Small Business Financing Checklist

5 min read • Oct 13, 2021 • Lendio

Considering small business financing? Whether you’re looking for a small business loan, a business line of credit, equity financing, or another form of financing, the process is smoother when you have your ducks in a row before you start.

Why are you applying for small business financing?

Before beginning your application, work through the following questions:

  • Why do you need financing?

    There are a multiple reasons to apply for small business financing, and knowing clearly your intent with the funds  can help a finance manager match you to the right product. Are you seeking financing to make repairs, to acquire much-needed equipment, to help your business bridge the gap between billing and invoice? Be sure you know how you’ll use the money or credit you’re requesting. While you may be able to manage with existing cash flow, a boost in funds could pay for your expansion or act as a just-in-case cushion. Remember, it’s always better to apply for financing before you need it, and the terms you qualify for may also be more appealing if you apply while cashflow is strong. 

  • How will the capital be used?   

    Lenders will want to know specifics. Are you investing in new equipment? Hiring more employees? Expanding or upgrading your office space? Don’t leave anything out. Specify what the funds will be used for—if you’re applying for an equipment loan, state the type of equipment, the dollar amount, even the model and the brand, if you have that information. You’ll also want to articulate why you need these improvements and how will this investments will contribute to the growth of  your business. 

  • When do you want/need the funds?

    Don’t wait for a crisis to apply for  small business financing of any kind. Look ahead and plan for growth and protection from potential crises.

  • How much will you need?

    This is where you’ll really need to get into the details. Predict what you’ll spend by doing research and getting quotes whenever possible. If you’re looking for funding to expand, it may be difficult to know if your financial forecasting is accurate. Take a big-picture view of everything you believe you’ll need, then use the financial records you already have and apply this information to your future plans to give you a better idea of what you’ll need to borrow.

  • What’s your ideal repayment schedule?

    There should be two parts to your answer: What is your preferred repayment plan? What happens if Repayment Plan A falls through? What if your sales are worse than projected—what’s your Plan B?

  • How healthy is your personal/business credit?

    Your personal credit is just as important as your small businesses’s credit—especially if you’re a startup. If your business is young, lenders will want to see your personal credit as well. And, depending on the lender and the type/amount of loan or financing you’re looking for, lenders will likely want to see your personal credit even if you’ve been in business for years. Lenders want to get an overall picture of your credit health. While your personal credit score may seem irrelevant, lenders view it as a great way to determine how you’ll run your business

  • What are the qualifications/capabilities of your management team?

    You’ve assembled an amazing team. Make sure you know their qualifications—this collective “resume” can be impressive to lenders.

Your 6-Item Small Business Financing Checklist

Next, it’s time to gather the documents you’ll need. Having these documents with you when you apply for small business financing can simplify—and speed up—the process.

1. Income Tax Returns from Previous Three Years.

Lenders will definitely want to see your tax returns—business and personal. BTW, the more profitable your small business appears on your tax returns, the easier it can be to obtain small business financing. So if you’re planning in advance for a loan or other financing down the line, be sure you consider deductions carefully, particularly if they make your business seem not-so-profitable.

2. Financial Statements and Projected Financial Statements.

Balance sheet, assets, liabilities and net worth—be sure you have your financial statements available. Ensure they’re accurate. Lenders will do a numbers crunch, and if you’ve manipulated anything in any way, discrepancies will raise a red flag. Tell it straight. Do your due diligence with the projected financial statements as well. 

3. Personal and Business Bank Statements.

Most lenders want to see both personal and business bank statements. Be prepared to explain any periods where you were low on cash or went negative.

4. Business License and Registration.

Hate paper records? Your business license and registration are probably online if you haven’t kept a physical copy handy.

5. Articles of Incorporation.

Are you incorporated? Have an LLC? Grab those legal documents! 

6. Your Business Plan.

Make sure you write and edit your business plan. Find other experts and professionals to read through it and find holes before lenders find them. You want to make sure you’ve covered everything that lenders could possibly ask. 

Once you’ve collected everything, it’s time to apply. Get started here and see all of your small business loan options in one place, 

 

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