State and municipal economic-development agencies and many nonprofits provide low-interest loans to small company owners who may not qualify for commercial financing.
The good news is that most other lenders request the same information for equipment loans for small business applications. Naturally, each lending program has its own paperwork. Generally, you must present the same paperwork. You should collect everything you need before applying.
Small company loan applications often need these items:
1. Fill Out Loan Application
Forms differ per program and lender but need the same information. Be ready to answer these questions. Before applying, prepare this information:
- Why apply for a loan?
- How will loan funds be used?
- Purchase what assets, and who are your suppliers?
- What other business debt and creditors do you have?
- Who are your managers?
- Personal Background
As part of the loan application or as a separate document, you may need to supply personal background information including prior residences, names, criminal record, education, etc.
Some lenders need management or company expertise, especially for startup loans.
All lending programs demand a solid business plan with the application. The company plan should contain predicted profit and loss, cash flow, and balance sheet.
The lender will request your credit report throughout the application process. Before applying for a loan, get a credit report from all three main consumer credit rating companies. Your loan application may be hampered by credit report errors. Before applying, you must resolve them.
3. Business Credit Report
Existing businesses should file credit reports. Like your personal credit record, your company’ credit report should be reviewed before applying.
4. Income Tax Returns
Most financing programs demand three-year personal and corporate income tax records.
5. Financial Statements
Many financing programs need signed personal financial documents from company owners with more than 20% ownership.
Projected financial statements may be needed as part of or distinct from your company strategy. If a program you’re applying to needs certain papers to be submitted separately, have them available.
The following formats may be used to project financial statements:
- The Balance Sheet
- The Income Statement
- Cash Flow
- Bank Statements
Loan packages sometimes demand one year of personal and corporate bank records.
6. Accounts Receivable and Payable
Most lending programs demand current firm financials. Check your accounts receivable and payable before applying for a loan.
Collateral requirements differ greatly. Certain loans don’t need collateral. Loans with significant default risk demand large collateral. Excellent company strategies and financial accounts might help you avoid collateral. In any event, a collateral document should indicate the cost/value of personal or commercial property utilized to secure a loan.
8. Law Documents
Legal paperwork may be required by your lender depending on the loan. Keep the following elements in sequence, if applicable:
- Licenses and registrations needed to do business
- Articles of incorporation
- Third-party contract copies
- Franchise contracts
- Commercial Leases
- Document organization
Keeping proper records is crucial for a successful company, but especially when asking for a loan. Keep needed documentation organized and correct. Lenders and loan guaranteeing organizations will verify all your information. Providing false information will deny your loan. Keep personal copies of all loan packages.