What Will You Need to Apply for Small Business Financing?

What Will You Need to Apply for Small Business Financing?
Updated May 10, 2023
Julie Bawden-Davis
Written byJulie Bawden-Davis
Catherine Cohen
Edited byCatherine Cohen
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Banks reject 80% of small-business loan applications, meaning the odds of being turned down are high. Why? 

Sometimes, it’s a poor business plan, an out-of-touch valuation, or a shady founder. But frequently, the culprit is insufficient documentation. In other words, the small business owner doesn’t have the proper records the lender needs to make a decision.

That begs the question: What information do you need when you apply for a small business loan? When you apply for financing, it can literally pay to come prepared. So, before you click “Start application” or sit down at the lending officer’s desk, take a few minutes to gather the needed info. It’ll ensure the entire process goes smoothly. 

Must-Have Details

First and foremost, not every lender is the same. The bank down the street may have a laundry list of items they want you to have before you start the application, while an online lending marketplace like Lendio may only need a few must-have details to get the process started. At the very least, every lender or lending marketplace will ask for the following:

1. Amount You Want to Borrow

Whether you’re applying for a $1000 business line of credit or a $10 million loan to build a new manufacturing facility, the first thing almost any lender wants to know is how much money you need (yup, just like on Shark Tank). 

2. Business Information

They’ll want to know when you started your business and general information about it, including its owners’ names, addresses, and other basic details. 

3. Personal Information

Lenders require you to provide your personal information, including your birthday and social security number, to verify all business owners’ identities.

4. Bank Statements

Three months of business bank statements. Wish it were simpler? You may be allowed to connect your business bank account rather than manually uploading images of bank documents.

If you apply through a financing marketplace, the preliminary information below may be sufficient to see what types of financing you qualify for:

  • A copy of your driver’s license or state ID

  • Voided check from your business account

  • Proof of business ownership, which could be a business license, articles of incorporation, or something similar

  • Month-to-date business transactions

If additional details are needed, a financing manager will let you know.

Additional Documents That May Be Required

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Depending on the lender you work with and the type of loan or financing they offer, you may also need to provide some or all of the following details. Note that each will help the lender and their underwriter — the person or team that decides on your application based on perceived risk — determine whether they have a financing option that fits you, your business, and your situation.

Your Personal Credit Score

You may need to estimate your personal credit score range, although lenders will also confirm your score with a credit agency. The good news is that perfect credit is not essential for financing, so a less-than-stellar score shouldn’t stop you from applying.

Time You’ve Been in Business

“Amount of time in business” can be significant when obtaining financing, but how valuable your time in business is depends on the lender’s preferences and the financing option they offer you. 

For example, a bank may have a policy to fund only businesses that have been around for two years or more, but an online lending marketplace may offer options that work with startups or enterprises operating for at least six months or under a year. That means the online marketplace could extend a financing offer to a 6-month-old startup because the startup’s receipts fit the lender’s requirements. 

In other words, don’t second guess yourself! It’s always easier to apply so you can see what’s available to your business and situation.

Your Business Structure 

Sole proprietorship? Partnership? Limited liability company? Corporation? Some lenders prefer working with specific business structures because they’re less risky. If you’re not the sole owner of your business, you’ll likely need to provide information on all owners and their involvement in your business.

Your Tax Returns 

Lenders might request tax returns to verify profit or loss from business, among other things.

Your Business Plan

Some lenders will request a copy of your business plan. They might review it to evaluate the legitimacy of the problem your business solves and your solution to it, as well as how you plan to bring your solution to market and how you plan to make money from it. 

Don’t make the mistake of thinking that only apps and tech platforms solve problems. A hair salon could solve the simple issue of geography — no other hair salon is closer than six blocks away! A lender may review your business plan to fit their loans and lending strategy.

Your Business Credit Score

Your business has a credit score based on your industry, size, revenue, and history of payments to suppliers and lenders; however, most business owners don’t know theirs. If a lender needs your business credit score, they will research it. 

Additionally, most lenders will check your personal credit score, although an application can be submitted and reviewed by some lenders and lending marketplaces without impacting your credit.

Your P&L Statement

A lender may ask to see a year-to-date profit and loss statement updated within the past 60 days or other documents that indicate your cash flow, like a balance sheet or a debt schedule. Your accounting software can help you gather these documents.

Your Employer Identification Number

The IRS uses this unique 9-digit number to track your business’s tax returns. Not all companies need an Employer Identification Number (EIN), but you can get one for free by applying at the IRS website. The number also makes it easier to separate your personal and business finances.

Your Bank Statements

Lenders will review recent bank statements to ensure that your claims about your business’s financial history are accurate. You need a separate bank account to track your business expenses, or getting a small business loan will be challenging. It also helps distinguish your personal finances from your business finances.

Your Commercial Lease

If you rent your business space, a lender may ask to review your commercial lease before making a financing decision.

Your Accounts Receivable and Payable Reports

How good is your business at getting paid for its goods and services? How well does it pay its bills, and what type of recurring payments does it have? Lenders need to know the answer to these questions and accounts receivable and payable reports provide that answer.

Finally, lenders want to know if you have any legal obligations or agreements. They may ask if you have a partnership agreement, supplier contracts, franchise agreements, and other legal contracts.

Small Business Financing Solutions

Remember, these document requirements for small business financing vary by lender and will likely be different if you apply in-person at a bank vs. using an online lending marketplace. 

Lendio is an online lending marketplace that uses a single, 15-minute application to access offers from up to 75+ other lenders offering various financing options. Plus, if you’re not sure if you’ll qualify or not sure of the type of financing you’re looking for, you can apply quickly with no impact on your credit. That way, you’ll know what’s available without committing too much time and be that much closer to approval and funding.

Originally published on October 20, 2022, and last edited on May 10, 2023.

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