Is It Time for a Business Financial Review? Here’s What You Need to Know

Whether you run an LLC, S-corporation, C-corporation, partnership, or nonprofit, your stakeholders must trust the numbers you present. A business financial review performed under SSARS by an independent CPA gives you limited assurance—more credibility than internally prepared or compiled statements, yet faster and more economical than a full audit.

Below are the six most common situations that make a business financial review the smart middle-ground.

1. Welcoming New Equity or Debt Investors

When you admit a new member, shareholder, or limited partner—or issue preferred shares—investors need confidence that reported earnings and balance-sheet values are sound. Reviewed statements:

• Give you an independent baseline that valuation experts can trust, allowing fair buy-in pricing and earn-out formulas to be set quickly and transparently.
• Surface undisclosed liabilities—from contingent lawsuits to off-balance-sheet debt—before term-sheet negotiations escalate or derail the deal.

2. Applying for Bank or SBA-Backed Financing

Most community and regional lenders now require a business financial review (rather than a compilation) once credit facilities exceed the low-six-figure range, particularly for:

• Working-capital lines of credit where lenders rely on reviewed cash-conversion metrics to size revolving limits.
• SBA 7(a) or 504 loans when the bank’s credit policy references CPA-reviewed statements—even though the SBA itself has no blanket mandate.
• Equipment or real-estate term notes when collateral coverage is tight and management must prove debt-service capacity.

By lowering perceived risk, a review often earns you tighter spreads, higher borrowing limits, or both.

3. Meeting Industry or Licensing Requirements

Certain states and regulators stipulate a CPA review or audit to keep licenses or bonding in force. If your business falls into one of these categories, plan for a business financial review every year:

• Construction contractors raising bid limits or surety capacity—sureties view reviewed statements as the minimum for larger bonds.
• Health-care entities filing annual reports with state DMHC or insurance departments that mandate independent assurance.
• Regulated cannabis operators in jurisdictions requiring attested financials to verify cost-of-goods-sold and cash-handling controls.

Always confirm the exact rule with your state board, regulator, or bonding underwriter.

4. Navigating Mergers, Conversions, or Business Sales

If you plan to convert from an LLC to a corporation, merge with a strategic buyer, or launch an ESOP, a business financial review:

• Provides a reliable valuation foundation, helping appraisers normalize earnings and benchmark multiples.
• Gives acquirers early-stage confidence without forcing a full audit, keeping diligence costs reasonable while talks progress.

5. Handling Owner Disputes & Buy-Sell Triggers

Operating agreements often require a neutral set of books when an owner departs or passes away. Reviewed statements:

• Deliver a single, objective version of financials everyone can accept, cutting down on finger-pointing and litigation.
• Clarify earnings trends and normalizing adjustments so arbitrators and appraisers can reach conclusions swiftly.

6. Strengthening Governance & Internal Controls

Even without outside pressure, many businesses order a business financial review every two or three years to:

• Check revenue recognition, expense classification, and key ratios—alerting you to misstatements before they balloon into fraud, penalties, or covenant breaches.
• Receive actionable CPA recommendations on segregation of duties, documentation, and oversight long before an auditor or regulator comes knocking.

Compilation vs. Business Financial Review vs. Audit

Conclusion 

A business financial review is more than compliance—it’s a strategic asset that boosts credibility, unlocks capital, and protects owner interests across every entity type. If you are courting investors, refinancing debt, or facing licensing thresholds, a review may be the most cost-effective assurance tool on the table.

Contact G&S Accountancy Inc. at (909) 217-7855 or info@gns-cpas.com. Our CPAs deliver timely, independent reviews that keep deals moving and stakeholders confident.

Frequently Asked Questions

Can my tax CPA perform the business financial review?

Yes—provided independence isn’t impaired. If the CPA makes managerial decisions (e.g., bookkeeping), you need a separate firm to perform the review.

How long will a business financial review take?

For a $5 million–$15 million revenue entity, fieldwork typically wraps up in 2–4 weeks once your documentation is ready.

Is the review fee worth it compared with a compilation?

For companies chasing outside capital or state licensing, the incremental cost is usually offset by lower borrowing spreads, smoother deals, and reduced diligence headaches.