When you apply for a small business loan, you will be expected to provide a considerable amount of information. The efficient you make the application process, the more quickly you can secure funding. One way to make this process more effortless is to gather all the required documents beforehand.
Generally, lenders ask for personal details, financial records, legal documents, and usually business licenses.
Personal Identification Information
Lenders ask for personal information to verify your identity and assess risk factors. Because you're more than just a credit score; this data helps build a profile of you as a borrower.
For the application, beyond your name, address and social security number, you usually need to provide information, outside of the business, about your sources of income, your assets, investments, and financial obligations such as loans and credit cards.
By gathering these details in advance, you remove roadblocks, making it easier for lenders to process your loan.
Lenders want a complete financial picture of your business. This helps them assess how well you manage money and how likely you are to responsibly pay back the loan. You'll often need these documents:
- Business bank statements (up to one year)
- Personal and business tax returns (most recent three years)
- Recent and projected balance sheets
- Income statement and cash flow statement
- List of current accounts receivable
- Schedule of business debts
Each document serves a specific purpose. Bank statements show cash flow and spending habits. Tax returns provide a yearly financial snapshot. Balance sheets display assets and liabilities, while income and cash flow statements show profitability and liquidity.
Accounts receivable and debts show who owes you money and whom you owe. The combination of this information shapes how your business performs and allows lenders to determine your suitability for a loan.
Legal documentation lays the foundation for your business loan application. These documents establish the legitimacy and operational aspects of your business. Usually, you'll need:
- Business plan
- Executive summary
- Company description
- Market research
- Descriptions of your products or services
- Marketing strategy
- Funding request
A business plan gives lenders a roadmap of your enterprise. The executive summary offers an overview, while the company description digs deeper into what your business does. Market research indicates the demand for your product or service, and the marketing strategy explains how you'll meet this demand.
The funding request spells out how much money you need and where you'll use it. By organizing all these documents in advance, you streamline the application process.
Business Registrations and Licenses
When applying for a business loan, having your licenses and registrations in order makes a big difference. Lenders look at these documents to confirm the solvency of your business. Typically, you should have these documents ready:
- Articles of incorporation
- Franchise agreement- if applicable
- Business licenses and permits as required by your industry or locale
Articles of incorporation legitimize your business structure, while a franchise agreement outlines your rights and responsibilities as a franchisee. Business licenses and permits vary by industry and location, but they show you have the authority to operate.
Every lender has its own set of rules for loan applications. Some may ask for more documentation, while others are content with less. Don't assume that one lender's requirements will match another's. It's wise to contact the lender you're considering and request a list of the required documents so you can tailor your application to their specifications.
One lender may emphasize financial history, while another might place more value on your business plan. Knowing these nuances can help you focus your efforts effectively and increase your chances of approval.
Your goal in collecting all the documents is to present a full and accurate snapshot of your business to inspire confidence in potential lenders. Before sending in your application, double-check to ensure you have included all required documents.
Partner with Woodsboro Bank for your Business Loan
While this guide provides a broad overview, every business is unique. Consulting a local lender can offer you personalized advice tailored to your specific situation. They can help you better understand the intricacies of loan requirements, helping you to grow your business.
The right loan for your situation will depend on your specific needs—and that’s why Woodsboro Bank spends time getting to know each and every customer. We are happy to provide you with the information you need to help you achieve your goals. Contact our local team to discover how we can help you build your business.