Any small business owner seeking a business loan can tell you: there’s a lot more paperwork than you’d guess between finding a satisfactory loan and getting your capital in-hand. While delays can happen for near-boundless reasons, it ought to be the prerogative of every small business owner to be certain those delays aren’t caused by insufficient documentation. All kinds of loans, small business or otherwise, require some amount of paperwork for consideration and eventual approval. While no two business loans are identical, before even considering a loan, small business owners ought to have these documents in good order. This list encompasses the basic requirements for one of the most frequently sought small business loans, the SBA 7(a) loan. SBA loans have some of the most stringent and comprehensive documentation requirements, so if you’re prepared for this loan, you’ll likely be prepared for almost any loan!
Loan Application Form
This may sound obvious, but why not be thorough? Lenders generally require all people who own at least 20% of the applying business, guarantors, and sometimes managers to fill out some information on your application form. Each loan’s requirements are unique, of course, so be sure to check with your lender which members of your business must fill out the loan application form. The SBA’s 1919 Borrower Information Form is a good blueprint for what just about all lenders would like to know before partnering with your business.
Personal and Business Résumés
Résumés are important to the loan process; personal résumés reassure lenders of your character and experience while business résumés prove a history of business aptitude and success. For those applying for 7(a) loans, the SBA requires business owners to send résumés for each loan being applied for; this is a near-universal requirement when applying for loans from traditional lenders.
Business Plan + Overview and History
Your business plan must lay out – in exact detail – how the small business loan you are seeking will help your business. Whether you are planning to expedite growth through financing or you could simply benefit from more working capital, be certain that you are able to indicate exactly where the principal will go.
Your business overview and history should be a comprehensive retelling of your successes and shortcomings as a business owner. Take off the rose-tinted glasses and talk numbers – your job here is to convince lenders that your business has the potential to succeed and that you have the gusto to overcome unforeseen problems.
Loan Application History
Your loan application history often must include all loans you have applied for, not simply the loans that you have received. Include relevant contact information and reference numbers where possible.
Statements of Personal History and Financial Background
Unlike the earlier business overview and history statements, this requirement is much more straightforward. The statement of personal history (SBA Form 912) is a generally quite short form asking for basic information like your address and date of birth. SBA Form 912 also asks if you, the business owner, are under indictment, have been arrested recently, or have been convicted of a crime. While loans not guaranteed by the SBA won’t require the 912 form exactly, the form is a good template for questions most lenders are likely to ask.
Your personal financial statement (SBA Form 413) asks you to lay out your assets, collateral, sources of income, stocks and bonds, real estate, as well as nearly any financial liabilities you may have. This type of information usually factors into determining your repayment ability and creditworthiness, so it pays to be comprehensive.
Current Business Financial Statements
Organize and compile the following financial documents alongside your loan application:
- Profit and Loss Statements from at least the last three years & Interim Profit and Loss Statements
- Year-End Balance Sheet from at least the last three years & Interim Balance Sheets
- Reconciliation of Net Worth to current day
- Projected Financial Statement for at least the next 12 months
Business Income Tax Returns
In addition to your other financial documents, be certain that you have signed personal and business income tax returns for, at the very least, the past three years.
Have a copy of the current lease for your business. If you do not have an existing lease but plan to pursue one following your loan, organize with your landlord for them to provide a certification of a proposed lease.
If you plan to use the principal from your small business loan to purchase another business, there are more articles you will require:
- Interim Profit and Loss Statements from the business you plan to purchase
- Proposed bill of sale + list of assets from the business you plan to purchase
- At least the two previous years of income tax returns from the business you plan to purchase
Business Certificate or License
Organizations like the SBA flatly require that your small business have a certificate or be fully licensed as a for-profit business to be considered for a loan. There are several benefits to seeking certification, but squarely among them is consideration for 7(a) loans. Alternative lenders will likely think highly, as well, of those businesses that have certificates and proper licenses.
The State of Small Business Loans and the Importance of Being Earnestly Organized
The meter-high stack of documents lenders expect from you aren’t for nothing. The information you provide on yourself and your business are meant to assess how likely it is that you will pay back lenders in a timely fashion. Seismic shifts in the business world are nothing new in the era of COVID-19. But an unexpected side effect of current trends is that lenders offering SBA secured business loans – or loans simply aimed at small business owners – are often looking for businesses with proven track records of timeliness and funding success. It looks even better for your small business when your loan application is well organized.
Keeping your financial and personal documents in an orderly, easy to access manner has benefits far beyond loan preparedness, but those small businesses who are earnestly on top of their current documents digitally and in print are often the most likely to make a positive impression on lenders which can never hurt.