Five Things to Know Before Applying for a Small Business Loan
Applying for a small business loan is easier and faster if you take the time to prepare your paperwork in advance. The exact documentation required for evaluation will depend on the lender and loan program you choose to apply with, but there are five things that virtually all lenders will include in their required application process.
This is not something you can slap together quickly in order to rush the application process. Lending institutions will assign a level of risk to your application depending on what they see in your plan. If you have the funds, hire someone to help you with your business plan. If you are saving money, you can put it together yourself and have a business attorney or another professional look it over.
Personal and Business Financial History
Documentation demonstrating your personal financial history will vary depending on the lender and loan program, but some or all of the following items may be requested:
Bank statements for the past six to 12 months
Credit reports and scores
Income tax returns for the past two or three years
Personal financial statement
If your business is already in operation, you may need to provide that documentation for your personal and business finances. Some lenders will also ask for documentation regarding any outstanding debt the business has already accumulated.
Do not wait for the lender to check your credit report. Pull your report with all three credit bureaus before you apply for the loan. If you have outstanding debt, start saving money right now to pay it off.
Personal Background Information
You will be required to provide some documentation about your personal history, including some or all of the following:
- Resume or work history
- Maiden name or aliases
- Criminal history
- Previous home addresses
Some lenders will look through this information to determine if you have the educational background to successfully manage a business. Your lender wants to know that you are a trustworthy professional who is likely to succeed in business.
You will not necessarily have to put any of your assets up as collateral to obtain the loan, but it may be required if the lender associates a high level of risk to your loan. A collateral statement supplies details of the assets you are willing to offer as collateral and their value. If you are not willing to put any of your assets up as collateral, then you may need to explain that to the lender if they ask for a collateral statement.
Bios for Key Employees
Who will you trust to manage your company? Do you have a partner? Have officers been assigned to the company? You will need to at least reveal the names of key people working on behalf of your business. In most cases, you will need to provide bios for these people. In some cases, a lender may request more substantial background information. The lender wants to see that the people leading your business are respectable, trustworthy, knowledgeable, and talented.
It is best to obtain all of this information before you apply for your small business loan. It will make completing the application packet faster while showing the lender that you have thought your business out and know what you are doing.