Applying for Small Business Loans: Application Checklist
Today the possibilities to get small business loans are numerous: from state and local economic-development agencies to a great number of nonprofit organizations. But regardless of the lender you choose, you still need to be prepared for the application process. In this article we tried to combine all essential information about the process and documents required.
Loan Application Form
All lenders require you to provide pretty much the same information, however the form itself may vary. Be ready to answer the questions below:
- The reason for applying for small business loans
- How will your loan proceeds be used?
- Describe your assets to be purchased and also your suppliers
- Explain what business debt you already have (if any) and who your current lender is
Be ready to describe your personal info, including previous names, addresses, criminal record details, education, etc.
Sometimes you might be asked to provide a resume, so it is better to have it in advance. It should include information about evidence of management or business experience, especially for small business loans used to start a business.
You will always need to show a sound business plan. In the business plan small business loans experts advise to include complete set of projected financial statements, do not hide your losses but explain them, your cash flow and balance sheet.
Business Credit Report
If you already have a business then be ready to show your credit report. Make sure that you have both your personal and business credit reports.
Income Tax Returns
Most lenders of small business loans require business owners to submit their personal and business income tax returns for the three years.
A lot of current loan programs require small business owners to have more than a 20 percent stake in the business in order to submit their signed personal financial statements. Some lenders also require projected financial statements which can also be a part of the business plan. It is not an obligatory thing to have, but highly advised to have it with you when applying.
Accounts Receivable and Accounts Payable
You will also have to show your current financial position. So before you head to the lender’s office, make sure to have accounts receivable and payable.
This part vary significantly from lender to lender. Some loans programs do not even require any collateral. If you are applying for small business loans and you are of higher risk to lenders, then you will have to have substantial collateral. With strong business plans and financial statements you can avoid putting up collateral. Anyway, be ready for it in case it happens.
Jon Reynolds acts as a blogger for a range of digital publications, who covers various financial topics exemplified by the complete guide to small business loans application process and anything else related. A proud nomad of digital community and an opinion maker in all that has to do with the finances.