Borrowing money to grow your business is intimidating to most small business owners. Small business owners need loan documents when seeking a business loan. Undoubtedly, every lender is different, and many require additional documentation. So, where do you start, and what documents do you need for your loan application? You don’t need to worry – we got this. Here are six critical financial documents you’ll need for any small business loan.
What Are Loan Documents?
Several forms and applications are needed to apply for a loan, among them the promissory note, security agreement, and disclosure statement. The loan documents contain all the information the lender needs to decide on the loan. Lenders may also require information about your credit score, debt-to-income ratio, and business and financial information.
The 4 Main Types of Loan Documents
To obtain business financing, a borrower must provide the following four types of loan documents:
- Loan Estimate. As the first piece of lender paperwork, the loan estimate outlines the loan’s terms.
- Rate Lock Form. Rate locks are agreements between borrowers and lenders that guarantee a specific loan rate.
- Borrower’s Information. The borrower’s information contains the personal information of all the people listed on the loan application.
- Closing Disclosure. Closing disclosures contain final loan details, including any conditions.
6 Essential Financial Documents Needed For Small Business Loan
- Your business financial statements: Lenders will look at these documents to ensure you can repay your loan, including a Profit & Loss Statement (P&L). A current version should be attached to your application within 90 days of submission; include any schedules for the last three fiscal years. Along with a detailed projection of income and expenses, you should also include a written plan explaining how you plan to achieve your goals. It is easier, however, with most online lenders. Along with your annual revenue, many will also ask for your checking account statements for the last three months.
- Your personal financial information: When applying for a loan, you must give your personal and business economic history. It is essential if you have just started your business or are a small business. In addition to a personal guarantee, you can also expect to sign a loan contract. In some cases, the SBA may not require you to collateralize a loan fully; instead, they will need all the collateral you have, including your home and personal belongings.
- Income tax returns: You should have the last three years signed federal tax returns for all the principal members of your company at hand.
- Ownership and affiliations: If you have financial interests in other companies, you should disclose them. Any documents related to your loan application will need to be signed by your partners if you have any.
- Business Certificate/Business License: If your business is a corporation, you’ll need your corporate seal; otherwise, you’ll need your business license. The only requirement for most online lenders is that the business must have a checking account.
- A copy of your business lease: If renting space or leasing equipment essential to your business, include a copy of the lease agreement.
Conclusion
Some lenders will only require some things here, but this is an excellent place to start since some will ask for more information. It’s a good idea to have these documents ready whether you need them for any particular business loan application because they will help you understand some of the critical questions lenders will likely ask.
By keeping this information at hand, you will not only be able to see what’s happening in your business, but it may even increase your chances of success.
