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.
What Is SBA Form 413, and Why Is It Important?
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.
Who Needs to Fill out SBA Form 413?
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:
- Each proprietor
- Each limited partner with 20% or more interest and each general partner
- Each stockholder owning 20% or more of voting stock
- Any guarantor of the loan
Also note that these applicants’ spouses need to sign off on Form 413.
Getting Started With SBA 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.
Documents to Gather
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:
- Two business tax returns for the most recent years
- Two personal tax returns of any owner with 20% or more stake in the business
- The current year-to-date business financials (i.e. your profit & loss and balance sheet)
- Business debt schedule
…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:
- Checking and savings account statements
- IRA statements
- Life insurance documents
- General market data about your cars, homes, and other personally owned property
- Mortgage statements, auto loan statements, credit card statements, and documentation of any other personal debt
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.
How to Fill out SBA Form 413
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.
- Cash on Hand and in Banks: The amount in your and your spouse’s checking accounts.
- Savings Accounts: Include the amount in any money market and CD accounts, too.
- Retirement Accounts: The value of your IRA or any other retirement accounts in your and/or your spouse’s name.
- Accounts and Notes Receivable: You’ll only need to fill this out if you’ve personally loaned money and that amount is still owed to you.
- Life Insurance—Cash Surrender Value Only: If your life insurance has a cash payout, list the dollar amount you would receive if you canceled it. This only applies to whole life insurance policies, not term life insurance. Describe this in detail in Section 3.
- Stocks and Bonds: List the current value of all stocks and bonds owned by you and/or your spouse.
- Real Estate: List the current fair market value of all commercial or residential real estate you and/or your spouse own. You’ll describe this in detail in Section 4.
- Automobile: The current fair market value of all cars, boats, planes, or other automobiles you and/or your spouse own (not the automobiles you’re leasing).
- Other Personal Property: Estimate the combined worth of all the valuable material items you own and could sell for cash, but that don’t fall into any of the above categories. (Think your home, jewelry, electronics, and antiques.) Describe this further in Section 5.
- Other Assets: Estimate the value of any other assets you own that don’t fall into the above categories, including the value of your interest or equity in the business. It’s best to contract a professional valuation for this, but if that’s not possible, you’ll need to undervalue your estimate to avoid fraud charges. Describe this in detail in Section 5.
- Total: Add up the total value of your assets.
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.
- Accounts Payable: Essentially, this field refers to any debts you owe to another party other than banks, usually on a short-term basis (i.e. 30, 60, or 90 days). Most applicants can leave this section blank.
- Notes Payable to Banks and Others: This is where you’ll list all outstanding balances on your personal credit cards, lines of credit, and installment loans. Describe this further in Section 2.
- Automobile Installment Account: Provide the total and monthly payment amount of your balance for any outstanding automobile loans.
- Other Installment Account: List the total and monthly payment amount of any outstanding personal installment loans on your books, including student and personal loans.
- Loan on Life Insurance: Provide the balance of any loans you’ve taken out for which you’ve pledged your life insurance policy as collateral (only if it was whole life insurance). Describe this further in Section 8.
- Mortgages on Real Estate: The balance of mortgages on your owned real estate. Describe this in detail in Section 4.
- Unpaid Taxes: List any due but unpaid taxes since your most recent filed tax return. Describe this further in Section 6.
- Other Liabilities: Provide the total amount of any other outstanding debt not listed in the previous sections. Most applicants don’t have any additional liabilities, but if you do, you can describe them in detail in Section 7.
- Total Liabilities: Add up the total amount of your liabilities.
- Net Worth: Subtract your total liabilities from your total assets to determine your net worth.
- Total: Add your “Total Liabilities” and your “Net Worth.” This value should be equal to your total assets.
Section 1: Source of Income and Contingent Liabilities
Source of Income:
- Salary: Provide your and your spouse’s total annual salaries, as reported on your tax return.
- Net Investment Income: List any income you earn as dividends and interest from your investments.
- Real Estate Income: Provide the net income you receive from any of your owned real estate, i.e. through sale, lease, or rental. Be sure to list your net income, or the income you earn after expenses.
- Other Income: Provide the total amount of any income received through venues not listed above. This can include alimony, child support, pension, social security, and the like. Describe the sources of this income in the section below.
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.
- As Endorser or Co-Maker: The total balance of any outstanding debts for which you or your spouse acted as guarantor or co-signer.
- Legal Claims and Judgments: The total amount you might owe for any pending legal claims or judgments.
- Provision for Federal Income Tax: The amount of money you’re setting aside to pay federal taxes for an expected increase in income due to a pending litigation, dispute, or asset sale.
- Other Special Debt: The total amount of any other outstanding contingent debts not listed above.
Section 2: Notes Payable
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:
- Name and Address of the Noteholder: The name and address of your creditor.
- Original Balance: The balance owed when the credit was first established. This will be $0 for credit cards and lines of credit, or the total amount of the loan for installment loans.
- Current Balance: The amount you currently owe.
- Payment Amount: The amount you pay for this debt each month. If it’s an installment loan, list your monthly repayment amount. If it’s a credit card or line of credit, list “varies.”
- Frequency: How often you pay your loan bills, i.e. monthly or weekly.
- How Secured or Endorsed/Type of Collateral: Explain the type of collateral you pledged to secure your loan. If it was unsecured (as most credit cards are), list “unsecured.”
Section 3: Stocks and Bonds
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:
- Number of Shares: The number you own.
- Name of Securities: The name of this security.
- Cost: Its original cost.
- Market Value Quotation/Exchange: Its current market value.
- Date of Quotation/Exchange: The date you calculated its current value.
- Total Value: Your number of shares multiplied by its current value.
Section 4: Owned Property
Explain in greater detail all the property you own, as listed in your Assets and Liabilities.
- Type of Property: This may be your primary residence, an investment property, or an undeveloped lot.
- Address: The property’s address.
- Date Purchased: The date listed on your mortgage.
- Original Cost: The property’s purchase price.
- Present Market Value: Ask your broker for a current valuation of the property.
- Name and Address of Mortgage Holder: The name and address of the bank that holds your mortgage.
- Mortgage Account Number: Find this number on your mortgage statement.
- Mortgage Balance: The amount you still owe on your mortgage.
- Amount of Payment Per Month or Year: The amount of your monthly or yearly mortgage bill. If you’ve paid off your mortgage, list “N/A.”
- Status of Mortgage: Write “current,” “foreclosure,” or “paid in full.”
Section 5: Description of Personal Property and Assets
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.
Section 6: Description of Unpaid Taxes
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.
Section 7: Description of Other Liabilities
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.
Section 8: Description of Life Insurance
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.
Completing SBA Form 413
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.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those
of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
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