Your Small Business Loan Checklist: What You Need Before You Apply
You have a small business and you’ve decided to expand, get some new equipment or hire extra hands. A small business loan can be a great way for your company to grow and get ahead. Today, there are more options than ever for finding a lender, especially online.
So where to start? Let’s go step by step.
1. Get your papers ready
Countless people apply for small business loans and the process can involve jumping through hoops. Try to get the right documents together in advance.
Luckily, most loan applications ask for more or less the same things - your current and former addresses, your resume, a comprehensive credit report, your criminal record if you have one, a report of any debt, financial reports and tax info, a breakdown of the loan you need, and your plan for the money. You’ll need to show documents related to your business such as your lease contract, licenses, franchise agreement if you have one, and examples of monthly expenses.
If you can put up collateral for the loan, bring all relevant documents to the meeting with your loan officer.
2. Prepare a business plan
Your business plan is your opportunity to present your case in a professional, clear and well-detailed manner. You should consider preparing some simple visual aids, and be ready to answer these questions:
- What type of business are you running?
Create an overview of your company and what you do that makes your business unique. Be able to show who your suppliers are, the makeup of your customers, and any plans you have for increasing your clientele.
What competing businesses operate in your area and what’s your edge over them? How will you have the revenue to repay the loan?
- How’s your business doing?
The lender wants to see your business' financial data to make sure you can repay the loan, like estimates of expenses, expected sales, and costs. Include a break-even analysis,cash flow projections, and tax returns for the past 3 years. Also show your accounts receivable and payable, balance sheets or profit and loss statements, and bank statements from the last year.
- How do you plan to use the money?
You need show how the loan fits into the long-term goals of your company and how it can promote growth and revenue.
- How much money do you need?
Come up with a figure and stand by it with your goals and revenue projections.
- Do you have any debt?
If you have any outstanding loans, the lender will find this and it could reflect your chances of receiving a loan. resent documentation for your other debts and how you plan to repay them and explain that this won’t interfere with your ability to repay the loan.
- Who’s on your team?
Your business lives and dies with its employees. Provide a close look at your workforce, the management of your business, and how you’re qualified to help them reach their potential.
3. Budget accordingly
Once you’ve received your loan, it’s crucial that you budget the monthly payment into your expenses. When the funds come in people can get lost and spend beyond their means. This leads to further debt and forces you to need another loan to dig yourself back out.
Stick to the budget and you will be on your way growing the company you dreamed of.
Learn more about leading business loan providers by checking out our in-depth reviews.