What You Need Before Opening a Business Loan Application Form

Why Lenders Scrutinize Every Business Loan Application Form

When it comes to financing of any kind, no lenders would ever give approval based on just faith or a promise. The risk is too great for them to take such chances. Hence, each and every business loan application form is actually a structured request for proof or evidence that the borrower can actually repay the loan, that the business he represents is genuine and the risk taken can be handled by the lender.

What lenders actually look for in a business loan application form is creditworthiness, cash flow stability, asset value and business's time in operation. This criteria remains the same for all the avenues of business loan, like bank, credit union or an online platform.

Lenders evaluate creditworthiness, cash flow stability, collateral value, and business history simultaneously. Whether applying through a bank, a credit union, or an online platform, the underlying criteria remain largely consistent.

So before a single field is filled, the groundwork must be laid.

What a Business Loan Application Form Actually Asks For

The scope of a business loan application form is often overlooked by many businesses. It is more than a name and a loan amount. Check out the core categories that most lenders cover below:

Each category factors into the lender’s decision. Missing just one can result in a request for more info – or worse, a complete restart. It should be noted that not all business loan application forms are the same. Each application form varies depending on what they are looking for.

The Document Checklist Several Small Business Loan Application Form Requires

This is where preparation can be the difference between an easy submission and frustrating back and forth. Open the business loan application form from the digital PDF file you downloaded for each item. Banking portals have session time-outs and they don’t save your work in progress.

Business and Legal Identity Documents

• Business name: It is the legal name and any DBA (Doing Business As) registered with the state

• Business address and street address: Provide this clearly if they are different from mailing address

• Tax ID: It is Employer Identification Number (EIN) given by the U.S. government

• Entity structure: It means you need to clarify whether your business is a sole proprietorship, limited partnership, limited liability company, etc.

• Business formation documents: You need to attach documents such as articles of incorporation, and operating agreement

• Business phone: You must give the correct phone number registered with the business

• Confirmation of U.S. citizen status: You need to give proof of your U.S. citizenship as required by the federal agency or lender

Personal Identification

• Applicant name: You need to give your name exactly as it appears on a driver’s license or government-issued ID

• Social security number (SSN): If you are the owner with more than 20% or great ownership interest in the business, you will need to submit your SSN here

• Date of birth
• Home phone and mailing address
• If you are under any obligations for child support or alimony, which is commonly asked on most credit application forms, it must be disclosed.

Financial Statements

Strong financials are the backbone of any commercial loan application. Have these ready:

• Balance sheet: This means current balance sheet, showing total assets and total liabilities of your company

• Income statement: It covers the last two to three fiscal years and it is one of the most important business documents you will need to submit. So, make sure it is accurate

• Personal financial statement: It is a summary of individual net worth

• Business and personal tax returns for the past two to three years
• Accounts payable schedule, if applicable
• Bank statements from the last three to six months

Credit and Loan History

• Authorization for the lender to pull credit reports (both business and personal)
• Existing loan account numbers and current balances
• Credit card account summaries
• Any past due obligations or existing indebtedness to a financial institution
• Active line of credit disclosures, including account number and outstanding balance
• Consumer credit history summary if requested separately

Collateral and Guarantor Documentation

• Not all loans are collateralized. But secured loans, and most Small Business Administration-backed products, will require it.
• Description and market value of the real estate, personal property or business assets pledged
• Life insurance policy pledged as additional collateral details

• Guarantors list: Needs to have full name, SSN, date of birth and a completed personal financial statement for each guarantor.

• Details of co-maker or endorser, signed and notarized where required

What Lenders May Want in a Business Plan on Your Business Loan Application Form

A startup has no financial history to speak of. So the business plan is a replacement for what an established business demonstrates through years of tax returns and income statements.

Even if the established company is looking to refinance or increase its line of credit, lenders may request a letter of explanation of how the loan proceeds will be used. It doesn’t have to be a 40 page paper. Often a short statement of how the funds will be used, the loan amount, how much you can afford to pay each month and when you will repay the loan is enough.

The Small Business Administration requires a more formal business plan with market analysis and financial projections especially for the SBA form-based applications, i.e. the 7(a) or 504 programs. Prior to starting an online commercial loan application, take time to review program specific requirements directly from the SBA.

Types of Business Loan Application Forms

Not every application ends up with the same product. The right loan application with the right lender saves time and may increase the odds of approval.

1. Traditional Bank Loans

Traditional banks typically require the most paperwork. Be prepared to complete a formal business loan application form that will ask you to provide a lot of financial information, often more than 20 fields.

2. SBA Programs

There are loans partially guaranteed by the Small Business Administration through approved lenders. These require additional information: SBA form 1919 (borrower information), SBA form 413 (personal financial statement), and sometimes additional disclosures for loan proceeds use.

3. Credit Unions

Typically, a credit union will give members with established relationships more leeway in underwriting. The small business loan application form might be shorter, but credit reports and financial statements are a must.

4. Online Lenders

The online business loan application process is usually quicker and less paperwork is involved. Some platforms, however, will approve mostly based on an analysis of bank statements and consumer credit scores, rather than a full balance sheet review. But speed often comes with a higher interest rate.

Understanding the Need for Guarantors and Co-Makers on a Business Loan Application Form

The majority of small business owners just look at their qualifications. The guarantor or co-maker role is often forgotten until signing day and that creates problems.

A guarantor will agree to pay the loan if the main borrower defaults. The endorser signs the note but may not be equally liable depending on the laws of the state. From the beginning, a co-maker is liable.

Each person named in the business loan application form needs to submit their own personal financial statement, along with SSN and authorization for a credit application pull. There is usually a need for a guaranty too.

Each person is required to submit their own personal financial statement, SSN and credit application authorization to pull. General partners in limited partnerships and limited liability companies are typically expected to provide a guaranty once they reach a certain level of ownership. If the guarantor does not submit all the documents, the business loan application form may take much longer to review.

A Final Check Before Submitting Any Business Loan Application Form

Before you hit the submit button, you need to go through this:

• Downloaded business and personal tax returns from last 2-3 years
• Current and in PDF format balance sheet and income statement
• SSN, Tax ID & all account numbers on hand
• Guarantor documents gathered and completed
• Loan amount and purpose statement of use of funds
• Scanned driver’s license and personal ID
• Portal login confirmed and session length noted

In the lending business, you can’t skip the prep. Filling out a complete business loan application form on the first try demonstrates financial discipline and catches the eye of lenders.

Conclusion

A lot of business owners do not appreciate the value of a well prepared business loan application form. If you have filled out your application form correctly, it will show on your form and it will signal to the lender that you are serious, organized and very much aware of everything related to business financing.

More than just filling a box for the lender, a well prepared business loan application form tells the lender that the borrower is serious, organised and financially aware. Every upfront document you get, every guarantor you vet, every balance sheet you download in PDF is one rung lower on the risk ladder of delays, session timeouts and chasing up.