Capital Resources, like most other lenders, requires each applicant to complete and submit a current personal financial statement for each insurance agency or financial advisory loan application request. This is one of the means used to determine the general financial health of a current or prospective insurance agency or financial advisory loan customer.
A personal financial statement is comprised of two main components: Assets and liabilities. Current assets might include current cash held in accounts, retirement account balances, real estate, stocks, bonds, and even long-term note receivables. Personal assets such as art, furniture, fixtures, firearms, etc. may have real value, but most lenders do not look at these items as real assets that increase an individual’s real net worth.
The liabilities component of the personal financial statement summarizes any monies owed by the individual to any other people or entities. Liabilities might include credit card balances, mortgages, insurance agency or financial advisory seller note payables, or other insurance agency, financial advisory, or other business-related loans. Other liabilities might include unpaid bills, such as unpaid taxes, utilities, and even unpaid legal settlements.
Once all assets and liabilities have been compiled, the total number of liabilities are subtracted from the total value of assets. The resulting product is the individual’s net worth. A positive net worth means your assets are worth more than the sum of all the amounts you owe. A negative net worth means your assets are worth less than what you owe. The more positive the net worth, the stronger of a loan candidate you become in the eyes of most insurance agency and financial advisory lenders.
Personal financial statements are also used to disclose to lenders, or other interested parties, any items from the individual’s past that might explain their current financial position. Examples of these might be a previous bankruptcy, any previous or current legal settlements or ongoing litigation.