Properly Reflecting Business Loans on Your Company’s Financial Statements

The business loan process can be lengthy and cumbersome, but there is work to do even after you receive your money. When you receive a loan, you must properly reflect it on your company's financial

statements. Doing this the right way can keep you on the IRS's good side, as well as improve your chances of getting loans in the future. For a detailed overview of this topic, read the Step-by-Step Guide to Getting a Business Loan.

Your financial statements will include your current liabilities. Typically, "current liabilities" are considered ones that must be paid within 12 months of the date of your financial statement. These are the liabilities that can really hurt your company if you can't pay them. Next you will list accounts payable, which are obligations due to suppliers or vendors that have provided inventory or goods and services used in your business.

You'll also need to show the portion of your long-term debt that's due within the next 12 months. You can determine this by multiplying your long-term loan's monthly payments by 12, to determine the annual liability, including fees and interest.

Lastly, you will list the noncurrent portion of your long-term debts. You will list only the principal amount; interest due is noted as an accrual. The noncurrent portion of long-term debt is the portion of a term loan that is not due within the next 12 months. It is listed below the current liability section to demonstrate that the loan does not have to be fully liquidated in the coming year.

Properly reflecting your financial obligations is important, as it can show good use of credit, which can help to secure short-term credit for inventory and receivables.