The Business Loan Application Process – What to Expect
Once you’ve completed all of your due diligence – determining your needs and selecting your lenders of choice – you’re ready to move forward to the application stage. At a high level, there are 4 primary steps to applying for a business loan:
Step 1: Gather your paperwork
Step 2: Complete the application and submit the applicable paperwork
Step 3: Compare your business loan offers
Step 4: Select the business loan option that best meets your needs
While steps two and four are self-explanatory, steps one and three can be a bit more complex, so we delve into them a bit further.
Get Your Paperwork in Order
Applying for any type of business loan requires paperwork to convince any lender to approve your application. If you’re looking to borrow, getting your paperwork in order beforehand will help expedite the borrowing process. The types of universal paperwork you will need is:
Several years of tax returns.
Past tax returns will show your potential lender your business’ annual revenue for the past few years, which is often crucial to getting approved for a loan.
At least 6 months of bank statements.
Potential lenders want to see that your business has a history of strong cash flow, so it’s best to have at least six months of bank statements from your business checking account.
Business plan.
A business plan is kind of like a resume for your business. At the very least, it will explain to your potential lender your plans to grow your business, which is something lenders want to scrutinize. Some lenders, especially alternative lenders, don’t require this depending on the reason you’re borrowing, but nevertheless, it’s important to update your plan and be ready to present it.
A presentation of future products or services.
If you’re seeking to borrow for growth, most lenders will want to examine any products or services that you are planning to roll out, and a roadmap for why you think they will generate more revenue.
A detailed credit report.
If you get approved for a loan, the cost of capital will greatly depend upon your credit score. It’s important to contact the three main credit bureaus, Equifax, Experian, and Transunion, and obtain your report. The last thing you want is for your score to be dragged down by mistakes on your report. Potential lenders will pull your credit report on their own, but by pulling it yourself before you apply, you will have a realistic picture of what you may qualify for, and it gives you the opportunity to correct any mistakes before you apply.
Having this paperwork ready beforehand will save you time and energy and will show potential lenders how serious you are about getting a loan.
Choose and Compare Lenders!

Choosing a lender can be a difficult process. If you want face-to-face service and are confident in your ability to get a loan, you may want to go with a traditional bank. If you want fast service and still have the ability to consult with a small business lending expert, alternative lenders may be your best bet. If you are inexperienced with business lending and feel like you’re starting from ground zero, you should probably consult with a third-party broker who can give you independent advice.
Additionally, it’s always good to have options when it comes to business loans. Therefore, when you’re seeking a business loan, talk to more than one lender, or go through a broker or marketplace administrator. It behooves you to be able to compare rates and offers to lower your cost of capital.
What to do if You’re Rejected for a Loan
Lenders may reject your application for a variety of reasons: your debt-to-equity ratio may be too high, your credit score may be too low, or your business doesn’t have a strong enough cash flow history. If your application is rejected, don’t worry, it’s not the end of the world, as there are plenty of ways you can improve your business so that you can get approved next time.
Consider other financing options.
Business loans are not the only type of financing available for small business owners. From a business line of credit to invoice factoring, and equipment financing (to name just a few), there’s a host of alternative business financing options available.
Talk to your creditors.
If you have any outstanding debt, it’s worth contacting your creditors to see if you can modify your payment structures. Remember, creditors would much rather negotiate a new payment arrangement with their borrowers than have to send the debt to collections. Once a new arrangement is agreed upon, you can comfortably make payments without having any late payments show up on your credit score.
Talk to Your Lender.
Keep in mind that small business lenders make money by giving loans and therefore, most of them want you to succeed in getting approved. If you’ve been rejected, they most likely will give you a detailed explanation as to why, and suggest ways to improve.
Pay off or lower your revolving debt.
If you can afford to, make sure the debt on your business line of credit or business credit card is at most 30% of your spending limit, as that is the credit utilization level that lenders and credit agencies prefer to see. Not only will this reduce your interest rate payments, but it also lets potential lenders know that you can properly manage your debt.
Encourage your suppliers to give you trade references.
Having a strong payment history with your suppliers will not be reflected on your credit report. However, your suppliers can give you a trade reference: a verbal or written notice to credit reporting agencies such as Transunion, Experian Business, or Equifax stating that you’ve always made payments on time. These positive references may increase your score and will be looked upon favorably by potential lenders.
Try to increase your credit limits.
If you have a line of credit or a business credit card, increasing your limits on them can increase your credit utilization ratio and help boost your FICO score.
These improvements are not difficult to achieve and can be made fairly quickly in most cases, and making them could make it easier to qualify for a business loan the next time around.

Key Takeaways
There are several points to consider if you’re in the market for a small business loan: