Applying for a small business loan can be both exciting and stressful for many entrepreneurs, but when you’ve got key information about the process before you apply, it becomes much easier. In this overview, you’ll learn why and when you may need additional loan documents during the review process and how to be better prepared.
What happens during the small business loan process?
You should become familiar with the small business loan process in advance. This includes reviewing the types of loan documents that are required, as well as why additional documents may be needed. This will keep your loan process on track so that the financing you need isn’t delayed. When you know what’s expected, you’ll alleviate much of the stress that comes with applying for and receiving financing.
One of the most significant stages of the application process is underwriting. Underwriting is the process for a lender to determine whether they can approve your business for a loan. During this process, you may need to give additional information to your lender after you’ve submitted your loan application package, as well as to third parties, like the Small Business Administration (SBA).
What loan documents are typically required?
When you apply for a small business loan, your loan officer will give you a loan application checklist with the basic information you’ll need to formally apply for the loan. While it may vary depending on your business, there are certain documents that are common across most small business loan applications. These include:
- A business plan and financial projections.
- Accurate and up-to-date financials for your business operations.
- Tax returns, completed in full for federal filings. If your state requires you to file tax returns, then these may also need to be included, depending on the lender.
- Accurate and up-to-date business and personal bank statements.
- Items like insurance and permits that may be required by your municipality or state for your business.
Review your application checklist carefully and gather what you need as soon as possible.
Why you’ll need additional loan documents
As the underwriting process is underway, your lender may request additional information and documentation.
The reason for this is at the beginning of the process, a lender doesn’t always have a full picture of your business, its owners, or the financing need. It’s often not until the underwriting process that a lender will know what additional documents are needed to decide your loan request.
Sometimes, these additional items reflect personal or business circumstances that were revealed during the application or underwriting process, such as a change in your business’s location or personal circumstances that might impact your ability to repay a loan. As a result, you’ll need to find or create the documents if you don’t have them readily available.
Here are some examples of the types of additional loan documents that could be requested:
- Lease documentation: This helps the lender ensure that your business is located where you’ve said it is and that the location is secured through a lease.
- Updated interim financial statements: This often occurs if the documents you initially provided were either incomplete or incorrect. In this case, your lender may request refreshed documents or that you get assistance from a certified public accountant (CPA) to address any misinformation or errors before resubmitting.
- Proof of resolution for past challenges: You may have experienced personal or business-related challenges that impact your loan decision, like a past criminal record or bankruptcy. You’ll need to give documentation to show the resolution and status of the incident.
As with all documentation related to your loan request, when a lender asks for additional documents, it’s important to be responsive to keep your loan application moving forward.
How you can improve the loan process
Open and honest communication is essential to successful loan applications. As you work your way through the application process, watch for calls, texts, or emails from the lender and be sure to respond right away. If you know your lender’s request will take time to complete, then it’s a good idea to let your lender know where things stand and an estimated timeline.
The quicker you respond with the additional required documentation, the faster your lender can process your request and, if approved, the sooner you’ll have funds in-hand to move forward with the vision and goals for your business.
Pursuit is your partner throughout the loan process
Pursuit is a mission-driven and non-profit lender. We’ve helped thousands of small business owners get financing to launch, grow, and thrive. We offer a range of options for small businesses in New York, New Jersey, Connecticut, Pennsylvania, Illinois, Nevada, and Washington State, with more than 15 loans and a line of credit.
We also offer insightful resources and business advisory services for all small business owners about the loan process, loan documents, preparing applications, and much more.
Take a look, then contact us today to learn more about ways we can help.
