Lenders want personal financial statements that are accurate, transparent, and simple to assess real estate partners’ financial strength.
In commercial real estate, lenders look beyond the deal; they evaluate the people behind it. One of the most critical documents in that process is the personal financial statement (PFS).
Demonstrating financial strength
For general partners and syndicators, a well-prepared PFS demonstrates financial strength, liquidity, and capacity to support an investment. A clear, accurate statement can streamline the review process, while a poorly prepared one can cause delays.
While a CPA can assist with preparing or compiling a PFS, the document ultimately represents the owner’s financial position. Every figure, including estimated property values, reflects the owner’s judgment and responsibility.
Lenders expect transparency and consistency
Accuracy matters. Many lenders prefer CPA-compiled statements because they follow accounting standards and include disclosures. If your financial position includes complex or illiquid assets, such as partnership interests or real estate held in trusts, ask your CPA to include explanatory footnotes. This helps lenders interpret the information without assumptions.
Asset valuations should reflect market reality. Overstating values can raise concerns about reliability. Use appraisals, broker opinions, or market comparables when available. If estimates are necessary, label them clearly and apply a consistent approach.
Liquidity is another key focus. Separate liquid assets from illiquid ones and identify any restrictions or pledged collateral. Cash balances, marketable securities, and available credit lines should be easy to locate.
Keep the structure clean — avoid unnecessary complexity, group holdings logically, and clearly identify personally guaranteed liabilities. Excessive jargon or unexplained entities can slow the review process.
Common pitfalls in personal financial statements
Frequent issues include omitting contingent liabilities (such as guarantees), using outdated information, and providing numbers without context. If you hold minority interests in LLCs or partnerships, include details such as ownership percentage, distribution history, and liquidity timelines. Supplemental schedules or footnotes can provide clarity and prevent misinterpretation.
A PFS reflects how you manage your business and investments. Accuracy, transparency, and simplicity make the process easier for lenders and strengthen your position as a reliable partner. Working with a CPA who understands real estate structures helps your PFS meet professional standards — but remember, the responsibility for the content rests with the owner.
How CLA can help with personal financial statements
CLA combines deep commercial real estate experience with a clear understanding of lender expectations to support you in preparing your PFS. We collaborate with lenders as needed, add explanatory footnotes for complex assets, and advise on valuation methods that reflect current market realities.