For many entrepreneurs, financial statements can feel like something only accountants or bankers care about. But the truth is, understanding these reports gives you power, the power to make better decisions, access funding, and confidently steer your business forward.
If you are applying for a loan, whether from a bank or a private lender like Pumpkn, you will likely be asked for your last three years of financial statements. This is not just paperwork. Lenders want to assess two key things:
To do this, they will focus on three core financial statements:
Let us unpack what each shows and why they matter.
The balance sheet is a snapshot of your business’s financial position at a specific point in time. It shows:
Your balance sheet reveals how financially stable your business is. Are you building value over time? Are you overly reliant on debt? Lenders use it to assess your capital structure and risk profile.
Tip: If you are unsure how to read or interpret your balance sheet, seek help from your bookkeeper, accountant, or financial advisor.
Tracking these ratios helps you stay financially resilient, detect risks early, and improve your business’s credibility with funders.
Lenders want to see that you are not over-leveraged and that you have enough liquid assets to weather tough periods such as slow sales or production delays. They also evaluate the quality and value of your assets and whether there is sufficient collateral in case of repayment issues.
The income statement shows how your business performs over a period (typically a month, quarter, or year). It breaks down:
This statement answers a key question: Are you actually making money? It shows if your sales cover your expenses and whether your margins are sustainable.
Tip: If these terms feel unfamiliar, speak to your accountant or financial advisor to help you interpret your numbers.
Tip: Review these monthly. Trends over time can help you adjust pricing, control costs, and improve profitability.
Lenders assess whether your business is profitable and consistent. They examine trends in revenue and expenses and assess whether you generate enough income to break even and cover interest and repayments. A strong income statement reassures lenders that your business can grow and meet its financial obligations.
Profit does not equal cash. The cash flow statement tracks the movement of money in and out of your business, and it is crucial for understanding liquidity.
It is divided into:
You can be profitable on paper but still run out of money. This statement shows if you have the cash to cover salaries, rent, input costs, and avoid missed payments.
Tip: Your bookkeeper or accountant can help you prepare and review a monthly cash flow statement if you are not already doing so.
Tip: Monitor these monthly with the help of your bookkeeper or advisor to avoid surprises.
Lenders closely review your cash conversion cycle and operating cash flow. They want to know if your business generates cash fast enough to handle repayments and day-to-day costs. Efficient cash management means you are less likely to default and more likely to qualify for larger loans with better terms.
✅ Work with what you have – Even basic financials are useful. Ask your bookkeeper, accountant, or financial advisor to help prepare them.
✅ Review monthly – Do not wait until year-end or a funding application. Make financial reviews a habit.
✅ Ask questions – You do not need to be a finance expert. You just need to understand what the numbers mean for your business.
✅ Looking for funding? At Pumpkn, we finance growing businesses in the agri and food value chain. If your financials are in order, you are already one step ahead.
These are not just reports, they are your business’s dashboard. Once you understand them, you gain control, boost your funding chances, and make decisions with confidence
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