What to Include When Applying for a Small Business Loan
Whether you’ve decided to start your own business or are in a cash-strapped position with your current venture, you’ve decided to apply for a small business loan. You know that the requirements for small business loans can be taxing, and you want to make sure you are prepared. As with any application process, whether it’s for a job or a grant et al., the more prepared you are, the better. After all, if you were a lender who had their pick of many options, you would definitely feel more confident handing money over to someone who had demonstrated knowledge and competence. Application requirements are also much stricter than they were before the financial crisis. What are the most important things to prepare for the application process?
An application for small business loans will require personal financial information from you, the business owner, and will often require financial information from anyone with more than a 20% stake in your business. (If you are new to starting a business, it can be helpful to have partners with proven track records and the experience you lack.) Make sure you have collected a credit report from all three major consumer credit rating agencies. (If you have been in business for awhile and have a business credit score, do the same with this.) If there are any inaccuracies or discrepancies, work quickly to clear these up. Do anything to improve your credit score, if possible, even if it means delaying your loan application.
Business Financial Statement and Plan
It’s crucial that you have paperwork showing the current state of your business and your plan for repaying the loan. Current financial position includes information on accounts payable and receivable, which determines your profit margin. You’ll need a Profit & Loss (P & L) Statement current within 90 days of your application, and supplemental schedules from the last 3 years. Your plan will include a detailed, one-year projection of income and finances, as well as an explanation of how you plan to achieve these objectives.
Ownership and Affiliations
Include a list of names and addresses of any subsidiaries and affiliates, incorporating those in which you have a controlling interest. Any businesses that may be related by ownership, franchise, proposed merger or otherwise must be disclosed.
Income Tax Returns
You’ll need signed personal AND business federal income tax returns of your business’ principals for the prior 3 years.
Business Lease and Any Applicable Equipment Leases
Add a copy of your business lease and any leases for equipment critical to the running of your business.
Additional Information for Small Business Loans
In addition to the above, you might also be asked for loan application history, résumés, supplemental information if you are purchasing an existing business, etc. Keep in mind that the more detailed, but concise, your application, the more faith the lender will have in their decision to lend money to you. You can rest assured knowing that you’ve made the best case for a small business loan as possible.