Why some loans cost more than expected

One thing I see business owners underestimate all the time when taking on debt is the financial reporting requirements that come with it.

Depending on the size of the loan and how the lender views risk, you may be required to provide:

Internally prepared financial statements
Reviewed financials from an outside accounting firm
Or a full annual audit

What often surprises people is that these requirements are not one-time asks. They remain in place for the life of the loan and become part of how the business operates going forward.

Over time, that can mean:

Ongoing costs that add up year after year
Additional internal workload to meet tighter reporting timelines
Less flexibility when the business needs to adjust or respond to change

Some level of reporting is unavoidable, but the amount and type of reporting required is often negotiable, especially early in the process before terms are finalized.

This is where having a Fractional CFO involved makes a real difference. A CFO helps you understand what the lender is actually asking for, evaluate whether those requirements make sense for the size and complexity of your business, and push back where there is room to simplify. Just as importantly, they help you see how these terms will affect cash flow, operations, and decision-making over time.

Lenders aren’t trying to create problems; they’re managing risk. But when reporting requirements aren’t properly aligned, they can quietly become an ongoing drain on the business.

Next week, I’ll shift to a related topic: what private equity firms look for when evaluating family-owned businesses.

Talk soon,
Lowell

P.S. Loan agreements don’t just affect financing — they shape how you run your business for years.

Why some loans cost more than expected

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