6 Documents to Prepare When Applying for a Loan | Fora Financial Blog
6 Documents to Prepare When Applying for a Business Loan
December 09, 2020

6 Documents to Prepare When Applying for a Business Loan

Applying for a business loan is one of the best ways you can invest in your business and ensure that it becomes financially secure. However, the loan application process can sometimes be quite complicated, especially if you’ve never pursued outside funding options before.

Depending on the lender, there may be several specific documents required in order for you to get approved. If these documents aren’t provided, or if incorrect information is supplied, it could lead to your business getting denied necessary funding.

In this post, we’ll discuss some of the documents that are frequently requested in the loan application process. Typically, the more information that small business owners can provide to lenders, the easier it’ll be to get quickly approved.

How to Prepare Six Common Business Loan Documents for Your Application:

1. Credit Report

To gain access to additional capital, your business should ideally be able to demonstrate a history of paying back loans in full and on-time. Although having a poor business or personal credit score won’t necessarily make it impossible to get approved for a loan, it’ll likely prompt lenders to give you higher interest rates or smaller loan amounts.

The differences between your personal and your business credit histories will depend on the specific structure of your business. Usually, it’s recommended that you try to create a separate legal entity for your business (LLC, Partnership, Corporation, etc.). This way, factors such as late payments on old student loans won’t affect your lendability as a business owner.

Having a credit report available when applying for a small business loan can be beneficial if you have an exemplary score that will make you an ideal loan recipient.

 2. Bank Statements

Usually, small business lenders will want to review your business’ recent bank statements. Not only can they prove the legitimacy of your business, but they can also help you defend your future cash flow expectations. Lenders are much more likely to lend to businesses that they believe are actively earning revenue while managing their expenses in a healthy way. Due to this, it’s important that your bank statements reflect this.

3. Tax Returns

Your business’ tax returns can illustrate how your business has performed in the past. If your business is brand new, you should ask your accountant to help you create a projection of what your tax returns might look like in the upcoming year.

When filing your taxes, it’s important to balance maximizing deductions while maintaining the image of consistent revenue. Although writing off a significant portion of your taxes can allow you minimize your annual expenses, having too many tax deductions may create some complications with potential lenders.


4. Income Statement

Your income statement is a report of how your business has historically experienced cash flows. Generally speaking, an income statement will be clearly divided into columns of revenues and expenses.

Income statements are very useful for lenders who want to understand how a business has performed over the past year(s). Even if your expenses exceed your revenues — which is often the case for newer businesses — all types of lenders will want to view your income statement.

5. Balance Sheet

There are several differences between an income statement and balance sheet. While your income statement is a historical report, your balance sheet is a snapshot of your current financial situation. A balance sheet will represent your business’ currents assets, liabilities, and sources of equity. Each of these figures will be very important to lenders.

Essentially, the purpose of a balance sheet is to illustrate what your business currently owns and how much you currently owe. If your liabilities substantially exceed your current assets, you may have a more difficult time securing a small business loan with a low interest rate.

6. Budget and Future Cash Flow Projections

When considering you for a loan, lenders will want to know how your business plans to utilize the financing, and what your future plans are. Still, because your budget and future cash flows are only projections, you’ll often be afforded some freedom with your claims.

To secure a loan, you should create two future scenarios. The first scenario will illustrate how you believe your business will perform without any additional financing.

Then, the second scenario should reveal how your business will be able to produce better outcomes once you receive a loan. Hopefully, this will convince lenders that you’re a viable candidate that could successfully utilize and repay a loan.


Lastly, remember that paperwork may vary depending on the financing option you pursue. If you apply for a business line of credit or merchant cash advance, the requirements may differ from that of a traditional loan. In addition, required paperwork may vary by lender. If you pursue an SBA loan, they also have their own prerequisites.

Overall, you must assure lenders that providing your business with financing will be mutually beneficial. By doing this, you’ll be more likely to secure a loan with a low interest rate. Although there are numerous variables considered during the loan underwriting process, having the documents mentioned in this post available will certainly be in your best interest.

Editor’s Note: This post was updated for accuracy and comprehensiveness in December 2020.

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Andrew Paniello
Post by:
Andrew is an experienced writer with a degree in Finance from the University of Colorado. His primary interests are investing, entrepreneurship, and economics.