Business loan applications can be daunting, but having the correct supporting documents ready will make it much smoother. Here are the key documents you should prepare when applying for a business loan:
Financial Statements
One of the most important documents needed for business loan applications is your company’s current and historical financial statements. This includes:
- Balance sheet—This shows assets, liabilities, and equity at a specific point in time. Include balance sheets for the past 3 years.
- Income statement—This shows revenue, expenses, and profit/loss over a period of time. Include income statements for the past 3 years.
- Cash flow statement—This shows cash inflows and outflows over a period of time. Include cash flow statements for the past three years.
Having audited or reviewed statements is ideal, but many lenders will accept compiled or self-prepared financials for small businesses. Ensure the statements are current – within 90 days of submitting the loan application.
Business Plan
A comprehensive business plan is essential for business loan applications. This overview of your company should include:
- Executive summary – Brief overview of business goals and financial needs
- Company description – Details about products/services, target market, and competitive advantage
- Marketing strategy – Plans for pricing, promotion, distribution
- Operations plan – Business facilities, equipment, personnel
- Management team – Background on owners/key employees
- Financial projections – Detailed revenue and expense forecasts
- Loan request – Exact amount and purpose of financing needed
Having a well-written and thorough business plan shows lenders you have a solid strategy and vision for growth.
Personal Financial Statements
For small business loans, lenders will also want to see the personal finances of the business owner(s). This includes:
- Personal balance sheet – Assets, liabilities, and net worth
- Personal income statement – Total income, expenses, and taxes
- Bank/investment statements – Documentation of assets
- Tax returns – Minimum 2 years of personal and business returns
- Resume – Work history and education
- Identification – Copy of driver’s license/passport
By evaluating your personal finances, the lender determines your ability to personally guarantee the loan if your cash flow is insufficient to repay it.
Supporting Documents
In addition to the financial statements, business plan, and personal documents, here are some other items lenders may request:
- Lease agreements – If financing real estate or equipment
- Purchase agreements – Details on precisely what the loan will buy
- Certificates/licenses – Anything required legally to operate the business
- Insurance policies – General liability, workers’ comp, etc.
- Contracts – Service agreements, vendor accounts, etc.
- Articles of incorporation – Formal business registration documents
- Bylaws/operating agreement – Rules governing the business
- Bank statements – Minimum 3 months of statements from operating accounts
- Debt schedules – Other business loans and terms
- Collateral documentation – Titles, liens, etc.
- Appraisals – If real estate or equipment is offered as collateral
Having all applicable supporting documents ready to submit with the business loan applications will speed up the loan review process. Work closely with your loan officer to determine precisely what is required, and make sure to use certified mail labels for mailing.
Being organized and thorough on the front end will lead to faster decisions and better funding for your business loan.
Image Credit: Photo by Scott Graham; Unsplash
