10 Loan Requirements for Your SBA Loan Part 3

In this series, we have been able to discuss some of the loan requirements you will need to successfully finish up your SBA loan application. In this third and final portion of the blog series, we will discuss some of the pieces you need to apply for your small business loan. At Merchant Flow Financial, we make your loan process simple, by giving you this list of items that you will need. We do this to ensure that you are given everything you need to apply for your loan.

7. Personal and Business Income Tax Returns

In the last portion of the second part of this series, we discussed the importance of your personal credit score, as well as your business’s credit score. By having both scores, our loan officer will be able to determine how dependable you are as a borrower.
However, aside from your credit reports, we will also need your personal and business income tax returns. Just like your credit score, your tax returns will allow our lenders to gauge whether you are a reliable borrower.

But, what do your tax returns tell your lender exactly?

Well, by observing your tax returns, our lenders will be able to verify your income and determine if you can financially sustain payments for your loan.
For your business tax returns, lenders will use this information to determine how much income your business is bringing in. During your application, your lenders will ask to see the past three years of your personal and business income tax returns. This can obviously take some time to compile, so don’t assume that you can rush into your application without all of your paperwork.

8. Business Financial Statements

Aside from your business’s income tax returns, you will also need to submit other financial statements. Your lender will ask you for two main financial documents: your balance sheet and your profit and loss statement. Both documents will provide your lender with the information to determine how well you are running your business, your aptitude for keeping your business’s books, and your organizational skills.

Balance Sheet: Your business sheet shows how you are managing your business’s assets and liabilities.

Your balance sheet is a great way for your lender to “put a finger to the pulse” of your business. It demonstrates the current health of your business. As stated in this blog series, your assets are things that add value to your business such as inventory, land, accounts receivables, etc. Your liabilities are things that do not add value to your business such as expenses, debt, and accounts payable.

Profit and Loss Statement: This document is your income statement for your business.

Your profit and loss statement is your income statement for your business. This allows the lender to see your business’s revenues and expenses over time. This can give your lender insight into where the money for your business is coming from and where it is going. From this statement, your lender can be alerted if there are sums of money missing or unaccounted for.

Ultimately, with these two documents, your lender will able to clearly see the health and business practices of your business.

9. Debt Schedules and Bank Statements

Most businesses owe money to somebody. Debts, or money that is owed, are very common. However, your lender will want to see your business’s debt statement. In this document, you will need to break down your debt in monthly payments, which shows interest and principal due each month.
If you have substantial amounts of debt, this may inhibit you from successfully securing your loan. Unfortunately, if you have a lot of debt, most lenders won’t take the chance that you can’t pay off your loan and your debt at the same time. The good news is, your lender and you can go over you debt and find practical payment methods to ensure that you limit your debt. Once your debt is under control, you and your lender can then discuss the possibility of a loan.
Again, debt is natural for a business, and will not always exempt you from your loan. However, substantial amounts of debt can be an issue. Speaking with a lending officer will be the best way to determine how significant your debt is.
Your lender will also ask for your personal and business-related bank statements. This information will tell your lender where the money that you are receiving is going. This is primarily to discern if you are abusing your business.

10. Personal Guarantee and Other Legal Documents

For all SBA loans, you will need to submit a personal guarantee to your business loan office. In this document you must state that you will pay back the loan you are taking out in full. In the event that your business can’t afford to pay back the loan, you must guarantee that you will pay back the loan with personal assets. Though you may never need to pay back a loan with personal assets, sometimes called collateral, you have to agree to it in your personal guarantee document.

If you own more than 20 percent of the business associated with the loan you must sign a personal guarantee with your lender.

The legal documents you must submit to your lender are as follows:

  • Business Licenses and Registrations
  • Contracts With Third Parties
  • Lease Agreements for Equipment and Real Estate
  • Franchise Agreements
  • Articles of Incorporation or Article of Organization

Once you have compiled all of these items, you are officially done with your loan application! Congratulations!

Merchant Flow Financial Loan Offices

Though the loan application process might seem massive and complex, if you partner with the right loan office, they can help simplify the process for you. Instead of wondering and questioning what documents and information you need, Merchant Flow Financial has representatives that may be able to help you. We can not only give you advise to compile your application, but we can give you very clear directions of what you will need for a successful loan application.

If you are interested in a small business loan for your business, contact Merchant Flow Financial today.