Why lenders ask for a cashflow package
Lenders use a cashflow package to verify that your business generates—or will generate—enough cash to cover operations and loan payments. The package reduces uncertainty and speeds underwriting by presenting reconciled records, realistic forecasts and evidence for your assumptions (Consumer Financial Protection Bureau, sba.gov).
Core components to include
- Historical financials: profit & loss (P&L), balance sheet and cashflow statements for the prior 2–3 years when available; at minimum, 12 months of bank statements and P&L. (IRS: provide tax returns as requested.)
- Tax returns: 2–3 years of business tax returns and owner personal returns if the lender asks (IRS).
- Bank statements: 12–24 months to show cash receipts and withdrawals.
- Accounts receivable / payable aging and major contracts or invoices that support revenue projections.
- Monthly cashflow projection: a 12-month, month-by-month forecast showing opening balance, projected receipts, disbursements, loan payments and closing balance.
- 2–3 year pro forma summary: quarterly or annual projections to show longer-term viability.
- Use-of-funds and assumptions memo: short narrative explaining key assumptions (pricing, sales growth, seasonality, collection days).
- Supporting documents: client contracts, purchase orders, rent/lease, payroll schedules, and any letters of intent.
How to prepare the package — step by step
- Gather documents: bank statements, P&L, balance sheet, tax returns and major contracts.
- Reconcile accounts: match deposits to invoices, flag one-time items and adjust for owner draws or related-party transfers.
- Build a monthly cashflow model: start with opening cash, add forecasted receipts (sales collections, other cash inflows), subtract cash disbursements (COGS, payroll, rent, taxes, loan service) to produce closing cash.
- Base assumptions on evidence: convert sales pipeline, signed contracts, or historical collection rates into collection schedules. Show conservative and base-case scenarios.
- Stress-test: run a 10–25% sales drop or slower collections scenario to show resilience and identify cash gaps and timing risks.
- Create an executive summary: 1–2 pages that state why you need the loan, planned use of funds, repayment source and key metrics (monthly cash surplus/deficit, break-even and DSCR if applicable).
- Compile and label: assemble PDFs with a cover page and table of contents. Ensure all numeric schedules tie to source documents.
Practical examples and lender signals
In my practice helping cafes and service firms, lenders typically expect a monthly 12-month projection with notes explaining seasonality (e.g., summer slowdown or holiday spikes). For equipment or expansion loans, lenders will also want to see the contract or invoice that justifies the use of funds.
If a lender asks for underwriting metrics, be ready to provide debt-service coverage ratio (DSCR) calculations and a 13-week cashflow for short-term liquidity review. See our deeper guide on why lenders scrutinize cashflows and what they focus on: “Why Lenders Review Business Cashflows Carefully” (https://finhelp.io/glossary/why-lenders-review-business-cashflows-carefully/).
Common mistakes to avoid
- Overly optimistic revenue forecasts without supporting contracts or pipeline evidence.
- Ignoring seasonality and timing of receivables, which creates perceived short-term cash shortages.
- Failing to reconcile bank statements to P&L, which raises red flags for underwriters.
Quick checklist before submission
- Monthly 12-month forecast plus a 2–3 year summary
- P&L, balance sheet, cashflow history (12–36 months)
- 2–3 years of tax returns (business and owner if requested)
- Bank statements (12–24 months)
- AR/AP aging, major contracts, invoices
- Use-of-funds statement and assumptions memo
- Executive summary and labeled PDF bundle
Additional resources
- Preparing financial statements and other bank-ready documents: “Preparing Financial Statements for a Small Business Loan Application” (https://finhelp.io/glossary/preparing-financial-statements-for-a-small-business-loan-application/)
- U.S. Small Business Administration guidance on loan documentation: https://www.sba.gov/
- IRS for tax return documentation and transcripts: https://www.irs.gov/
- Consumer Financial Protection Bureau on lending fundamentals: https://www.consumerfinance.gov/
Professional disclaimer: This article is educational and not personalized financial or legal advice. For tailored guidance, consult your CPA, lender or financial advisor. In my practice I often build a one-page cashflow summary that highlights repayment sources and weak spots—lenders appreciate clear, evidence-backed narratives that match the numbers.
