Every lender is a little different when it comes to asking for business and personal documentation for a business loan or lease. Obviously, the smaller the loan, the less documentation will be required. For example, many banks offer an unsecured business line of credit. These business lines of credit range in size from $25,000 to about $150,000. Larger banks will often take a loan application over the phone or in person at a local branch. Credit decisions are almost solely made based on the personal credit score of the owners. Often there is no or very little documentation required. However, if your business needs substantially more cash, or if the loan cannot be made using this “low doc” approach, your lender is going to ask you for additional documentation.
Here is a comprehensive list of what lenders will ask you for. This list is sorted in a “top down” format, meaning the items at the top are most often needed, whereas the items closest to the bottom are commonly but not always used. During the next several posts, I will explain in more detail each of these items and why a lender would request them.
- Complete business tax returns for last 2 or 3 years
- End of year business financial statements for last 2 or 3 years
- Interim financial statement dated less than 90 days old
- Current accounts receivable aging.
- Current accounts payable aging.
- Complete customer list
- Owner’s personal financial statement
- Owner’s personal tax returns for last 2-3 years
- Source and use of funds schedule
- Inventory listing
- Business plan including revenue forecast
- Building plans if construction related
- Company articles of incorporation
- State issued corporate charter
- State issued certificate of good standing
- Assumed name certificates
This list is very comprehensive and I certainly don’t want to scare anyone, and your lender may not require many of the items on this list. However, it is good business knowledge to know what these items are and why a lender will want to review them during the credit decision process.
My 15 years of lending experience has taught me a few important things about putting a loan package together. Starting in the next post, I will discuss each of the items in more detail, but first I want to give readers a three tips about the process.
Tip # 1: Start by knowing exactly which of the items on this list your lender will require.
Tip # 2: Do not take each document to the lender one at a time. You will wear the lender out quickly. Get all your docs together (or at least most of them) organize them in a logical way, and then present them at one time. Lenders want to review your complete file one time without putting it down and having to pick it up when you deliver new documents. Bottom line is a complete file gets processed and approved quicker than one that comes together slowly.
Tip # 3: If you promise to have something to your lender by a certain date, try to keep your promise. Lenders often schedule their loan review work in advance of getting a package or additional required document. If your lender has budgeted their time for you and your stuff isn’t there, it tends to cause them to work a little less hard when you do get it to them.