There are many economic development agencies and nonprofit organizations that offer small business owners a low-interest rate business loan. Despite having specific forms for different programs, most of them require the same types of documents. Below are the typical documents that they require.
Loan application form
Lending institutions have varying forms. But, all of them ask for the same information. Be prepared to answer the following questions:
- Why do you need this loan?
- How are you going to use the loan proceeds?
- What assets will you buy and who will be your suppliers?
- Do you have other business debt? Who is your lender?
- Name your management team.
- Provide your personal background.
Resume
Some creditors require a resume. This serves as proof of business or management experience, especially if you will use the loan to start a new business.
Business plan
A business plan is required in any loan program. This should include your projected financial statement as well as your profit, loss, balance sheet, and cash flow. Your creditor will be the one to get your personal credit report, but you’ll still need to contact all the three major consumer credit rating institutions for you to get a credit report.
Business credit report
Prepare to submit your business credit report if you already have a business. Ensure to review the credit report of your business before starting the loan application process.
Income tax returns
Majority of the loan programs require business and personal the income tax returns for the past three years.
Financial statements
Many loan programs usually require a personal financial statement of the owner who has over 20% stake in the business. Some also require a projected financial statement. Use a balance sheet, cash flow, income statement, and bank statements to prepare the requested projected financial statement.
Accounts payable and receivable
Ensure that your business’ accounts payable and accounts receivable are ready before beginning your loan application. This is because many loan programs require the details of your business’ most recent financial status.
Collateral
There are different collateral requirements for various loan programs. Some don’t require collateral while some require substantial collateral, especially those that have higher risk factors for default. It sometimes helps to avoid the need for providing collateral if you have financial statements and strong business plans.
Legal documents
Always keep good records when running a business. Depending on the loan program requirements you may need franchise agreements, articles of incorporation, commercial leases, contracts with third parties, as well as business licenses and registration.
