Finance term
Personal Financial Statement (PFS)
Also known as: SBA Form 413, personal net worth statement, PFS
Definition
A Personal Financial Statement (PFS) is a standardized document — SBA Form 413 — listing all personal assets, liabilities, and income; required for SBA loans and most bank commercial loans when a personal guarantee is involved.
Detailed explanation
The Personal Financial Statement is the lender's tool for evaluating the net worth and financial position of the principals behind a business loan — especially when those principals are providing personal guarantees. SBA Form 413 is the most commonly used standardized format; many banks have their own versions with similar information.
PFS components: Section I (Assets) — cash, savings, retirement accounts, real estate (market value), stocks/bonds, other assets; Section II (Liabilities) — mortgages, auto loans, student loans, credit card balances, other debts; Section III (Income) — salary, business income, rental income, other; Section IV (Contingent Liabilities) — co-signed debt, pending lawsuits, guarantees given on others' debt.
For SBA 7(a) and 504 loans, all 20%+ owners are required to provide a PFS and personal guarantee. Lenders review the PFS to assess: (1) net worth (total assets minus total liabilities) as evidence of financial stability; (2) liquidity (cash + near-cash) for post-closing reserves; (3) contingent liabilities that might affect repayment; (4) real estate equity available as additional collateral.
◈ Worked example
- Business owner PFS: Home value $450,000 / mortgage $280,000 = $170,000 equity; Retirement accounts $95,000; Savings $35,000; Vehicle $28,000 / auto loan $18,000. Total assets $608,000, total liabilities $298,000 = net worth $310,000.
- Contingent liability example: Owner co-signed $75,000 loan for a relative. Even if not in default, this appears as a contingent liability on the PFS and may reduce the lender's assessment of the guarantor's capacity.
- SBA Form 413 is publicly available at sba.gov. It must be signed under penalty of law — materially false statements are federal crimes.
Common questions
The most-asked questions about Personal Financial Statement (PFS) — answered straightforwardly.
Who must provide a Personal Financial Statement for an SBA loan? +
All owners with 20% or greater ownership interest in the business. If the total of 20%+ owners is less than 51%, the lender may also require a PFS from the owner or key person with the most management responsibility. Co-borrowers, guarantors, and spouses (in community property states) may also be required.
Do I need to include retirement accounts on my PFS? +
Yes. IRA, 401(k), and pension account values are listed as assets on a PFS. However, because these assets have withdrawal penalties and tax implications, most lenders discount them 20-30% from face value for collateral purposes — they are counted but weighted less than liquid assets.
What net worth is typically required for an SBA loan? +
There is no fixed minimum net worth requirement for most SBA programs, but lenders look for positive net worth and evidence of financial stability. Negative personal net worth (liabilities exceed assets) is a significant negative signal — it suggests the guarantor's guarantee has limited recovery value.
Further reading
This glossary entry is educational content. ClearValue Lending is a business & personal financing platform — not a lender, broker, or financial advisor. Specific product terms vary by lender; verify with the lender or issuer before applying. See privacy policy.
https://clearvaluelending.com/glossary/personal-financial-statement