Gone are the Wild West days of acquiring a loan on a handshake, your word, and a good reputation. There are thousands of small business owners out there seeking loans, and banks are only lending to those who are prepared and able to pay it back. Here’s what a bank will want from you when you seek a business loan:
- Your Business’ Past and Current Financial Details. This includes current loans, past loans, debts, all bank accounts, investment accounts, and credit card accounts. This information will all need to be supported by a tax ID number, addresses, and contact information.
- Collateral. Most banks will require some sort of collateral before extending a business loan, usually in the form of personal assets or house equity for a startup. In order to reduce the risk of lending to you, they need to know that you believe in your business enough to take some risk as well.
- A Solid Business Plan. Don’t have one? It’s time to right one. Before a bank will give you a business loan, you’ll need to provide them with a summary of your company, your future plan, target market, employee plans, etc. It can be a document you write yourself–nothing too fancy, but definitely legit.
- Insurance Details. Many times, banks will ask business owners to take out insurance against the death of one or more of the founders. This helps the bank reduce risk and ensure that the loan will be paid off in the event of a tragedy.
- Complete Accounts Receivable and Accounts Payable Details. You’ll likely have to provide these two things, plus credit references, and the contact information of companies that sell to your business on account that can vouch for your payment behavior.
- Personal Financial Details. If your personal finances are a mess, it is telling of your business finances. Banks want to see that you have all aspects of your finances in order before extending a business loan. You’ll also need to provide your social security number, net worth, bank accounts, debts, investments, credit cards, vehicles, loans, mortgages, and more.
- Past Tax Returns. Obviously.
Your lender may request more information from you, based on the type and amount of business loan you are seeking, but this is a quick list to get you prepared.