The documents needed to get a business loan from a traditional bank depend on several factors, including the type of financing sought, the size of the loan, how long you’ve been in business, and the profitability of your business for the past two years, among many other things. Traditional banks require more documentation–generally speaking–than online lenders.
Lenders seek information similar to what you’d fill out on a job application, such as any prior names you may have used, previous addresses, educational and business background.
If you’re seeking startup funding and you’ve never owned a business before, , lenders often like to see proof that you’ve had managerial experience and/or experience in the same industry.
Your Business Plan
Lenders often request a business plan, which should include the following elements::
- An executive summary
- A market analysis explaining the competition and the opportunity
- A description of your business (what it does and what differentiates it from any competitors)
- Information about operations and management, including the management team’s experience
- Your marketing and sales strategy
- The purpose of the loan
- Detailed financial projections and financial statements, including a profit and loss statement, cash flow statement and balance sheet
Your Personal Credit Report
Your Business’ Credit Report
Income Tax Returns
Lenders generally require copies of both your personal and business income tax returns, including schedules, for the past three years.
In addition to what’s included in your business plan, some lenders may want to see your projected financial statements in a separate document. Generally, lenders require monthly or quarterly financial projections for the first year, then quarterly and/or yearly projections for the next four years.
Typically, you’ll be asked to provide both personal and business bank statements for the past 12 months.
Documentation of Collateral
Collateral is business or personal property you’re willing to pledge as security for repaying the loan. You should be prepared to show that you own the assets and that they are properly titled and unencumbered.
Other Contracts and Legal Documents
- Business licenses and registration
- Articles of incorporation
- Leases for commercial real estate or business equipment
- Franchise agreements
- Contracts with third parties such as clients or suppliers
Before submitting a loan request, ask the about how the lending institution views lending to startups, to companies in your industry, and/or if they use any other parameters when considering small business loans.
Once you’ve identified a potential lender, ask for a complete list of documents they want. It can save time if you submit everything at the same time once you’ve compiled all the information.
Gathering documents for a loan application process can take some time. In addition to being required to apply for a loan, the exercise can also be useful for a business owner. Seeing the details of a business in a format that is probably different than what is seen on the day-to-day operations level can be empowering and yield additional insights about your business.