For nearly all small businesses, getting off the ground is the hardest part and one of the most important aspects of the start-up process is securing your loan. Obtaining the right amount of money and a manageable interest rate are keys to the success of your small business. You should know the requirements for a small business loan well before you need to obtain the money, as it can take time to get the documents together . There will be different loan requirements depending on the specific institution you select as your lender — though generally they are for the same purpose.
Banks will want to know that you are reliable. They can get this information from things like credit scores, but will also require your criminal records. The credit scores are generally obtained from all three major credit rating agencies. There are other background pieces of information they need such as recent and current addresses, any other aliases and other personal information. All this information you should have to hand normally or is easily obtained.
Personal Business Ability
The lenders will want to be confident that you are capable of running your small business and making it successful. Lenders will use things like resumes and look into your experience as a manager or general business person — depending on the nature of your small business. This may take into account the success of businesses under your management in the past, as well as the length of time worked at each place —demonstrating dedication to a single company.
The banks will want to understand the nature of your business and see how it can succeed. They are really only concerned about getting their money back with interest, and they need to know that your business is able to generate that kind of profit. They will assess the potential for growth in both the short and long term. The actual documents required for this will vary from bank to bank and will also depend on the type of small business you are starting.
There will be personal and business bank statements required, along with recent income tax returns. These are fairly standard documents to have on file when lending to anyone. There are also many legal documents which may be required, depending on your business. These may include your business license and proof that your business is registered. If you have contracts with third parties, including leases or franchises, they may need to be kept on record as well. Articles of Organizations are also commonly one of the requirements for a small business loan.
Information about What the Money is to be used for
The lender will want specific information as to what the money is actually going to be used for. They are putting forward a lot of money and are anxious to know that it will be put to good use and will be paid back. They will require specific details of your suppliers for key purchases, as well as to know who will be making decisions on the management of the business going forward. You must be sure to have supplier details ready, as well as the information on the rest of the management team.
Banks don’t require an extraordinary amount of information, considering they are lending you money for your business. The main requirement for a small business loan is really to be organized with all the information, so the lender is confident in your management capability. Run through all the possible scenarios before you go to your meeting to prove that they should have confidence in your ability, and you’ll be half way to securing the loan already.