Landlord request for audited financial statements from new business?

I have a new company/business that will lease a retail space. The landlord has asked for audited financial statements which I obviously don't have yet. What do I provide to the landlord?
In Leasing Property - Asked by Ruben B. - May 1, 2010
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Brad L. K.
Columbus, OH

You should be able to provide them financial statements that are certified to be accurate by you and not audited. If you have an accountant that does your tax returns they may also be able to certify that they are accurate, if necessary. The landlord may also ask for tax returns which will also help validate the accuracy of your financial statements. Since you are a new business, many landlord's will ask you to personally guarantee the lease in which case they will also ask for your personal financial statements and tax returns. If they ask for this personal guarantee you may try to limit this guarantee to a portion of the lease or to the landlord's out of pocket costs. A good commercial real estate agent can help you negotiate such liability limitations.
Bradford L. Kitchen, SIOR
Alterra Real Estate Advisors

May 1, 2010
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Ann L.
La Quinta, CA

Your landlord may ask for a personal guarantee and a copy of a current credit report. If your credit score is medium to low, the lease term may be reduced to 1 year to protect the landlord, and to give you time to build up good credit with him. He may also offer you "Options to Extend" if you build up good credit with him.
Note: If your rent is due on the 1st late on the 5th or a few days early, pay it on the 1st - not on the last day. This in it's self gives you credibility with your landlord and will make it easy to exercise your options.

May 2, 2010
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Lou A.
Corporate Investor
Northlake, IL

You can present your unaudited financial statements if you use accounting software like Quickbooks , etc. Or a prior year tax return. Depending on which form you file, the information would be on schedule M on the 1120 form. The landlord is basically extending you credit in the form of possession of a property and wants to make sure you have enough income to pay the rent, etc. - when we look at applications we typically take the credit score and pay stubs (for smaller properties) from the person. We require about 3 times the rent in income or more and a number of years you have been in business. 95% of all businesses fail in the first 5 years, so we want to reduce that risk as much as possible by making sure you personally can continue paying the rent if your business becomes unsuccessful.

May 2, 2010
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Joel O.
Canton, GA

The landlord is probably just determining how strong of a tenant they have before giving you lease options. Also if you are wanting TI and build out expenses and are a weak tenant it might be better to leave the space empty and wait for another tenant to come along.
Just give them what you have an ultimately it is their choice. If they feel if they can wait and can a national tenant in there with a guarantee then they won't want a mom and pop startup.
There are so many variables it just depends.

May 3, 2010
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James S.
Port Saint Lucie, FL

A large security deposit equal to three months rent should induce any landlord. Or use it as prepaid rent for future months 3rd month ,6th month etc..

May 3, 2010
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