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New forms introduced for small business loans.

CPAs with small business companies and clients seeking bank loans may find it easier to meet lenders' information requirements.

In the past, most banks required financial statements conforming to generally accepted accounting principles to evaluate loan applications. However, many small businesses considered GAAP statements too costly to produce. A Business Credit Information Package (BCIP) currently can be submitted to bank loan officers instead.

The set of forms, developed by a joint task force of the American Institute of CPAs private companies practice section technical issues committee and Robert Morris Associates' (RMA's) accounting policy committee, helps bankers gather the financial and accounting information needed to evaluate loan requests in a cost-effective manner.

Judith H. O'Dell, a partner of Beucler, Kelly & Irwin, Ltd., Wayne, Pennsylvania, called the BCIP "a viable alternative to the full disclosure requirements of GAAP." She added, "With BCIP, bankers receive enough financial information to allow realistic analysis, and small business borrowers can satisfy their bankers' needs at a reasonable cost."

The BCIP can be requested in writing by banks for companies that previously would have submitted tax returns or compilations to support loan requests. Its five forms include

1. A request letter, which documents the banker's request for financial statements compiled in the BCIP format.

2. A business borrower questionnaire, which asks questions about the prospective borrower's accounting practices and gathers other information needed to evaluate a loan.

3. A reporting and disclosure checklist, which lists the various types of financial statements that must be included and the disclosures that must accompany the statements.

4. A form for the preparation of financial statements, formats for financial statements and footnote disclosures.

5. An accountant's report, which establishes the BCIP as an acceptable presentation format and says the bank has agreed to accept it.

Use of the BCIP is not mandatory. Some banks still may require full disclosure. Therefore, CPAs should advise small business companies and clients seeking loans to shop around to find a bank willing to accept the new package.

Copies of the BCIP are available in packs of 10 at a cost of $13 each from the RMA customer service department, One Liberty Place, Suite 2300, 1650 Market Street, Philadelphia, Pennsylvania 19103. Telephone: (215) 851-0585.
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Publication:Journal of Accountancy
Article Type:Brief Article
Date:Dec 1, 1993
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