Building Your Loan Package

If you're ready to ask your bank for a business loan -- whether for a credit line or a term loan -- before you make your request be sure you have your ducks in a row. This is your chance to demonstrate to your banker that you're a sophisticated business person well worthy of the loan.

So, how can you help your loan process along? Make sure you have all the following documents and information ready to go.

Business profile. This document describes your business, including annual sales, number of employees, length of time in business, and ownership. A very important part of this profile is the professional resume of you, the owner.

Business plan. If you're a new business this document is critically important. Your plan should convey all important facts about your business in a concise manner. Your business plan may range anywhere from 5 to 20 pages, plus financial projections. Make sure the plan is a really working document that you can also use as your business blue print once you get your loan.

Loan request. Your banker cannot read your mind. Detail the amount of money requested, how the funds will be used, the type of loan, etc.

Collateral. Describe what will be used to secure the loan, including equity in the business, borrowed funds, and available cash. And yes, you may even need to offer up other non-business personal assets for collateral?

Personal financial statements. You will likely need to provide financial information for anyone who owns 20 percent or more of the business, including owners, partners, officers, and stockholders. There are plenty of personal financial statement forms to be had on the Internet or you can get a form from your banker.

Business financial statements. Provide current statements to include a balance sheet, income statement, statement of cash flows, accounts receivable aging and a detailed accounts payable aging. Cover a minimum of three years. If possible, have these statements compiled, reviewed or audited by your CPA firm.

Personal income tax returns. Copies of your three most recent personal federal income tax returns including all attachments.

Forms K-1. Copies of the Form K-1, this is what reports your income from S corporations, partnerships, estates and trusts on your returns.

Optional documents. While not necessarily mandatory some documentation may help your chances in getting your loan. Examples are letters of intent from commercial accounts stating their intent to do business with you; market data showing demand for your type of business; research on competitors, including information on their customer base and price points; etc.

The following documents, while not initially necessary for your loan package, will be needed at some point in the process. So go ahead and dust off the files and pull them for copying.

  • Articles of incorporation or formation
  • Partnership or LLC agreement if applicable.
  • Depreciation schedules
  • Detailed inventory listings
  • Proof of insurance and the contact information for your insurance agent.

A Big Caution

For many small business clients one frequent reason they fail to secure loans or investment money is the quality and accuracy of their financial statements. Don't be fooled into thinking that just because you use an accounting software program your financial statements are accurate. We see new clients every week whose accounting software bank account is reconciled but the financial statements are a true train wreck. Any banker, investor or potential partner who understands finances would look at the statements make a very poor initial judgment of the business... and the business owner.

What can you or should you do? If you are not a financial professional or don't employ a professional be sure to have your computerized accounting records reviewed a couple of times each year by your CPA. A small investment in keeping your records and financial picture in order will pay you big dividends.

And your added bonus is...

If you do commit to making sure you always have accurate timely financial statements not only are your chances of getting a loan better, but you'll have the business information necessary to discover how to increase your profits and opportunities.

Free, No-Obligation Consultation

I would be honored to chat with you about your accounting, tax and finances whether personal or business. I offer a Free, No-Obligation consultation (at your place or mine). During our meeting we will discuss your concerns and questions and let you know how we can help you and our costs. My consultations are not just sales pitches, I will offer you some solid ideas and solutions to help you right off the bat. To schedule a consultation at a time convenient for you, call me at any of offices or call me toll-free at (888) 758-5966 or click here to email me.

I hope you found this information useful. I am excited by the fact that my practice is growing. The key to my firm’s growth — and probably your business too — is referrals from satisfied clients, customers and friends like you. If you know of a friend, colleague or business that would like to grow with us please let me know.