If you have small business dreams, applying for small business loans is often a necessary step towards making those dreams a reality. Afterall, you need funding to purchase that equipment, hire workers, buy materials or get the perfect business space.
Different lenders will have different requirements. Some financial institutions will ask for the bare minimum and only want to see credit history information, bank statements, business licenses and a driver’s license. Other organizations, such as the Small Business Administration, will have a laundry list of requirements and things that you will need to present to them. To help you out, we’ve gathered together a list of the common things that you will probably need to have on hand when applying for small business loans.
Income Tax Returns
A majority of lenders will want to see both personal and business income taxes. You should gather your returns from the past 3 to 5 years. The income tax returns will show a financial history that provides a personal guarantee that you have a personal net worth to pay back the loan.
Personal and Business Credit Reports
Normally you won’t have to bring your personal credit report with you. The lender will obtain your permission to pull your credit report themselves. However, you should bring along your business credit reports. Prior to applying for small business loans, it’s always a good idea to pull both and check for inaccuracies so you can address any problems before shopping for a lender.
Your bank statements can show the lender the stability of your business as well as your ability to pay back the loan. In most cases, you will need to include both personal and business bank statements.
Business Property Leases
If the reason for your loan includes physical expansion or a move, you will need to have your business property lease on hand to show the lender. You can also include photographs of the location. If the building has yet to be constructed, blueprints may also be provided.
Some financial lenders will ask for collateral to lower their risks when offering you a business loan. A collateral document can show the assets you are putting towards the loan — such as personal property, business property, or inventory– as well as the values attributed with any and all items that are being furnished as collateral.
Financial statements can consist of accounts receivable, accounts payable, balance sheets, cash-flow statements, and profit and loss statements. These statements will be used to compare your business to other companies on the market to develop benchmarks and see if your company performs at or above market norms.
Your business must be legit before lenders fork over the cash. They may want to see business contracts with partners, vendors and third-parties. The lender may also ask for articles of corporation, business licenses, registrations, and franchise agreements.
You may have a start-up business with little financial history to review. If so, analyze your market niche, customer demand trends and competitor details and create projections that clearly and accurately assess future financial profits.
Although a business plan isn’t always a requirement, some lenders may ask for one to get more information about your business, top-tier management, company budget and other financial information.
Market Segment Documents
Understanding your company’s market niche and target customers can provide lenders with more information about your products and services. This information can enable them to have a more informed understanding of your branding strategies and market placement.
Applying for Small Business Loans: Consider a Pro
Having a CPA/Bookkeeper or CFO is a good practice in general and especially when you’re applying for small business loans. When you find you need more capital, having a professional in your corner who understands your goals and makes sure your financials are positioned properly to support GAP funding or other financing needs can make a substantial difference.
As they say, success is where preparation and opportunity meet, so prepare wisely and set yourself up to win!
What You Need to Know About Applying for a Small Business Loan (read)
Unsecured Small Business Loans Explained(read)