The process of acquiring more funding for your business is already stressful before you even begin to consider the sheer amount of paperwork needed for a traditional business loan. It can be very difficult to keep track of which lenders want to see what documentation.
For that reason, you might want to consider using a comprehensive list to pull together all the possible documents you could need to apply for funding from any form of lender. That way, no matter what paperwork you need for your business loan, it will be on hand and clearly available.
Luckily, we’ve put that all together for you in this article.
1. Loan Application
Perhaps the most obvious piece of business loan paperwork is the loan application itself. The particulars of the application will vary by type of loan and financial institution, but you can expect most loan applications to act as a concise summary of who you are, what your business does, and what you plan to do with any money you receive from the lender.
Nowadays, many loan applications can be submitted online, but there are still some more old-school lenders (especially many regional and community banks) who may require a paper application. The processes will likely be roughly the same whether you’re doing it online or in print. But with an online loan application you can get a decision much more quickly.
2. Personal Information
As a business owner, your credentials for running a company are really important to your lending decision. Lenders will want to know about who you are and where you’re from. So you should expect to submit a statement of personal history, which asks for disclosure of any criminal or legal troubles in the past that you have personally faced. In addition to the history statement, you’ll need a valid drivers license or other ID card and some sort of proof of residency to properly establish your identity.
3. Business Plan
Writing a business plan is necessary for almost any loan. Lenders will want to know where your business is headed in the future, and your business plan will tell them how you see that path.
4. Loan Purpose
Some lenders will want a detailed statement outlining the exact purpose of your new loan. They’ll want more detail than “to hire new employees” or “to get a bigger space”. You’ll want to give details – you want to hire five new employees, or sign a lease at a particular address because of its proximity to pedestrian foot traffic.
5. Real Estate Leases
Lenders will want to know the legal parameters, pricing, location, and rules of operation at your current physical space, so make sure you’ve got a copy of your commercial lease available if you rent.
6. Personal Credit Report
Your personal credit report shows your potential lenders how trustworthy you are with money. Do you make payments on time and in full? How many sources of credit have you sought out? Are you opening lots of credit accounts in the recent past? Why might that be? Take time to review your credit reports to ensure their accuracy, so lenders can see that you’re worthy of their approval.
7. Business Credit Reports
How consistently has your company paid its contractors, suppliers, and vendors? Is your company seeking out lots of financing at the same time? Lenders will look at your business’s credit report as well as your personal report, so it’s also worthy of proofreading.
8. Personal Tax Returns
As a business owner, it’s important that you’re an upstanding citizen. Lenders care a lot about how you treat your personal finances and your individual or family tax return is one of the best examples of that.
9. Business Tax Returns
Deciding to give you a loan means making a bet on your company succeeding. Tax returns, both personal and business, give the lender a wide-angle view of your personal and professional finances. You may be required to present a couple years’ worth of tax returns to show that your company is making enough money to repay the debt.
You may also need to bring along a voided business check from any accounts in your company’s name. This further provides documentation of your business’s financial standing.
10. Collateral Documentation
Many loans require some kind of collateral, be it your company’s inventory, a vehicle, a piece of real estate, or equipment, in the case of an equipment loan. Documenting that collateral means having an appraiser calculate the approximate cost of the collateral while also providing proof that you own it.
11. Articles of Incorporation, Franchise Agreement and/or Ownership Agreement
Lenders who are going to extend credit to your business want to know how your business operates. Preparing a copy of your articles of incorporation or partnership agreement is always a good idea since it shows the financing company that you have clear rules and guidelines for how the business is required to run.
All three documents show your potential lenders just who owns the company, which can be a positive and a negative for owners looking for a loan. Multiple owners can mean multiple chances for lenders to see a red flag. Four chances for mistakes. An ownership agreement breaks down just who owns how much of the company.
A franchise agreement can show lenders how much money you’re paying to be a part of a larger company. Franchises can certainly be expensive, but they also come with a built-in customer base and lots of help from the master brand.
If your company is a corporation or LLC, it will be important to provide proof that you’re registered with your state. Articles of incorporation will also include founders’ names and your business’s address.
If your business requires any sort of specialized licensing, it will likely be necessary to have copies of all appropriate licenses when applying for funding. This can mean health code permits for a restaurant, barber licensing for barber shops, or liquor licensing for a distillery. Make sure you’ve got everything up to date and in accordance with the most recent and accurate laws of your state and municipality.
13. Third Party Contracts
Many businesses will have regular arrangements and contracts with other companies, either as buyers, sellers, wholesalers, suppliers, or the like. When you’re off to apply for a loan, you’ll want to disclose these arrangements. If you’ve got regular money coming in, that’s a positive your lender will want to know about, while purchases from a vendor or supplier will be taken into account as expenses.
14. Disclosure of Other Debt
Some lenders will become privy to this information without your consent or knowledge, so it can be important to be fully aware of your loan application history and be able to explain any applications.
Lots of applications in the near past can imply to lenders that your business is floundering, while a recently-founded company with no history can be a risk.
In addition, disclosing your other debt can be both a help and a hindrance. If you’ve done an excellent job of tending to your debts – making payments, using the funds wisely – your disclosure of other debt and application history will show lenders your trustworthiness.
15. Profit & Loss Statements and Accounts Payable Statement
How much are you earning and spending in a given month? Many lenders will ask for multiple months of statements showing them that you’re operating at the profit needed to justify a loan. And an accounts payable statement will show lenders exactly where that money is coming from.
Getting a business loan can take a lot of paperwork – be prepared!
By following a checklist – even one as wide-ranging and generally inclusive as this one – you’ll make sure you’ve got every document you’ll need at a moment’s notice, ready to be turned over to a lender as you seek out capital.