Are you thinking of the documents you need to get a business loan in order to cover, say, daily expenses, business equipment or business expansion? You really need this article if you answered yes.
Are you even aware that more than 50% of the businesses in the U.S. are running on business loans? You are probably a novice in the business world if you don’t. Nevertheless, as long as you see the need for your business to get a loan, you are reading the right content.
Spend the next few minutes exploring this article to properly equip yourself with the right documents you need to get a business loan.
To gather the right documents for a business loan, get:
- A Personal Credit Report
- A Business Credit Report (if Any)
- Personal Tax Returns
- Business Tax Returns (if Any)
- A Business Plan
- A Business Loan Proposal
- Business Financial Statements
- Business Bank Statements
- Business Legal Documents
- Business Licenses, Permits and Insurance Policies
1. A Personal Credit Report
To begin compiling the required paperwork for a business, first obtain your personal credit report. Prove to your lenders that you are not a risk to them by tendering a good credit report. Lenders check your credit report not only to know your credit score but also to see your credit history.
They (lenders) want to know your payment history and credit utilization, including fraud activities (if any), and more.
2. Get Your Business Credit Report (If Any)
To have the right documents for a business loan, provide your business credit report if you have one. A business credit report works like a personal credit report because every lender needs a credit report to determine your creditworthiness.
If your intended loan covers start-up capital for a new business, lenders may require your personal credit report.
>>>MORE: What is Business Financing?
3. Get Personal Tax Returns
To ensure you are on track in getting the required documents for a business loan, also include personal tax returns. Being able to file a tax return demonstrates that you are a responsible citizen and also convinces the lender that you are financially responsible.
Lenders also use tax returns to estimate your net income, which enables you to calculate the loan amount you are eligible for.
4. Get Business Tax Returns If Any
To follow the required documents for a business loan, be ready to tender your business tax return if you have any. Business tax returns give your potential lenders a better understanding of your business’s financial condition.
Through tax returns, they can know the interest you paid on a loan in the past and the interest you earn on secondary sources of income.
5. Get a Business Plan
To compile the official documents required for a business loan, include your business plan in the compilation. Having a business plan makes you appear as a good candidate before your lenders.
It shows your business has an operating plan (and vision) for the present and the future. Ensure your business plan contains your organization’s financial history and a balance sheet, in addition to your business’s goals.
Here is the most important information that must appear in your business plan:
- Your business description
- Data on the ownership and management of your organization
- Products and services that your business offers
- Actual sales and projected sales
6. Get a Business Proposal
To possess genuine documents for a business loan, never forget to add business proposals. Similar to a business plan, a business proposal helps you demonstrate the viability and sustainability of your venture to your lenders through written documents.
While a business plan outlines your business goals and possible achievements, business proposals compel an individual or a target organization to believe in your dream and goals for your business. Therefore, ensure your proposals give your lenders worthwhile reasons to finance your business
7. Get Your Business Financial Statements
To submit adequate documents for a business loan, ensure you add your business financial statements. It’s another way of detecting the health of your business to know whether it can pay back the loan or not.
Business financial statements contain cash flow, profit and loss, owner’s equity and balance sheet data. Additionally, provide actual and projected statements to your lenders.
8. Get Your Bank Statements
To really provide one of the most important documents for a business loan, tender your bank statements. Use bank statements to display to lenders the picture of your business’s financial health, including information on deposits, withdrawals, and balances—all of which assist lenders in determining your monetary credibility.
Note that your bank statement has to cover 6-12 months. If you are managing multiple bank accounts, see to it that you share the account statements of those accounts.
9. Get Business Legal Documents
To tender official papers as part of the required documents for a business, provide your business’s legal documents. Start with the EIN (Employment Identification Number) that the IRS assigned to your company.
Prepare your business incorporation documents that contain information on the establishment, such as articles of incorporation, an operating agreement, meeting minutes, and corporate bylaws if you are running an LLC type of business.
>>>GET SMARTER: How to Get a Large Business Loan With Bad Personal Credit
10. Get Business Licenses, Permits And Insurance Policy
To establish the legal ownership of your business, tender your business licenses and permits to lenders. Licenses and permits—such as seller permits, special permits, industrial licenses, federal licenses, etc. —give legal protections to a business and its owner.
These licenses and permits also boost your business’s credibility because they shows your lenders and investors that they are giving their money to the right business (and person).
Also, submit to your lenders business insurance policies that protect you from unexpected costs of running a business, like an accident, lawsuit or natural disaster.
Recap
To have the proper compilation of the required documents for a business loan, begin with securing both your personal credit score and your business credit score, including your personal and business tax returns. Then proceed to add a copy of your business plan and business proposals.
Furthermore, provide your business’s financial statements and your bank statements. In addition, tender your company’s legal documents, including licenses and permits. Do you have the documents ready?
If yes, you are good to go to apply for a business loan from the lender of your choice. However, be aware that these documents may vary from lender to lender. Before you choose a lender, always compare lenders to know the suitable one for your business.
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