How to Make a Business Loan Application

Business loan applications can be confusing to fill out.

Many businesses require financing in order to expand, hire and operate. Small-business startups often look for loans to get their business started, while existing businesses frequently seek funding for ongoing operations or for business expansion and capital investments. One of the most common forms of business financing is a loan from a commercial lending institution. Banks that make business loans are in business to make money themselves, so they require you to demonstrate your ability to repay the loan according to the agreed-upon terms.

Difficulty:

Moderately Challenging

Instructions

Applying for a Loan

1. Complete the application. You will be expected to provide detailed information about your business and the reason you are applying for a loan, including what you will use the money for, the collateral value of the assets you are purchasing, other debts you have outstanding, and the history of your company and management team. A small-business start up loan might require a loan guarantee from a government agency such as the Small Business Administration (SBA); a loan for an existing business usually can be approved on the strength of the business' financial statements.

2. Provide personal information about the officers and owners of your company. Many lenders require personal guarantees in addition to liens on collateral. The people responsible for managing the money borrowed will have to demonstrate a history of fiscal responsibility, especially in the case of business start up loans. Bankruptcies, criminal convictions and poor credit records can result in a denial of credit.

3. Provide a complete and detailed business plan that demonstrates the likelihood of success of your business. A solid business plan that includes detailed information about your products, markets, production, distribution and management practices will go a long way toward demonstrating your likelihood of success. For business start ups seeking a loan guarantee from the SBA, a detailed business plan is essential.

4. Provide tax and financial statements about your business. Tax returns demonstrate a history of income generation, and your balance sheet, income statement and statement of cash flows provide insight into the stability and financial health of your company. These documents will not be expected for a small-business start up loan.

5. Provide bank statements, documentation of assets and current accounts payable and receivable. Lenders will require information about your cash on hand, any assets that can be used as collateral for the loan, and your accounts payable and accounts receivable. Small businesses will be expected to provide bank statements for the owners as well.

6. Provide proof of legal compliance. You will need copies of your business license, any licenses or certifications required for your type of business, any contracts to which you are a party, franchise agreements, leases and articles of incorporation.

7. Gather all of your documentation, and present it with your completed application to your lending officer. Talk with him about any other information the bank requires, and answer any other questions he might have.

References

• Business Loan Checklist

Resources

• Small Business Administration