Proof of Funds is a document that demonstrates how much money a person or entity has available. When purchasing some type of business (i.e. banking, manufacturing, pharma, etc) , a potential Buyer may need a POF to show the Seller that he/she/it can cover the purchase costs.
There are several types of funds that qualify as POFs:
- Proof of Funds usually comes in the form of a bank, security or custody statement, and can be procured from a bank or financial institution that holds the funds.
- In some transactions, simply having a bank statement from a bank or printed online can qualify as long as the bank can confirm the authenticity.
- Additionally, a certified financial statement or copy of a money market account balance will qualify, as long as the institution issuing the document can confirm the authenticity.
- Other times, a letter from a public notary confirming the funds availability could be the best option (this option is valid only in the 27 countries of the European Union)
It’s important to note that the funds must be liquid. This means that mutual funds, life insurance, another person’s bank account, shares and bonds or proof of other possessions do not qualify as POFs.
Items that must be included in a Proof of Funds Letter include:
- Bank’s name and address
- Official bank statement
- Copy of money market statement and balance
- Balance of funds in checking and savings accounts
- Bank certified financial statement
- Copy of an online banking statement
- Signature of an authorized bank employee
All those documents are considered as strictly confidential information.
In order to be accepted, the authenticity of a POF has to be confirmed by the issuing institution (Bank).