With all the different business loan options available today, qualifying for a loan is a possibility for almost every business owner – but it requires a more savvy approach to evaluating your options picking the loan that best suits you and your business’ situation. Lenders evaluate both your personal credit history and your business credit profile to determine your eligibility, but hopefully the following information will provide you with what you may need to prepare to apply for a business loan.
As you prepare to make a loan application, be prepared to answer questions about what you need the funds for and how you plan to make repayment. Any lender, including traditional banks and online lenders, will want to get a clear picture of your credit history, your business, and your business’ future plans. Preparation is key and you can stay one step ahead of the game by having all of the necessary documents and data at your fingertips. Every lender will have their own paperwork requirements, which you must complete to apply for a loan, and not all lenders require the same types of information, but there is some information that the majority of them will look for—including the following:
- Business Plan:
- Description: A detailed document outlining your business’s goals, strategies, market analysis, and financial projections.
- Importance: Demonstrates your understanding of the business and its potential for success.
- Financial Statements:
- Income Statement: Shows your business’s revenue, expenses, and profits over a specific period.
- Balance Sheet: Provides a snapshot of your business’s assets, liabilities, and equity at a given point in time.
- Cash Flow Statement: Details the inflows and outflows of cash, highlighting how well the business manages its cash position.
- Importance: These statements help lenders assess the financial health and profitability of your business.
- Tax Returns:
- Description: Copies of personal and business tax returns for the past 2-3 years.
- Importance: Provides lenders with a history of your income and helps verify financial statements.
- Credit Reports:
- Description: Personal and business credit reports showing credit history and scores.
- Importance: Lenders use these reports to evaluate your creditworthiness and history of repaying debts.
- Bank Statements:
- Description: Recent bank statements for your business (typically the last 6-12 months).
- Importance: Helps lenders verify your cash flow and financial stability.
- Legal Documents:
- Business Registration: Proof of your business’s legal status and structure (e.g., incorporation documents, partnership agreements).
- Licenses and Permits: Copies of relevant business licenses and permits.
- Importance: Ensures your business is legally compliant and operating within the legal framework.
- Accounts Receivable and Payable Aging Reports:
- Description: Reports that detail the age of receivables (money owed to you) and payables (money you owe).
- Importance: Provides insight into your business’s cash flow management and credit practices.
- Collateral Documentation:
- Description: Information on assets that you can offer as collateral (e.g., real estate, equipment, inventory).
- Importance: Secured loans require collateral, and documentation proves the value and ownership of these assets.
- Personal Identification:
- Description: Copies of personal identification documents (e.g., driver’s license, passport).
- Importance: Verifies your identity as the business owner.
- Debt Schedule:
- Description: A list of your current debts, including lender names, outstanding balances, and monthly payments.
- Importance: Helps lenders understand your existing debt obligations and assess your ability to take on additional debt.
- Detailed Loan Proposal:
- Description: A document explaining the purpose of the loan, how much funding you need, and how you plan to use the funds.
- Importance: Provides clarity to lenders on how the loan will contribute to your business’s growth and repayment plan.
Gathering these documents and ensuring they are accurate and up-to-date can significantly enhance your chances of qualifying for a small business loan in Canada. It also helps to present a clear and professional application to the lender.
It can be more difficult for start-ups and small businesses to qualify for funding but if you’ve been in business for at least a year, have annual revenues of at least $100,000, and otherwise have a healthy business; Journey Capital may have a solution for you.