Gathering documents before applying for a small loan can seem like a daunting ordeal. Just tackle them one by one. You’ll need to locate the following basic documents to secure funds:
- Personal background—Provide previous addresses, names used, criminal record, and education background.
- Resumes—Provide evidence of management or business experience. This is particularly important when you want to start a new business.
- Business plan—Create a sound business plan, including a complete set of projected financial statements—profit and loss, cash flow, and balance sheet. You may wish to include a short history of your business and its challenges.
- Personal credit report—Obtain a report from each of the three consumer credit rating agencies before submitting a loan application to a lender. It’s critical that you try to clear up any inaccuracies or blemishes on your report that could hurt your chances of getting the loan approved.
- Business credit report—Review your business credit report before beginning the application process.
- Income tax returns—Submit personal and business income tax returns for the previous three years.
- Financial statements—Owners with more than a 20 percent stake in your business may be asked to submit signed personal financial statements. Projected financial statements may be required as part of, or separate from, your business plan. Have a version of your projected financial statements as an individual document if necessary for the loan.
- Bank statements—Prepare to submit one year of personal and business bank statements.
- Collateral—Prepare a collateral statement describing the cost and value of personal or business property that can be used to secure a loan. Even though some loan programs don’t require collateral, other high-risk loans want substantial collateral. Strong business plans and financial statements can help you avoid collateral.
- Legal documents—Include any business licenses and registrations required for you to conduct business, articles of incorporation, copies of contracts you have with any third parties, franchise agreements, and commercial leases.
- Affiliate information—Include a list of names of any affiliates, such as concerns in which you hold a controlling interest or may be affiliated with by franchise, proposed merger, or stock ownership.
- Loan application history—Record any loans you may have applied for in the past.
- Business lease—Obtain a copy of your business lease or a note from your landlord.
Be ready to answer questions your lender may pose to you, such as the following:
- Why are you applying for the loan?
- How will the loan proceeds be used?
- What assets need to be purchased?
- Who are your suppliers?
- What other business debt do you have?
- Who are your creditors?
- Who are the members of your management team?
Paperwork is always onerous, but preparing the documents you’ll need to submit in advance will save you a headache.
