by Debi Enders
Although paperwork requirements may vary from bank to bank, there are certain documents all financial institutions will need to review during the loan process. The following are documents business owners should have prepared for lenders when seeking a loan.
Tax Returns
Typically, a bank will need to see at least two to three years of business and personal tax returns. Small-business owners should discuss with their accountants how to position themselves properly for borrowing before applying for a loan. Ideally, tax returns will determine whether the company is profitable enough to pay back the new loan.
Personal Financial Statement
One of the most important documents you will need to provide is the personal financial statement (PFS), which gives a view of where you are with your finances now. A PFS gives the banker a financial picture of an applicant/owner/guarantor. It shows the banker a person’s assets and their value. It also shows what a person owes in debt. A completed personal financial statement can help identify additional sources of repayment. This is typically not required on business loans for large corporations, but small-business owners can expect this to be part of every business loan.
Application
Applications will vary from bank to bank, but most will require that anyone who owns 20% or more of the business be on the loan. When reviewing loan applications, bankers usually look for answers to two questions: Will your business likely be around for the term of the loan, and will it generate enough cash to pay off the debt? Make sure your application includes a business plan focused on your current performance.
Debi Enders (debi.enders@commercebank.com) is assistant vice president, small business banking at Commerce Bank.
Submitted 10 years 31 days ago