23/4/2025
23/4/2025
Income statement and balance sheet: key documents for obtaining financing
The income statement and balance sheet are the two fundamental documents that reflect your company's financial structure. Analyzing these documents is important, especially when you're looking for a loan. How do you understand these financial statements, and what are the key elements to master in order to optimize your chances of obtaining financing?
The complementary nature of the income statement and balance sheet
A dynamic and static vision
The income statement and balance sheet are closely linked, providing a complete picture of your company's financial resources and situation. The former measures cash flow over a given period, while the latter provides a snapshot at a given moment of your financial equilibrium. This complementarity is essential for building a solid financing case.
The operating cycle analogy
A company needs to manage its operating cycle efficiently to maintain good financial health. The income statement represents the business in motion, with its cash inflows and outflows, while the balance sheet captures the situation of current assets and permanent capital at a given date.
The income statement: the film of your business
Performance over time
The income statement tells the story of your business and its liquidity over a given period, usually one year. It highlights your ability to generate cash and manage your supplier debts. An in-depth analysis of this document is crucial to choosing the right financing for your business.
Impact on financing decisions
ℹ️ For an e-commerce company, for example, the income statement shows the impact of payment deadlines on the company's cash flow. One company was able to demonstrate that, despite seasonal variations, its volume ofwork-in-progress offset financing requirements, justifying the need toborrow to build up inventory.
Key indicators to track
The performance ratio, which reveals your ability to generate cash in relation to your investments. A stable or growing ratio is a positive signal for financiers.
Depreciation and provisions, which impact yourcash flow and the value of your fixed assets.
Net income, which represents your final performance after all expenses anddebt.
The balance sheet: a snapshot of your financial situation
Structure and composition
The balance sheet provides a snapshot of your permanent capital and accounts receivable. It is made up of assets (what the company owns) and liabilities (how these assets are financed).
Analysis case study
ℹ️ Let's take the example of a technology start-up that had developed a solid business plan. Its balance sheet showed a good balance between working capital and working capital requirements, with optimized management of payment terms anddiscounting.
Key balance sheet items
Working capital requirement (WCR), which represents the time lag between cash receipts and disbursements linked to your business. Good working capital management is essential to maintaining a healthy cash flow.
Shareholders' equity, which reflects your company's financial strength and ability to absorb losses.
Net cash, which reveals your ability to meet short-term commitments. How do you plan your cash flow?
How these documents affect the chances of obtaining financing
Evaluation criteria for funders
Financiers meticulously analyze these documents to assess your company's financial health and ability to repay a loan. This analysis is crucial to accessing the best short-term financing solutions for your situation.
A success story
ℹ️ A distribution company recently applied for financing to expand its business. Despite a slightly negative net result, its income statement showed a steady increase in sales and improved margins. Combined with a solid balance sheet and controlled WCR, this profile made it possible to obtain the necessary financing.
The Karmen solution: a modern approach to financing
At Karmen, we've launched an innovative approach to short-term financing that takes into account the operational reality of businesses. Our Karmen Loan solution offers flexible loans from €30K to €5M with terms from 1 to 24 months.
Our solutions are ideally suited to financing :
- Stock requirements
- WCR
- Marketing investments
- Operational growth
Our analysis is not limited to accounting documents alone. We take into account the dynamics of your business and your growth prospects, to offer you a financing solution tailored to your needs.
Practical tips for optimizing your financial documents
Rigorous accounting
Keep your accounts up to date and accurate. Delays or approximations can create doubts among funders.
Financial projections
Prepare realistic, well-documented forecasts. A well-constructed forecast strengthens the credibility of your financing application.
Indicator tracking
Regularly monitor your key ratios. Daily cash management is essential.
Income statements and balance sheets are more than just accounting documents. They are strategic tools which, if properly understood and presented, can open the door to financing tailored to your needs.
