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Every Document You Need to Apply for a Small Business Loan

8 min read • Oct 01, 2019 • Andrew Mosteller

The documentation you need to apply for a loan varies substantially depending on where you apply. Online marketplace lenders like Lendio, for example, require almost no documentation to apply. 

But if you’re looking into traditional opportunities like the classic bank loan, know that you’re in for mountains of paperwork. To help ease your burden a bit, we put together a list of the most common documents and information traditional lenders will request when you apply for a loan.

A few details may differ between the various banks and financial institutions, but the 20 details and documents listed below tend to be common among almost all traditional lenders.

1. Amount of Money Requested

The first thing almost any lender wants to know is how much money you need. Most lenders will finance specific amounts, so take a look at the minimum and maximum loan offered before you inadvertently low- or high-ball them.

One thing that’s important to note is that traditional lenders spend the same amount of time and resources determining creditworthiness for applicants requesting $10,000 and those requesting $100,000 or more. The difference is that lenders make a lot more money on the latter.

So it’s important to note that your likelihood of getting financed depends somewhat on your ability to demonstrate a need for a larger loan. 

2. Intended Purpose of the Loan

Lenders want to know what you plan to do with the money once you get it. And the key to nailing this requirement is specificity. Broad purposes like, “I plan to invest in equipment” pale in comparison to more specific plans like, “I plan to invest in a new shake machine.” 

Even if you plan to use the loan for several purposes, spelling those things out can boost the lender’s confidence in your intended use of the money. 

Understanding what you need financing for can also help you decide on the loan product that best suits your needs. Equipment financing, for example, may be a better option than a traditional bank loan if you only intend to use the loan to invest in new equipment like a forklift or a new fryer for your food truck.

3. Your Personal Credit Score

In applying for almost any kind of financing, your credit score is crucial. Lenders want to see if you have the ability to pay off your debts, so as soon as you apply, banks will pull your credit score and credit history. 

The higher your score, the more likely you are to get funded. Also, your score can determine your interest rates. The higher the score, the lower your interest rate.

4. Your Business Credit Score

Your business has a credit score based on your industry, size, revenue, and history of payments to suppliers and lenders. 

You may not even know that your business has a credit score, but if you’ve opened a business bank account, incorporated a business, or obtained an Employer Identification Number (EIN), then the major credit agencies probably opened a file on you.

If you want to look at your business credit score, you’ll have to check with the 3 major business credit reporting agencies: Dun & Bradstreet, Experian, and Equifax. Make sure your scores reflect the truth of your business’s financial history because a lender can pull your score at any time.

5. Time in Business

Traditional lenders typically only fund businesses that have been around for 2 years or more. If your business is still young, fear not—there are alternatives to traditional lending. Startup loans, for example, are designed to cater to younger businesses with less of a track record.

6. Business Plan

Business plans or loan proposals aren’t always required, but many lenders want one. These plans typically consist of:

  • Mission statement
  • Info on the owner(s) and management team
  • Target market and competitors
  • Your business’s unique value proposition
  • Products and services you provide
  • Current marketing tactics
  • Financial projections for the next 3–5 years
  • Number of employees and business locations
  • Description of office space or facilities
  • Executive summary detailing your business plan

7. Industry

The particular industry your business is a part of can influence your ability to get funded. Some industries, like the technology sector, are considered more vibrant and lucrative than others.

8. Entity Type

Is your business a sole proprietorship, partnership, limited liability company, or corporation? Some lenders prefer to work with LLCs and corporations because these businesses have more legal protections.

9. Business Licenses and Permits

Most states require businesses to obtain multiple licenses and permits to operate so lenders want to see that you can legally operate the business you’re seeking to finance. Lenders don’t want to fund illegal enterprises. 

10. Employer Identification Number

The IRS uses this unique, 9-digit number to track your business’s tax returns. Not all businesses need an EIN, but you can get one for free by applying at the IRS website. The number makes it easier to keep your personal and business finances separate.

11. Proof of Collateral

Most lenders require that you put up some kind of collateral that can be taken by the bank should you fail to pay the loan back. This collateral can include cars, real estate, and other items of significant value. 

12. Annual Business Revenue and Profit

Typically, lenders will want to see both a year-to-date profit and loss statement, updated within the past 60 days, and statements from the previous 2 years.

13. Bank Statements

Lenders will want to see at least 4 months of bank statements to make sure the claims you’re making about your business’s financial history are accurate and true. You need to have a separate bank account to track your business expenses or it’ll be difficult to get a small business loan.

14. Balance Sheet

This report is a breakdown of your assets and liabilities, usually prepared by an accountant. If you don’t have an accountant and don’t want to hire one, you’ll have to put this sheet together yourself. 

15. Personal and Business Tax Returns

Most lenders want at least 2 years of tax returns. This requirement is all part of their interest in digging into your financial history to assess creditworthiness. 

16. Copy of Your Commercial Lease

This document shows that your business isn’t going to lose its property during the duration of the loan. Losing business space unexpectedly can severely hurt a business—especially retail operations that rely on brick-and-mortar sales. 

17. How Much Debt You Already Owe

Lenders are cautious about adding more debt to existing debt and don’t want you to be unable to make payments. You should calculate whether your business can afford a new loan before taking one on, especially if you have existing debts.

18. Accounts Receivable and Payable Reports

How good is your business at getting paid for its goods and services? Additionally, how well does it pay its bills? Lenders need to know the answer to these questions, and accounts receivable and payable reports provide that answer.

19. Ownership and Affiliations

Banks need to know who owns your business. If it’s you and a few other people, the lender will want detailed information on all owners. Sometimes it’s more difficult to get a loan when your business has multiple owners or the owners are involved in multiple projects. Conflicts of interest can arise, and it’s possible the creditworthiness of other owners can negatively affect your financing options.

20. Legal Contracts and Agreements

Finally, lenders want to know if you have any legal obligations or agreements. They may ask to see if you have a partnership agreement, contracts with suppliers, franchise agreements, and a number of other kinds of legal agreements. 

These agreements can cause legal issues for your business down the line, so that’s why lenders stick their noses deeper into your legal affairs. 

But You Don’t Really Want to Do All That Paperwork, Do You?

Here’s the thing—if you’re as exhausted reading about all of these little details and requirements traditional lenders need as we are writing about each and every one of them, then you’re probably better off ditching the whole concept.

Our application process here at Lendio only takes 15-minutes. And it doesn’t just get your business in front of 1 lender—it gets you in front of over 75 lenders. That certainly beats spending 30 hours to apply for a single traditional loan. 

Obviously we’re a little biased, but if you’re curious about saving time and still getting a great loan, you may want to hop over to our little loan application and get started today.

Andrew Mosteller

Andrew Mosteller is a freelance writer and regular contributor to Lendio News. His upbringing in an entrepreneurial family nurtured a passion for small business at a young age. Andrew's father, an equity fund manager, taught him the ins and outs of investment financing. Now, Andrew spends his time writing copy for business owners, helping them expand and advertise their unique brands. He's also studying Strategic Communications at the University of Utah. When Andrew's fingers aren't glued to the keyboard, he spends his time reading, podcasting, composing music, and bombing down the ski slopes.