Do you look forward to getting a business loan to support your business? Doing that won’t be a bad idea but it is necessary for you to know all the important documentation that will be required for you to be eligible for the loan. If you are yet to know these requirements, then this post is for you.
In this post, we will be looking at the requirements for business loans to make the process easier for you whenever you are ready to get the loan.
Business loan requirements put your personal financial information alongside your business’s revenue, income and tax information under the microscope as lenders determine whether you are qualified and which rates you could access.
Understanding your Business loan eligibility is an imperative first step if you hope to leverage this form of credit to improve your financial health.
Common Business Loan Requirements
Before you can start the application process, you’ll first need to familiarize yourself with how to qualify for a business loan. While every lender is different, most base business loan eligibility on the following factors:
- Personal financial information
- Business licenses and registration
- Business’s revenue,
- Legal documents
- Business plan
- Tax information
Business Licenses and Registration
Gather any business formation and licensure documents you received from the state or local government when starting your business. These documents prove that you are a legitimate business and include the following:
- Articles of incorporation
- Franchise agreement (if applicable)
- Business licenses and permits (if applicable)
Also, get ready to enter your Employer Identification Number (EIN) on the loan application.
Personal and Financial Information
Lenders want to confirm your identity and learn more about your financial health. The common personal information a lender requires is:
- Phone number
- Date of birth
- Social Security number
It is also necessary to have your personal bank statements from the past year and income documentation handy, just in case the lender requests them during the application process. See the Difference Between Personal Loans and Business Loans.
Small business lenders typically weigh your personal finances alongside your business finances. The lender will use your personal information to get a copy of your credit reports and scores. These factors affect your approval odds and the loan interest rate you receive.
If you’re requesting funding for a new venture, you may also be asked to provide a resume that reflects industry experience.
It’s not uncommon for lenders to request a written business plan before making a lending decision. You can create a lean or traditional business plan, but both should communicate your strategy to grow a profitable business.
Key elements to include are your:
- Executive summary
- Company description
- Market research
- Detailed descriptions of your products or services
- Marketing strategy
- Funding request
Lenders want to know if your company’s income is sufficient to make timely monthly loan payments. They will also confirm if your company is in good financial health and can afford to take on more debt by examining these financial documents:
- Up to one year of business bank statements
- Personal and business tax returns from the most recent three years
- Most recent and projected balance sheets
- Income statement and cash flow statement
- List of current accounts receivable
- Schedule of business debts
Bank statements can generally be retrieved from your online banking dashboard or by visiting a local branch. Ask your accountant for copies of your financial statements if you don’t have them on file.
If you are applying for a secured loan requiring collateral, the lender will likely request a document that includes the collateral’s market value. You can have the property professionally appraised if you don’t have this information in written form.
All you need to know before applying for a business loan have been compiled in this post to make the journey easier for you whenever you are ready to start. We believe you found it helpful.
For more information on this topic, you can reach out to us via the comment section, as we will be there to respond to you.