........................................
Opening inventory.................. $XXX
Plus purchases ................. XXX

Total goods to be accounted for ...... XXX
Less closing inventory .............. XXX


19-
$XXX
XXX

XXX

xxx


Cost of goods sold ........................... XXX

Gross operating profit ....................... XXX
Expenses:


Selling .........................
Admin. and general.................
Total expenses .................
Operating profit........................

Add other income:
Interest earned .....................
Recoveries on bad accounts.........
R entals...........................
M iscellaneous......................

Deduct other expenses:
Interest cost.......................
Sales discount.......................


XXX
XXX
o~.....


XXX
XXX
XXX
XXX


XXX
XXX


Net income..................... ......


XXX
XXX


XXX
S...
... ..


19-
...... $XXX
...... XXX

...... XXX
$XXX ......
XXX ......

XXX ......
XXX ......


XXX
XXX






XXX
XXX
XXX
XXX

XXX


...... XXX
XXX XXX

XXX ......


XXX

XXX



xxx
XXX






XXX



XXX

XXX


Form 3

THE BLANK COMMERCIAL BANK


Loan application form Loan Department
City.................... State..................


Date................


The undersigned hereby submit application and financial statement for a loan of
.......... dollars ($.......... ) repayable in .. days, or in monthly instalments
beginning 1 month from date of this loan, or on the following date ................
for the purpose of: ...................................................... ...
oe........l.............. Qo ..o......... .........Q..............







Form 3-Continued

BUSINESS RECORD


Name of business ....................... Kind of business ....
Address...............................................
Year established..................... .................
Annual rent .......... Lease expires .....................
Name of bank used by business ..............................


O Corporation
O Partnership
R Proprietorship
................


PRINCIPALS


N am e .............................
Home address .......................
Married E] Single L Separated Li
Age ..........
Previous home address ...............
Pers. ckg. acct .......................
Savings acct .........................
Membership in what business organiza-
tions .............................
Am't. of life ins ....... ..............
Present beneficiary ..................


N am e ..............................
Home address .......................
Married [] Single L Separated L
Age ............
Previous home address ...............
Pers. ckg. acct ............. .........
Savings acct. .......................
Membership in what business organize.
tions .............................
Am't. of life ins ............. ........
Present beneficiary ..................


FINANCIAL STATEMENT AS OF ..........


Assets


Cash in hand ...............
Cash in bank...............
Accounts receivable.........
Notes receivable............
M merchandise ...............
Total current assets .
Land and buildings..........
Machinery and equipment ....
Autos and trucks............
Total fixed assets ......
Cash surrender value of life in-
surance ..................
Investments .............. ..
Other assets................
Total other assets .....

Total assets................


$...o....




o ........o

o.ooo...
oo





......o .o
. o. .. .
........
.o.. ooo. .


Liabilities and net worth


Accounts payable...........
Notes payable to banks......
Notes payable to others .....
Chattel mortgages...........
Conditional sales contracts ..
Unpaid taxes ...............
Mortgage realty............
Other liabilities .............
Total liabilities ....
Net worth:
Valuation reserves .....
Special reserves.........
Capitol stock (or pro-
prietorship) ..........
Surplus .............. .
Total net worth......
Total liabilities and net worth.


$.......
.o....
. .

.......
.......o
..o .
....o....







OPERATING DATA FOR PERIOD ENDING


Net sales (year ending ............


$....... Name of Percent-
partners age own-
or officers ership


C ost of goods sold .................. ........ ........ .........
G ross profit........................ ........ ........ .........
Operating expenses................. $....... ........ .........
Overhead expenses.................. ........ ........ ........
Salaries:
Proprietors.................... ........
Officers ....................... ........
Net operating profit.......... ........
Are any assets shown on your statement pledged or assigned ...........
Yes or No
If so, give details .. ........................................................
Are you contingently liable as endorser or guarantor ...........
Yes or No
If so, give details ..... ......................................................
Bow much insurance do you carry on inventory, machinery and equipment, trucks:
Fire insurance $.......... Theft $.......... Property damage $..........
Public liability $...........



Present indebted-
ness Amt.
Bal. due
To whom owed Address due each
Acct. Orig. month
No. amt.


Our accountant is: Name.....................
Address..........................................
Signed this .......... day of ........... 19.....


B]

B3

0


Phone No. ............



(Name of applicant)
S................ ..........
(Title)
T....... ................
(Title)


13










UNIVERSITY OF FLORIDA
SI 1262 lll 083 111111 85 6
3 1262 08338 085 6




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