What Documents Do You Need to Apply for a Small Business Loan?

Whether you’re expanding your business or looking to improve cash flow management, a small business loan can be a game changer. Discover the key documents you’ll need to apply, how lenders assess your application, and tips to improve your approval odds.

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How lenders evaluate business loan documentation

When evaluating a business loan application, lenders look beyond the paperwork to assess your business's overall strength and reliability. One unofficial, widely used framework is the 5 C’s of Credit—Character, Capacity, Capital, Collateral, and Conditions—which help lenders determine how likely you are to repay the loan.

• Character reflects your credit history and reputation.
• Capacity is your ability to repay, typically measured by cash flow and financial performance.
• Capital refers to the money you’ve personally invested in the business.
• Collateral is any asset you’re willing to pledge to secure the loan.
• Conditions include the purpose of the loan and the broader economic environment.

Lenders also consider industry trends, business plans, and how well you’ve prepared your application. Being transparent, organized, and realistic about your finances not only helps you make a stronger case but also signals to lenders that you’re a responsible and strategic business owner.

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Documents to prepare for your small business loan application

Although loan requirements will vary from lender to lender, here are some important documents to prepare when applying for a small business loan.

Credit report

When examining your credit report, lenders can evaluate how you have managed debt and if you have ever declared bankruptcy. Your credit report helps them decide if you are a good candidate for a loan or if you are considered too risky. Generally, a credit score of 690 or higher is considered ideal when looking to secure a business loan.

If you have managed your debt responsibly and made regular, on-time payments, you probably won’t need to worry when lenders examine your credit report. However, if you have a low credit score and poor credit history, build your credit before embarking on the small business loan application process.

Income statement

To measure your business’s profitability over time, lenders will want to reference your income statement. Based on this financial document, a lender can estimate your sales volume and profit margins to decide how sustainable your business is. Lenders will have minimum criteria that your business must meet to qualify for a loan. Depending on the lender or specific loan, that minimum may be based on revenue or sales volume. Since this factor in qualifying for a loan is so cut and dry, you can do a preliminary check to make sure you qualify before wasting time applying.

Bank statements

Your bank statements provide prospective lenders with a glimpse into your deposits, withdrawals, and balances. This information gives them a better sense of your business’s financial health and your ability to pay back your loan. Your bank statements will also reveal if you have any outstanding debt you need to pay off.

Based on your bank statements, a lender can estimate how much money you’ll be earning and spending in the future and calculate where their loan may fit into that balance. A bank may be deterred if you are spending more money than you earn or if your income amounts are irregular and, therefore, unreliable.

Budget

As a small business owner, you’re no stranger to working on a budget. Lenders will want to know not only where your money is going but why your money is being spent the way it is. Beyond calculating the longevity and financial health of your business, lenders can also use your budget to get a better understanding of how you run your company. If you have a carefully maintained a well-executed budget, you can likely handle the regular payments necessary for repaying a loan.

Income tax returns

Gather your most recent tax returns (ITR) for your small business loan application. Your tax returns can verify your income and give lenders a look at your debt-to-income ratio. Lenders calculate your ratio by dividing any monthly debts by your gross income. If your debt-to-income ratio is over 43%, lenders will typically consider you a high-risk borrower and may reject your application. Prepare both your business ITR and your personal ITR for lenders to review.

Business plan

While documents like tax returns or bank statements are already set in stone, your business plan is one you can adjust for your application. An appealing business plan is organized, well-put-together, and clear. Don’t cut any corners; include a cover page with your business’s logo and table of contents outlining what’s to come.

An executive summary is especially important because it allows lenders to get a quick introduction to who you are and what your business is all about, and decide if it’s worth reading any further. Include an explanation of what your business does as well as how your company stands out from the competition.

Collateral valuation and documentation

Collateral is an asset, such as real estate, equipment, or inventory, that a business offers to secure a loan and that a lender can claim if the loan isn’t repaid. While not all loans require collateral, some, like SBA 7(a) loans, often do. Lenders may request documentation proving ownership, current value, and any existing liens on the asset. This might include appraisals, property deeds, or equipment invoices.

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Tips for increasing your odds of receiving a small business loan

Lenders want to feel confident that your business can repay a loan, and a strong application can significantly improve your chances of approval. Here are tips to help small business owners acquire a loan:

• Strengthen your credit score. Both personal and business credit scores matter. Pay down existing debt, correct any errors, and maintain a solid repayment history.
• Create a detailed business plan. A well-structured plan that outlines your goals, strategies, and financial projections shows lenders you’ve thought ahead and have a road map to success.
• Organize your financial documents. Lenders want to see clear, up-to-date records. Gather tax returns, bank statements, profit and loss statements, and any other relevant documentation prior to submitting your application.
• Demonstrate consistent cash flow. Show you have a steady and sufficient income to cover repayments. To evaluate this, lenders often assess your debt service coverage ratio (DSCR).
• Consider a smaller loan amount. Asking for a lower amount can reduce the lender’s risk and increase your likelihood of approval. Ideally, you should only ask for what you need.
• Build a relationship with your lender. Local banks and credit unions may offer more personalized guidance if they get to know you and your business.

Top lenders for small business loans

Finding the right lender can make all the difference when securing funding for your small business. Here are a few top options that cater to a variety of needs and business types:

• Accion Opportunity Fund: With a focus on underserved entrepreneurs, Accion Opportunity Fund offers flexible loans, educational resources, and business coaching. This nonprofit lender is a great option for minority- and women-owned businesses seeking community-based support.
• Bank of America: Bank of America’s Business Advantage line offers a variety of loan products with competitive rates and the backing of a national bank. Benefits include relationship rewards and access to expert advice for long-term planning.
• Chase: With term loans and lines of credit, Chase for Business provides tailored financing solutions and tools that integrate seamlessly with other Chase banking products.
• Fora Financial: Fora Financial is an alternative lender offering fast funding, sometimes within 24 hours, with flexible terms and fewer documentation requirements. It can be a strong option for small businesses needing quick access to capital.
• OnDeck: Known for its streamlined online application, OnDeck specializes in short-term loans and lines of credit for businesses with strong cash flow. It often provides funding in as little as one business day.

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Ready to apply for your small business loan? Check out our guide to help you get started.

Rachel Barton contributed to this article.

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