I’m asked to share the secrets of how to get small business loans all the time, and I’m forced to say the same thing time and again. The secret to obtaining a small business loan is you. This isn’t going to be one of those cheesy things where I tell you all about the power of wishes and wanting it. Perseverance certainly is important, but that won’t get you the loan you need by itself. The truth is that simply fulfilling the small business loan requirements to the very best of your ability is the number one way to increase your chances of success, so let’s look at them. Your business will definitely need the following documentation in order to receive serious consideration from a lender.
- Business profile- Carefully prepare a document that describes your business type, annual sales, number of employees, length of time in business, and ownership details. There’s no way a lender will feel comfortable helping you if he or she doesn’t have a grasp of your business’s characteristics.
- Loan request- You’ll need a detailed description of how you plan to use every dollar of the loan. Be careful not to underestimate the amount you need. You certainly won’t inspire confidence in your financial handling if you have to come back later because of an error in judgment. I also don’t recommend requesting the maximum loan amount.
- Collateral- If you can offer collateral to secure the loan, — and I highly recommend that you do — prepare a document that describes it. This can include equity in the business, borrowed funds, and available cash.
- Financial statements for your business- Make the last three years’ worth of complete financial statements available, as well as any current interim financial statements. These should include:
- Balance sheets from the last three fiscal year-ends.
- Income statements demonstrating your profits and losses for the last three years.
- Cash flow projections indicating how much cash you plan to generate in order to repay your loan.
- Accounts receivables and “payable aging.” Break your receivables and payables into 30-, 60-, 90-, and more than 90-day old categories.
- Personal financial statements- Share statements of all owners, partners, officers, and stockholders who own 20% or more of the business for the last three years. These should list all personal assets, liabilities and monthly payments, and include your personal tax returns from the last three years.
All of these small business loan requirements are important to lenders as they consider your candidacy for a loan. The more fully you can fulfill these small business loan requirements, the better your chances will be of obtaining the loan you need.