Which financial document might a contractor reference when applying for a loan?

A contractor applying for a loan would typically reference a tax return as it provides a comprehensive overview of their income, expenses, and overall financial health. Lenders often require tax returns as part of the documentation to assess the contractor's financial stability, tax obligations, and whether they have a consistent income. This information helps lenders evaluate the borrower's ability to repay the loan and understand their financial history.

While both profit and loss statements and cash flow statements are important financial documents, they serve different purposes. Profit and loss statements reflect the contractor's income and expenses over a specific period, offering insights into profitability but not necessarily the full financial picture available from tax returns. Similarly, while a cash flow statement provides details on incoming and outgoing cash, tax returns encapsulate a more extensive history, including taxes paid, which can impact a lender's decision-making process. The loan agreement, on the other hand, is a document that comes into play after a loan approval is granted and would not typically be referenced during the application phase.