Applying for a Loan Made Simple and Clear

Your Step-by-Step Guide to Business Loans

The loan application process can vary widely depending on the funding program, and it often feels overwhelming. But with thorough preparation and a clear understanding of what’s required, securing funding becomes much more manageable.

Here’s a list of essential documents for your small business loan application, paired with practical examples to show how they apply to different types of businesses.

1. Personal Background

This includes information such as your personal address, your name(s) as well as the name of the other owners of the company (should there be any), criminal record, educational background, Taxpayer ID Number, etc.

A restaurateur applying for a loan to open a new dining establishment provides personal details, including their residential address, educational background in culinary arts, and prior experience managing a successful café.

2. Resumes

Especially for loans that are intended to fund a new business, some lenders will required a resume to prove management or business experience.

An entrepreneur seeking funding to launch a tech startup submits a resume highlighting their extensive experience in software development and previous roles in project management, demonstrating their capability to lead the new venture.

3. Business Plan

A detailed business plan is an essential part of every new business or company. A sound business plan often includes an executive summary, financial review, organizational plan, sales and marketing strategies, as well as general company background and experience. An important aspect for the credit institute is especially a complete set of financial statements, including profit and loss, cash flow and a balance sheet.

A retail boutique owner presents a comprehensive business plan outlining the store's concept, target market analysis, marketing strategies, and detailed financial projections to secure financing for expanding to a second location.

4. Personal Credit Report

As part of the process, your lender will obtain your personal credit report. It is often advisable to obtain your own credit report prior to applying for a loan, in order to check for and clear up any inaccuracies or outstanding debt.

A freelance graphic designer reviews their personal credit report before applying for a loan to establish a design studio, ensuring there are no discrepancies that could affect their loan eligibility.

5. Business Credit Report

If you already have an operating business that has acquired credit, then you may also have to submit your business's credit report.

The proprietor of an established landscaping company provides the business's credit report, reflecting a history of timely payments to suppliers, to support an application for a loan to purchase new equipment.

6. Income Tax Returns

Most lenders will require your to provide a copy of the company's tax returns for the last three years. This also includes the guarantors' tax returns for the last three years.

A bakery owner includes copies of the bakery's tax returns from the past three years in the loan application package, demonstrating consistent revenue growth and financial stability.

7. Financial Statements

Like the tax returns, you will most likely be required to submit your business's financial statements as well as interim financial statements for the current year. Moreover, guarantors will need to provide updated personal financial statements.

A fitness center owner submits up-to-date financial statements, including profit and loss statements and balance sheets, to provide lenders with a clear picture of the gym's financial health when seeking a loan for facility upgrades.

8. Bank Statements

Many loan programs required one year of personal and business bank statements. It is important that these are kept separate.

An online retailer supplies one year of both personal and business bank statements, clearly separated, to show cash flow patterns and the ability to manage finances effectively, supporting a loan request for inventory expansion. 

9. Collateral

If the loan being applied for is a secured loan, the borrower will also need to provide information about the collateral being offered as security for the loan. Collateral can include personal real estate, property, business equipment, accounts receivable, inventory and supplies, or business real estate. However, the requirements for loan programs with regard to collateral vary greatly. Having a clear and strong business plan and financial statements may help you avoid having to provide collateral.

A trucking business owner offers company-owned vehicles as collateral when applying for a secured loan to expand the fleet, providing detailed information about each vehicle's value and condition.

10. Legal Documents

Depending on the requirements of the loan you are applying for as well as what type of legal structure you have chosen for your business, you may be required to submit some of the following documents:

• Business licenses and permits
• Articles of Incorporation (as would apply to a Corporation)
• Contracts with any third parties
• Franchise agreements
• Commercial leases

A franchisee submits necessary legal documents, including the franchise agreement, business licenses, and commercial lease for the store location, to comply with lender requirements for a loan to open a new franchise outlet.