Getting a small business loan can be challenging enough.
But, if you’re not prepared, you could find yourself scrambling to collect documents you are not familiar with.
This might be fine if you have time to spend but as we know most business owners don’t have tons of free time. When they need things, they needed them yesterday.
As someone who has been in lending for 22 years and spent about half of that working with business owners, I hate seeing businesses accept inferior loans because they think they can’t qualify for better options or the documents are just too much.
Do you know that if a client hands me a YTD profit and loss and balance sheet with the most recent years tax return I can tell people with about 99% accuracy whether they qualify for a more standard loan (simple interest with monthly payments) in just minutes?
Now I’m nobody special, just a guy who has been in lending long enough to understand the landscape, but I see it every week where business owners run into issues with supplying a simple profit and loss or balance sheet for the current year, or they don’t have a copy on hand of their previous year’s tax return. Having to show year to date numbers is no reason to give in and run to the loan sharks, the path of least resistance will most likely cost you Big TIME in the end.
Now don’t get me wrong I have extended my share of high interest loans in my day but there’s a time and a place and in some instances if the business can get a return on the investment even with the high cost then so be it if it’s the only option.
All I’m saying is don’t fold and think that’s the only route unless you 100% know why you cannot qualify for better loans. Getting turned down by the bank does not mean you cannot obtain a “bank style” loan in the private sector.
I can’t tell you how many businesses I have funded through the SBA or Private institutions after the client had previously been turned down by their local banks, it’s pretty much 99% of the loans I write.
What I want to get across in this article is what documents an owner should always have on hand when she or he is looking for capital for their business.
If you have these items handy when speaking with a lender I can assure you that you will get quick answers that could save you thousands.
Year to date profit and loss and balance sheet
This is an important document and not something you need to fear as a small business owner.
Thanks to technology companies like Quick Books, XERO, and Freshbooks have simplified the process of tracking cash flow, aged receivables, payables, and being able to print a P&L and Balance sheet with the press of a button.
Previous year business tax return
The income used to qualify a business for a loan comes from the most recent years tax return, of course there are exceptions in more complex transactions or in scenario’s where a business is looking for larger amounts of money but for most small businesses who are looking to borrow less than $1 million the spotlight will be on the most recently filed business tax return, make sure you have it when calling lenders to get options.
It will allow the person you speak with to give you some straight answers you can count on.
3 Months of business bank statements
Make sure they are the most recent 3 months.
How you manage cash flow is important so its important someone like myself has this data to make sure we can give you the answers you are looking for.
Now some may read this and think, “This is bush league stuff,” but not everyone is familiar with what lenders want and what they should have when looking for capital.
Be prepared as it not only will get you better and quicker answers, but it won’t make the loan process as stressful as you look around for capital.