Your Checklist for Applying for a Small Business Loan
Plan on applying for a small business loan in the near future? Proper preparation is how you can give your chances of being approved a serious boost. While loan officers like to see applicants with good credit, those who have filled out all necessary paperwork and are prompt to respond to messages, going to every length to be well prepared is also something that makes them smile. Check out this checklist as you set yourself and your business up for success.
1. Check Your Credit Rating
Get a hold of the most recent copy of your business and your personal credit report. Doing so lets you know what loan officers will see as they’re deciding whether to approve you for a loan. Credit reports are available from TransUnion, Equifax and Experian, all of which offer you one free credit report a year. Once you get your reports, check to make sure they’re accurate before you apply for a loan.
2. Gather Your Documents
Know that getting all of the necessary documents for your business loan is often a momemetal task, so prepare yourself accordingly. What makes this step so time consuming is that some items will need to be notarized while others have to be originals rather than photocopies. Examples of common documents you’ll need include:
- Income statements
- Business and personal income tax returns
- Payroll records
- Profit & Loss statements
- Business premises leases
- Intellectual property rights (copyrights and patents)
- Evidence of accounts receivable
3. Complete the Business Loan Application
Be sure you read over the application from front to back, checking both sides of the page. You’ll want to pay especially close attention to the annual percentage rate you’ll be charged. Don’t be afraid to ask questions about anything you don’t understand, and get a lawyer to look over the application should you feel it’s necessary.
4. Draft Your Background Statements
Even if you don’t have to compile a personal and business background statement for your loan, it’s a good idea to do so anyway. Lenders can use this information to see how much of an expert you are in your industry. Make sure you include your educational background, professional licenses and certificates with your statements, and include your work history as well.
5. Create a Financial Statement and Business Plan
As you’re creating your statement, be sure to show financial stability and that you can continue to operate a steady business. Your business plan should have a historic component, details that show what makes your business competitive and how you plan on using your business loan.
Be honest with every step of the loan. Remember that you’re not only trying to qualify for a loan, you’re also trying to prove you can grow your business with the proceeds of the loan.