What does it mean when a Landlord asks you to provide “Financials”?

If you are looking to secure a commercial real estate location for your business there are a few things that you should be ready for prior to beginning your search. Each Landlord is different; some are easier to deal with than others when it comes to negotiating and welcoming a tenant.  However, no matter who the landlord is they will almost always ask for a completed tenant application along with “financials”.  What are landlords talking about when they ask for “financials”?

At a Minimum: 

1.      Provide a completed tenant application from the owner(s) of the business

2.      Provide copies of Two Years of Tax Returns (Personal & Corporate)

a.      If the corporation is a sole proprietorship then provide personal tax returns of the owner(s)

3.      Provide a Profit & Loss (P&L) Statement for the previous full fiscal year and the current year to date (YTD)

4.      Past 3 Months of Bank Statements (Black out account numbers for Privacy)

May be requested:  

Balance Sheet/Personal Financial Statement:A current corporate Balance Sheet. If not available then complete a Personal Financial Statement detailing your Assets and Liabilities.

Business Plan:If you’re a startup business and you are looking to occupy the space be prepared to present a formal business plan to the Landlord, if asked. When you sign a lease, you're signing a business agreement, the Landlord may want to see your plan and how you are planning to budget the rent throughout the term of your lease. Make sure the business plan is thorough and precise.

Depending on certain factors like the strength of your corporate financials and length of years in business the landlord may require a personal guaranty. What is a personal guaranty?

Personal Guaranty:A personal guaranty is a legal document that is signed by an individual that guaranty’s the rent will be paid. Some, not all Landlords will want a personal guaranty from at least one individual within the entity or a related party. Having a signed guaranty from the tenant gives the Landlord some added assurance that contractual obligations will be met if the tenant were to break the terms of the lease. 

Should you have any additional questions or concerns please do not hesitate to contact your Allied Commercial Real Estate professional.