What Lenders Look for Before Granting a Small Business Loan

A lender will review your personal credit history and FICO score, especially if your company does not have a track record of producing revenue. Among the personal credit information that may be considered are:

• personal credit card debt
• personal loans
• liquid assets
• real estate holdings
• tax returns
• personal financial statements

Lenders will consider your personal spending habits, including how you use credit cards and handle installment debt. Lenders look askance at individuals with substantial personal debt, as they are less likely to withstand a reduction in income during slow times.

Lenders pay close attention to balance sheets. Any uncertainty or discrepancy of their contents will raise a red flag. They will also expect a business summary that describes, in detail, the nature of your business; how the funds from the loan will be used; and available working capital, with descriptions of how it will be allocated. It should also describe how you plan to differentiate your business from competitors.

While being prepared and organized can save time and possibly help your loan get approved, too much information may be more of a hindrance than a help. There is some information that lenders may want to see later on in the process, such as proof of insurance for collateralized items or lease documents. Have this information ready to submit if your lender requests it, but don't include it as part of your initial application. Overwhelming your loan officer with too much information may actually slow down the process.