Business Loan Qualifications

What do you need to apply for a business loan? It depends on the lender and the bank’s own internal rules a great deal. Also, it depends on the type of loan you’re going for: Applying for a SBA 7(a) loan has stricter rules than, for instance, merchant cash advances. Sometimes, applying for a small business loan can be much more flexible, but these are some of the more popular things traditional banks will ask for.

A Checklist of Items You’ll Likely Need

  • Your Résumé(s): Your resume (and your partner’s, if you have one) should be provided and hopefully convey business experience and compelling qualifications.
  • Personal Background Information: This is a document that may be asked for that should provide some background information on who you are. It may ask for the following:
    • Previous addresses
    • Prior names you’ve used
    • Education
    • Criminal record
  • A Loan Application Form (When Applicable): An alarming number of banks don’t have an online application.
  • Personal Credit Report: Your credit score (and your credit history in general) should be stellar when applying for traditional loans: Above 680 is best. Many people have difficulty with these qualifications. For business loan programs that aren’t 100 percent traditional, there’s more leeway here. Either way, you should get a credit report and check it before the banks do.
  • Personal Bank Statements: Come to the table with at least a year’s worth of financial statements.
  • Collateral Documentation: As far as business loan qualifications go, this is the one that people likely stress out about the most. What forms you bring depends on what’s on the line: the title for your car, the deed to your home, or papers for some other property.
  • Loan Application History: What sorts of loans have you applied for in the past? Did you get them? Have you paid them back?
  • Personal Income Tax Returns: Usually, this is required for the previous three years, though going back further isn’t a bad idea.

When You’re Already in Business

  • Business Credit Report: Your business credit and your personal credit are different! This score should be above 650.
  • Business Bank Statements: Usually, banks require a year to two years’ worth of statements.
  • Profit and Loss Statements: P&L statements usually need to be current, usually within 180 days of your application, going back about three years.
  • Other Financial Statements: Balance sheets and cash flow documents are usually what’s required here.
  • Legal Documents: Bring important paperwork on liens, owners, third-party agreements, or anything else the banks should know about.
    • Licenses, registrations, and certificates
    • Articles of incorporation
    • Leases (or documentation from your landlord)
    • Contracts with third parties
    • Franchise agreements
  • Business Income Tax Returns: Keep your business’s tax returns separate from your personal ones while also bringing three years’ worth.

Mastering the Business Plan

Whether you’re an experienced business owner who just needs a small loan or someone off the street hoping to create a successful startup, having the right business plan may make the difference between getting the loan or not getting it out of all of these other qualifications. For business loan newcomers, you may want experienced professionals or even legal counsel looking over your work. The bank itself may have its own rules, and many people will have their own advice on which business loan qualifications to include in the plan, but these are some of the top items to have:

  • An executive summary
  • A business profile/description
  • Product or service descriptions
  • Management team information
  • A loan request and repayment plan
  • Projected profit and loss statements
  • Projected cash flow
  • Industry and competitive analysis
  • Marketing and sales strategies
  • SWOT analysis (strengths, weaknesses, opportunities, threats)

That answers the question of “what do you need to apply for a business loan?” But what you also need to keep in mind in terms of the loan-awarding process is that it’s fairly nuanced: No one really is forced to give you money if they don’t feel that it’s right for whatever reason. The process can be long and difficult, and sometimes, it’s unrewarding. Fast funding solutions often come from alternative sources, such as online lenders like BFS Capital, which can simplify the process. See if you qualify for one of our small business loans today.