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Small Business Loans - How to Apply

How to apply for small business loans.

Many business owners turn to their local banking institution for small business loans, but there are other sources of funds as well. Regardless of who you get the money from, lenders of small business loans will require you to present a loan proposal, which outlines why you need the loan and what the loan proceeds will be used for.

Things to include in a small business loans proposal:

  • Description of your business: A brief history of the business, including what you intend to offer/sell, your plan of operations for the near future, your target customer base and your potential competitors.
  • Management Experience: Resumes of each owner of the business and the key management team.
  • Personal Financial Statements: Statements from all principal owners (someone who has at least 20% ownership of the company) within the last 90 days accompanied by the most recent annual federal income tax returns for each individual.
  • Loan Repayment Plan: Outline how you intend to pay back the proceeds from the small business loan. Indicate where the money will be coming from and include timelines, budgets and cash-flow schedules to support your plan.
  • Pro-forma balance sheet: This should include all current equity you have in the business and any other outstanding debt against the business.
  • Projected positive cash flow for at least one year: Present your expected earnings and expenses in a profit/loss format and provide explanations and assumptions used to obtain these numbers.
  • Collateral for the loan: State the property and assets that can be held as collateral for the small business loan.
  • Other documents of importance: Such documents can include lease, purchase, partnership or franchise agreement, licenses, letters of intent or reference, and contracts.

Why is so much information required for small business loans?

Lenders need to make sure that not only is demand for your product/service sufficient enough to repay small business loans, but the owners and management team are capable of running the business so it can repay small business loans.

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