Getting a small business loan can take awhile, particularly if you’re borrowing money from a bank. To speed things up, it’s best to gather and organize all the paperwork you’ll need in advance. Below is a handy checklist for your small business loan application!
Keep in mind, this checklist is designed for conventional bank loans and SBA loans. If you want to reduce your load of paperwork, consider obtaining business financing from an alternative lender. Alternative lenders typically require minimal paperwork, which speeds up the process of getting a loan. The catch is that they are generally costlier than a bank or SBA loan. Plus, the best SBA lenders have actually streamlined the application process and significantly reduced the amount of paperwork you need.
What You’ll Need for Your Small Business Loan Application
Basic Personal Information
In most cases, the first page of a small business loan application will ask for basic personal information, such as your name, address, phone number, and SSN. You may also have to provide the SSN and contact information of those who own 20 % or more of the business.
Basic Business Information
Basic business information, such as the business’ tax ID, number of employees, and business location(s), comes next. If you are leasing office space, you may also have to provide a copy of your lease.
Business Legal Documents
Depending on the lender, you may be asked to produce business formation documents, (e.g. LLC filing records), business licenses, records of pending legal claims (if applicable), previous bankruptcy records (if applicable), and contracts with other businesses (if applicable).
Business SIC and NAICS Industry Codes
These are codes that describe your business’ primary activity. Being placed in a ‘risky’ category, such as real estate investment, can affect the interest rates you qualify for. Click here to look up your SIC code and here to look up your NAICS code.
Personal and Business Credit Reports
Your credit score is an important part of your ability to get a small business loan. The lender will, as part of its due diligence, obtain its own copy of your business and personal credit reports. However, it’s helpful to get your business and personal credit reports in advance so you can find out where you stand and clear up any errors. Nav lets you view your personal and business credit information in one place – you can get score summaries for free and detailed reports for a fee.
Your Resume and Resumes for Your Management Team
If you’re starting a new business or acquiring a business, lenders typically like to see 3-5 years of management or relevant industry experience. You should include resumes for yourself and your management team in your small business loan application.
Last 3 Years Business and Personal Tax Returns
Tax returns tell the lender about your business’ financial performance over the last few years. Lenders also want personal tax returns because, if you default on a personally guaranteed loan, the lender can come after your personal assets. You must submit personal tax returns for anyone owning 20 % or more of the business.
Last 1 Year of Business Bank Statements
Bank statements give the lender a window into your business’ cash flows. If there are long periods during which your cash flow was in the negative, you should be prepared to explain that to the lender.
Current Year’s Balance Sheet and P&L Statement
The balance sheet and profit & loss statement are usually included as part of a business plan (see below). They show the revenues your business is bringing in by selling goods or services, your business’ operating expenses, as well as other debt that your business has. Accounts payable and accounts receivable should be included on the balance sheet. As with bank statements, if there is something negative in these documents, be prepared to discuss that with the lender.
If your lender requires collateral, take stock of business assets, such as equipment, and identify their value. This is called a collateral statement and should be included in your small business loan application. If you’re willing to pledge personal assets (e.g. your home) as collateral, you should have document their value as well.
Information on Existing Debt
Existing debt can affect your ability to qualify for a loan, as well as the interest rates that you pay. Make note of the names of existing creditors, outstanding loan balances, interest rates, terms, and how many payments are left on existing loans.
Future Business Plans
Including a good business plan with your small business loan application shows the lender that you’re not in business just for short term gain but that you have thought about your long term business goals and how to achieve them.
As for what to include in a business plan, that requires its own checklist! At a minimum, it should contain your target market, competition, executive team, and business model (including your budget for different business activities, such as marketing).
Startups should provide 3-5 years of financial projections. Existing businesses can provide projections for the next 12 months and the last 3 years of financial history.
Business plan writing is both an art and a science. If you need some guidance, we recommend using LivePlan business plan software. This user-friendly software will help you put together your business plan in no time and easily update your plan as your business grows.
What Lenders Will Ask You
When applying for a small business loan, be prepared to discuss yourself and your business and answer the following questions. Gathering the paperwork you need will help you develop compelling responses.
- What does your business do?
- Why are you applying for a loan?
- What will you do with the loan proceeds?
- What are your business and personal credit like?
- Who’s in your management team?
- Do you have management or industry experience (particularly important if you’re starting or buying a business)?
- Do you have other business loans?
Sometimes, getting a business loan can feel like a bumpy road. The checklist above will help smooth out and speed up your small business loan application. Keep in mind that every lender has its own specific requirements, but the checklist above includes basic information that most bank and SBA lenders will want to see. If you need help finding a business loan, we’re just a phone call away and will walk you through the entire process step by step.