Obtaining a small-business loan can potentially be a lengthy process. However, if you understand your lender’s qualifications ahead of time, your process will be much smoother.
At LendSpark, we see thousands of applications annually from small business owners of all industries. As follows, we are proud to be able to help all types of small business owners. Whether you are seeking working capital, equipment financing, or commercial real estate financing, being prepared when you apply gives you a “leg up” during the underwriting process.
Below, our team shares the top five small business loan requirements that we look for when evaluating applications.
1. Business Entity Filings and Status
When you apply for a small-business loan, we need a wide range of documentation. The first information we look at when evaluating small business loans is business entity filings and status. Many businesses don’t separate personal and business-related matters, whether that is bank statements, state filing, or licensing. This can make it more challenging when putting together this information. LendSpark suggests that first, ensure your company is properly filed with your state. Additionally, ensure your status is Active and in Good Standing. Lastly, you need to check that all owners are adequately listed with the state agencies, especially if there has been a change in management.
Completing those above steps makes it easier for our team to evaluate your information and properly put together your loan information.
2. Bank Statements
The people evaluating your loan application see this as a sign that the company is properly established with a local/national bank. With your business name and proper address on the banks, business bank statements give you more credibility with underwriters. In addition, with financial technology companies like Plaid, it may be easier to update banking information and allow the underwriters to check for any red flags. We typically require bank statements ranging from the previous three months to the last three years. Bank statements depict the cash inflows and outflows of your company. Thus, lenders can estimate your capacity to repay loans, cyclical tendencies, and the general stability of your business.
3. Consistency in Information
As stated above, consistency is essential. We want to see consistent information, such as the address of the business, on bank statements, website, secretary of state filings, and more. This again gives the credit team a higher level of confidence that your business is managed correctly and that we are offering a small business loan to you.
4. Updated Financials
Many times, loan applications will require financial statements, including AR and AP aging. Why? This is because financial statements are essential indicators of past and future business success. As a result, they are a crucial prerequisite for each loan application. These are frequently provided as part of your business plan, but it’s a good idea to prepare and have them ready in case you’re needed to submit them separately. If your financials are not correctly updated, it could delay the process and hurt your chances of obtaining a loan.
5. Updated Owner Information
How painful would it be to get approved for a loan, get to the loan documentation signing stage, and find your Drivers License has expired? This is why owners should keep all necessary documentation such as Drivers License, Passport (if available), and another necessary documentation current. Before you apply for a loan, we recommend going through all forms of identification, making sure that everything is up to date.
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Underwriting a loan consists of many layers and many different eyes on an application file. Think of it this way: the “cleaner” the file, with current information, proper and updated financials, and consistency is proven to give you a much higher chance of moving through the credit process.
Have questions? We totally understand. Contact LendSpark today for more information on your small business loan. Our team offers business loans with shorter payment terms and smaller regular payments compared to traditional bank loans. Learn more today!