If you’re trying to prove your business has the funds it needs, maybe for a loan, a real estate purchase, or an investment, you’ve likely come across two common options: a CPA letter or a bank statement. But which one is better for business funds verification?
When it comes to proving your business has the funds it needs, things can get a little confusing. Should you provide a CPA letter or just hand over a bank statement? What’s the difference and which one carries more weight with lenders or underwriters?
In this guide, we’ll break down the key differences between a CPA letter and a bank statement, when each one is used, and which is better for different situations. Let’s clear up the confusion so you can move forward with confidence.
What Is a CPA Letter?
A CPA letter is a document written and signed by a Certified Public Accountant. It confirms financial facts about your business like whether you have enough funds, whether the funds are from business revenue (not borrowed), and sometimes even how the funds will be used.
What makes it powerful? A licensed professional verifies it. That gives lenders or underwriters confidence that the information has been reviewed and isn’t just self-reported.
What Is a Bank Statement?
A bank statement, on the other hand, is a snapshot of your actual bank activity over a specific period. It shows deposits, withdrawals, and your current balance. It’s straightforward, factual, and easy to get.
Lenders often use bank statements to verify that funds are available quickly. But there’s a catch: they don’t always tell the full story.
Which Is Better?
Let’s look at a few key differences to help you decide:
1. Verification Level
- CPA Letter: Offers professional verification from a CPA who has reviewed your financials.
- Bank Statement: Shows real-time data, but no third-party verification or context.
2. Use of Funds
- CPA Letter: This can specify that funds are available and intended for a specific purpose.
- Bank Statement: Can’t explain what the funds are for or whether they’re committed elsewhere.
3. Flexibility
- A CPA letter can be tailored to exactly what the lender needs to know.
- A bank statement is what it is; you can’t edit or customize it.
When to Use a CPA Letter
You’ll likely need a CPA letter if:
- You’re using business funds for a real estate purchase
- A lender or escrow officer wants to confirm that funds aren’t borrowed
- You need a professional statement to explain how the funds are sourced
When a Bank Statement Might Be Enough
On the flip side, a bank statement could work if:
- You’re in the early stages of an application
- The party requesting verification just needs to see available cash
- There’s no concern about where the funds came from or how they’ll be used.
Can You Use Both?
Absolutely. In fact, many lenders ask for both a bank statement to confirm the current balance, and a CPA letter to verify the source and proper use of the funds.
It’s like showing both the facts and the expert confirmation of a one-two punch that makes your case stronger.
FAQ
1. Why would someone ask for a CPA letter instead of a bank statement?
A CPA letter provides professional verification that funds are available and not borrowed. Lenders or underwriters often require this extra assurance that a certified expert has reviewed the financials and confirmed the legitimacy of the funds.
2. Is a CPA letter more trustworthy than a bank statement?
Not necessarily more trustworthy, but it carries a higher level of credibility. A bank statement simply shows balances, while a CPA letter adds context and verification, especially when it comes to the source and intended use of the funds.
3. Can I just use a bank statement to verify business funds?
In some cases, yes. If the request is casual or for internal purposes, a bank statement might be enough. But if you’re dealing with a formal loan, investment, or escrow situation, you’ll likely need a CPA letter as well.
Conclusion
When it comes to a CPA Letter vs. a Bank Statement, it’s not always about choosing one over the other. It’s about understanding what the person reviewing your financials needs. If they want quick proof of cash, a bank statement might be enough. But if they need professional verification and context, a CPA letter is the way to go.
Still unsure which to use? Talk to a CPA they’ll know exactly what your situation calls for and can help you prepare the right documentation to keep your deal moving forward.
