Buying, building or expanding your business is a significant project that requires a great deal of planning, including getting pre-qualified for a loan. Pre-qualification can typically take from three to five business days. Adequate document preparation can help ensure that your pre-qualification is quick.
Before approving a loan for your project or purchase, we want to know that you have adequate experience to manage your business, sufficient collateral to cover our risk and enough cash flow to repay your debt. The following is a list of the documentation typically required when applying for a small business loan for a business purchase, expansion, remodel or refinance, or a new construction project.
- Personal Financial Statement. We will ask you to provide a personal financial statement showing your income, the value of your assets (such as your home, vehicles and savings accounts), outstanding debts, the amount of your debt payments and monthly overhead. This will give us a good idea of your personal cash flow and the amount of additional debt you can comfortably absorb. If you’re married, you will need to have your spouse sign this document as well.
- Estimated Use of Funds. We will look for a description of how you plan to spend or use the funds loaned to you. For example, if you are building a business or expanding your current facility, plan to outline projected costs for your architect, contractor, designer, equipment vendor, and other planned expenditures. If you are purchasing a business, you should include real estate and facility purchase costs, staffing, equipment, technology purchases, and any other transition costs.
- Year to Date Profit and Loss (Income) Statement and Balance Sheet. If you already own a business that you are remodeling, expanding or refinancing, include a current profit and loss statement (also referred to as your Income Statement) and a balance sheet dated within 90 days. This will allow us to see how the business is performing year-to-date. These can be unaudited reports from Quickbooks or your accountant.
- Personal Tax Returns. Plan to provide your personal tax returns for the past three years. We will use this information to verify your annual income.
- Business Tax Returns. If you own other businesses, we will want to see three years of tax returns as well as an interim profit and loss balance sheet on those businesses.
- Business Debt Schedule. If you currently own your business, we will ask for a business debt schedule detailing your current business loan, lease, or line of credit obligations. View our template.
- Authorization to Release Information Form. This form gives us your permission to check your credit score. If you’re married, you will need to have your spouse sign this document as well. View our form.
- Management Resume. We may also ask for a resume or curriculum vitae, particularly if you are planning to fund a business purchase. The objective of your resume is to show that you have the business experience necessary to manage your own business successfully. You may send a personal resume, but we will also need this management resume signed and dated as well. View our fillable template.
We will look at your credit (FICO) score to analyze your creditworthiness. FICO scores can range from about 300 to 900, with the vast majority falling in the 600 to 700 range. For business loans, most lenders look for scores in the mid to high 600’s. The key factors influencing how your credit score is determined are past delinquencies, credit management (do you always max out your credit cards?), age of your credit file, frequency of credit applications, and credit mix. Before applying for your loan, be sure to check your FICO score to ensure all information is accurate, and take whatever steps are necessary to strengthen your financial profile.
Once you have gathered the necessary documentation and confirmed an acceptable FICO score, you are ready to sit down with your lender to talk about your needs and the type of loan that will work best for you. With your loan pre-qualification secured, you have completed one of the most challenging aspects of your project and can now move on to one of the most rewarding – growing your business!