Loan Package Essentials: The 8 Required Items You Can't Ignore!

So you're applying for a small business loan, and you have to put together everything you need for the application. Whether you're a first-time borrower or a seasoned veteran, this information is crucial to getting your loan approved. The number of required documents can get a little daunting but in this article, I’ll list your requirements for your loan package, so you get your loan funded.??

1. Business Plan

When applying for a loan most lenders will require a business plan that describes your cause management and sales strategies. some lenders may only require?financial projections?if you've been in business for some time. a business plan will be required for all new companies to apply for financing. You can get help with creating your?business plan?from your local Small Business Development Center like us here at the University of La Verne SBDC.

2. Business Financial Statement

Lenders will generally want to see business financial statements for the past 3 years and May want to review Financial projections for 2 to 3 years. these financial statements will include an?income statement?(also known as a profit and loss), a?balance sheet, and a?cash flow statement. it is a good idea to communicate with your financial advisor or accountant to secure these financial statements before meeting with a lender.?

3. Personal Financial Statements

A?personal financial statement?may be required to show your personal assets, liabilities, and net worth. This information will be?compiled?from cash in the bank, yearly salary, current loans, property, and more. You may also need to complete a?debt schedule?for a thorough look at your current and long-term liabilities, with monthly payments, interest rates, and maturity dates.

4. Personal and Business Tax Returns

Lenders will often ask for?tax returns for the past 3 years. if you are a new business owner you will typically only be asked for personal tax returns. Current business owners may be asked to furnish business and personal tax returns especially if there are personal guarantees associated with the loan.?

5. Source and Amount of Equity Contribution

Business loans may require the owner to contribute between?10 and 30%?of project costs and cash or equity. It's important to Include documentation with the source and amount of your equity contribution. This may be included in the financial projections or business plan mentioned above.?

6. Credit Report

When applying for a loan the lender will order a credit report but you must know what they will see. You should see your report before meeting with the lender to explain any credit issues that might be found in the report. you can obtain a free credit report through?creditkarma.com?and identify issues before you meet with the bank.?

7. Collateral

When applying for a loan lenders will usually require?collateral. Collateral is assets that are pledged as security for the repayment of a loan, to be forfeited in the event a borrower defaults. You may be required to include options for collateral and amounts in your application. it's a good idea to have these options in mind before meeting with the lender.?

8. Purchase Agreements, Appraisals, Contracts, and Estimates

When applying for a loan there are?ancillary documents?that you may need to provide in the application. These could be purchase agreements to identify the price of purchasing a business. This could include appraisals for assets that may be submitted as collateral or official estimates to document costs that pertain to your project.?Any contracts like service agreements with clients or leases may also be required in the package.

Conclusion

When applying for a loan having all the documentation needed to complete an application is vital to keep the loan process going. Knowing what documents you're going to need as you're going into the process will cut down on the lead time and increase your likelihood of getting approved. if you do need help with applying for a small business loan, be sure to get help from your local?Small Business Development Center?to prepare your business plan and gather all the required documents for your loan package.

Funded in part through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, conclusions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.

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