Personal Financial Statement: What Every Business Buyer and Seller Needs to Know
Whether you're ready to buy a business or looking to sell the company you've built, one document can make or break your deal: the personal financial statement. For small business buyers, it's your ticket to being taken seriously by sellers and brokers. For sellers, it's the fastest way to separate serious buyers from those just kicking tires.
In this article, you'll learn how buyers use a PFS to position themselves competitively in today's market, how sellers rely on it to identify qualified prospects quickly, and how lenders view it as a benchmark for funding decisions.
What Is a Personal Financial Statement?
A PFS is a snapshot of your financial health at a specific moment in time. It shows:
- Assets—what you own (e.g., cash, investments, real estate)
- Liabilities—what you owe (e.g., loans, credit card debt)
- Net worth—the difference between assets and liabilities
For small business entrepreneurs, it's used to evaluate financial strength for purposes like:
- Applying for a business acquisition loan
- Proving you're a serious buyer to sellers and brokers
- Showing financial capacity during negotiations
The key difference between personal and business financial statements lies in focus:
- Personal statements reflect your individual or household finances, what matters most when you're personally guaranteeing a business loan
- Business statements show a company's revenue, expenses, and operational health
Most personal financial statements follow a standard format:
- A balance sheet with itemized assets and liabilities
- A net worth summary
- Optional additions like income, expenditures, and notes for context
This structured overview helps lenders, sellers, and advisors quickly assess whether you can handle a business acquisition and the responsibilities that come with it.
For Business Buyers: Demonstrating Intent
In today's competitive small business market, it's not uncommon for sellers to receive multiple offers. A well-prepared personal financial statement is what separates serious buyers from browsers. When you present clear proof of liquidity, manageable debt, and sufficient net worth, you immediately build credibility with both sellers and their brokers.
Sellers want to know if you can:
- Fund the deal without scrambling for last-minute financing
- Handle ongoing operating costs during the transition period
- Survive unexpected downturns in your first year of ownership
They typically look for buyers who demonstrate:
- Liquid assets sufficient to cover the down payment and initial working capital
- Low personal debt that won't compete with business loan payments
- A track record of financial discipline that suggests you can manage business finances
During deal negotiations, your PFS influences everything from seller financing options to closing timelines. A strong financial profile gives you leverage to negotiate better terms, like reduced upfront payments or flexible payment structures. More importantly, it helps you avoid the frustration of having offers rejected simply because sellers doubt your ability to close.
For Business Sellers: Qualifying Buyers
If you're selling your business, requesting a personal financial statement early in the process filters out casual interest and sets a serious tone. It allows you to verify whether the potential buyer has enough liquidity—such as in checking accounts, retirement accounts, or savings accounts—to realistically complete the sale. If they hesitate or delay sharing it, that's often a red flag worth noting.
Serious buyers typically show:
- A healthy balance between total assets and total liabilities
- A consistent income stream that can support business loan payments
- Minimal contingent liabilities and manageable monthly payments
- No unpaid taxes, child support, or excessive personal property debt
A PFS also helps you assess whether the buyer can secure financing. This insight is important because many small business sales fall through due to financing issues that could have been identified early.
If their notes payable are manageable and investment income consistent, they are more likely to meet business loan requirements. That foresight saves you time and helps you avoid stalled deals due to lender rejections months down the road.
Too many business owners waste months with tire-kickers who have little intention or lack the ability to close. Reviewing PFS details like bank accounts, interest rate exposure, or even alimony obligations lets you focus your energy on qualified buyers who can actually complete the transaction.
Financing and Business Loans
Lenders ask for a personal financial statement to assess the borrower's ability to repay, especially for small business loans with personal guarantees—which many business acquisition loans require. A strong financial profile can lead to better interest rates and higher approval odds, making your business purchase more affordable.
The eligibility requirements for an SBA business acquisition loan include a standardized PFS. Form 413 asks for information like retirement accounts, notes payable, and unpaid taxes to evaluate risk. Your financial health directly affects loan terms: the stronger your PFS, the more flexible the repayment structure and interest rate you'll receive.
Creating and Maintaining Your Personal Financial Statement
Start with a reliable template—many banks and SBA lenders provide standardized forms. Then, enter accurate figures for your personal finances, including income sources, expenditures, and other liabilities. Include all major assets like real estate, business interests, and investment accounts.
Use realistic methods to determine asset values:
- Rely on current market value or certified appraisals, not optimistic estimates
- For investments, use recent account statements
- For real estate, reference comps or third-party appraisals
Review and update your statement at least twice a year or before any major transaction. Adjust for any significant changes like new loans, asset purchases, or changes in income. Then, track how your net worth evolves.
How to Strengthen Your Personal Financial Position
Here's how to improve your personal financial statement and present a stronger financial profile for business transactions:
- Reduce debt. Focus on restructuring high-interest debt through balance transfers or consolidating loans at lower rates, especially if your current interest rate profile is above market average. Negotiate revised terms with lenders when possible, to improve cash flow and reduce long-term liabilities.
- Build liquid assets. Set target liquidity ratios (e.g., 20–30% of total assets in liquid form) and track them quarterly. Move excess funds from non-performing accounts into high-yield savings or money market accounts to grow cash reserves, while keeping them accessible for business opportunities.
- Diversify investments. Spread assets across mutual funds, IRAs, and other low-to-moderate risk vehicles. Diversification reduces exposure to volatility and stabilizes your total assets over time—important when lenders evaluate your financial stability.
- Optimize your credit score. Reduce credit exposure by requesting higher credit limits without increasing usage. This improves your utilization ratio without added risk. Freeze dormant credit lines that affect your score calculation or carry legacy terms.
Ready to Make Your Move?
Buying or selling a business is one of the biggest financial decisions you'll ever make. Having a solid personal financial statement isn't just about checking boxes—it's about positioning yourself for success and avoiding the costly mistakes that can derail deals.
If you're dealing with complex financial situations or want to make sure your PFS tells the strongest possible story, consider working with an accountant or financial advisor who understands small business transactions. They can help you present your finances in the best light and spot potential issues before they become problems.
Ready to find your next opportunity or connect with serious buyers? Explore BizBuySell's Business Broker Directory to work with experienced brokers who understand what it takes to get deals done in today's market.