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Do you struggle to collect financial statements from commercial borrowers?

Oct 11, 2023
By: Tyler Stevenson
Financial Services

Lenders across the country have a common complaint: It’s hard to obtain financial information from commercial borrowers and guarantors.

As a holdover from the COVID-19 pandemic (and the resulting delays in financial statement preparation and mass extensions of tax returns), delayed receipt of financial information has become the norm instead of an exception. That’s made it challenging to collect financial statements, tax returns, rent rolls and other key documents from clients.

Follow these four tips to collect timely and thorough financial information from commercial loan clients of every size:

1. Set clear expectations

Many financial institutions use boilerplate language requiring annual reporting that may not apply to the loan at hand. That means the borrower may ignore the language — and other requirements.

Instead, make expectations explicit and require borrowers to acknowledge them at origination.

Include detailed financial reporting requirements in your loan agreements and discuss the requirements with borrowers at signing. Some institutions designate space on their loan documents for the borrower/guarantor to initial each reporting requirement. You could also create a standalone agreement to provide financial statements in the event this language is not included in a loan agreement. This could be as simple as a one-page document listing the financial reporting requirements that is signed by the borrower.

2. Implement strong tracking systems

Document collection is recurring, so financial institutions need strong systems in place to monitor and follow up with borrowers.

Financial institutions can use reporting software or manually update Excel spreadsheets to track documentation. A strong system doesn’t have to be sophisticated. Get a system or process in place and be disciplined about keeping it up to date.

Ideally, your system will identify individual items that are required from each borrower/guarantor along with filing and exception dates.

3. Issue formal reminders

Send formal reminders before the due date. It could be an automated reminder or a good old-fashioned letter. In the age of emails and texts, phone calls are also very effective. A phone call is also a chance for relationship managers to have other discussions with their borrowers.

4. Be consistent

All your processes — borrower acknowledgements, deadlines, reminders, document collection — should be consistent across your loan portfolio. If you establish clear expectations, disciplined tracking systems and consistent communications and processes, then document collection will be less painful. What’s more, it can become an opportunity to strengthen your relationship with borrowers. These strategies can also help you identify potential credit issues earlier.

Collecting borrower financial statements requires institutional discipline. But the benefits are worth the effort.

How Wipfli can help

We want you to serve accountholders and stay compliant without headaches or hassle. We can help you find the right people, processes and digital strategies to make the business of banking easier to manage — and more profitable and effective. Contact us today to learn more.

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Tyler Stevenson, JD
Senior Consultant
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