Secure a Small Business Loan with Essential Documentation

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Secure a Small Business Loan with Essential
Documentation
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Core documentation needed for a small business
loan
When you apply for a small business loan, the
lender is essentially trying to figure out one
thing what is your ability to repay the loan?
Whether youre applying for a working capital
loan, a term loan, an SBA loan, or something
else, this is true for just about every type of
small business loan. The lender wants to know
your debt and income and will use things like
financial statements and credit history to help
them decide. With that in mind, lets break down
the list of documents that lenders will ask small
business owners to produce as part of the loan
application process
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• Bank statements Your bank statements show
  lenders how much cash you have on hand, your cash
  flow in and out of your bank account, and provide
  a general understanding of your business's
  financial situation. You will need to produce
  bank statements for all of your business banking
  accounts. Bank statements are generally easy to
  produce and are available via online banking. As
  a general range, you will be asked to produce
  anywhere from 3 months to two years worth of bank
  statements depending on your situation.

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• Credit statements Another way to help lenders
  assess your ability to repay a loan is to
  understand your credit. This might mean they will
  want to obtain your personal credit report in
  addition to your business credit report. A good
  credit score will increase your chances of being
  approved for a loan.
• Tax returns Around two years of both corporate
  and personal income tax returns might be
  requested by the lender. The lender will use the
  tax returns to understand how much money youre
  earning, the sources of income, and if its been
  consistent over the last few years.

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Documents for SBA loans
For U.S. small business administration loans,
business owners will need to produce additional
documentation. Proof of business activity, a
business plan, or other documentation outlining
their business model will be needed. Lets look
at the approval requirements for each of the SBA
loans as you will need to produce supporting
documentation

• SBA Microloans Generally, the SBA-approved
  lenders who make all credit decisions and set all
  terms for your microloan require some type of
  collateral as well as the personal guarantee of
  the business owner.

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• SBA 7(a) loans Operate for profit, be considered
  a small business as defined by SBA, conduct
  business in the United States or its possessions,
  have reasonable invested equity, use financial
  resources like personal assets before seeking
  financial assistance, be able to demonstrate a
  need for a loan, use the funds for a sound
  business purpose, not be delinquent on any
  existing debt obligations to the U.S. government.
• SBA 504 loans Operate as a for-profit company in
  the United States or its possessions, have a
  tangible net worth of less than 15 million, and
  have an average net income of less than 5
  million after federal income taxes for the two
  years preceding your application

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Why does a small business lender need so many
documents?
A small business lender asks for all of the
previously discussed loan documents to determine
your ability to repay a loan. There are many
qualifying factors when underwriting is reviewing
your business loan application. The lenders are
looking at your current liabilities (i.e., what
do you already owe?) and your financial
information (i.e., how much revenue are you
bringing in?) to figure out your interest rate
and repayment terms. Lenders are in the business
of risk management and reviewing all of your loan
documents is their way of trying to put as many
low-risk loans on their balance sheet as possible.
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If youre not an existing business, and youre a
startup business without any history, your
personal finances and personal credit score will
play a role in whether or not youre able to
secure funding. Traditional lenders might have
tougher loan requirements for startup businesses.
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Overview of the loan application process
Assuming you have all the required documentation
gathered, the loan application process can be
pretty quick depending on the type of lender. The
steps below are general and might change
depending on the lender, but you can expect to
encounter a loan application process that looks
like this

• Initial setup/profile whether youre using a
  traditional lender or an online lender, you will
  need to provide basic business information to
  help them understand your funding needs.

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• Submit Your Application The lender will likely
  have a general questionnaire that goes beyond
  your profile setup in step 1 and then will
  provide a mechanism for you to provide business
  documentation. A secure online portal will give
  you the ability to submit your documents as PDFs
  or connect your businesss bank accounts.
• Review funding options Once your documents have
  been securely uploaded/submitted to the lender,
  they will review and process them to provide your
  funding options. You can review your options and
  determine what you would like to move forward
  with.

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• Underwriting to make final approval The
  underwriting team - depending on the lender might
  be an actual team of humans or might be automated
  by software - will make the final approval
  determination.
• Receive funding Depending on the lender, you
  might receive your funds via wire, ACH transfer,
  or physical check.

The most important thing is to gather all of your
documentation ahead of time before starting the
application process.
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Why Choose Biz2Credit?

• Trusted partner for franchise funding
• Biz2Credit was founded in 2007 and has provided
  more than 10 billion in loans.
• Dedicated support team
• Tailored financing solutions

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