What Documents Are Required When Applying for A Commercial Loan?
Thinking about taking the next step towards expanding your business with a loan? Financial Institutions require a certain amount of information to evaluate and determine your ability to successfully borrow and repay a commercial loan.
The larger the loan request, the more information you will need to get a commercial loan. In all cases, however, you must provide sufficient information so that the commercial lending institution can verify your identity, your business is in good standing, and detailed financial history (business and personal) to quickly assess your ability to qualify for their commercial loan products. This information is fairly standard for all commercial loans, so to avoid redundant activities, it’s critical that you get organized early and find the best way to digitally share this information, especially if you are looking at multiple commercial lenders.
Here is a quick summary of the types of information and documents that are required by every financial institution to apply for a commercial loan:
Basic Personal Information
Business owners will be asked for their legal name, address, date of birth, and social security number. This information will be used to conduct an appropriate background check, required by Federal Law, and, if necessary, to pull credit history along with both personal credit score and business credit score.
Basic Company Information
Business owners will be asked to provide the legal name of the company, operating address, certificates on incorporation or organization, type of entity, applicable licenses and or permits as well as the company's Employer Identification Number (known as your EIN.) This information will be used to verify that your business entity is in good standing and registered to conduct business.
Lenders typically will ask you to provide two (2) or three (3) years of financial statements and interim financial statements representing the past 60-90 days of operations. This information helps commercial lenders evaluate the health of your business and the ability to borrow and repay your commercial loan.
You will be asked to provide your company’s bank statements for anywhere from the last six (6) months to last two (2) years. This information is used to assess your cash flow and can often be done by providing secure access digitally to your business operating accounts to save time and effort.
In addition to the above required documentation, here are a few additional items your commercial lender may request once they have begun to evaluate your loan application and need to learn more about your personal financial position and intended uses for the funds.
You will most likely be asked to provide signed copies of your federal returns for the two (2) or three (3) years prior to your loan application submission. The business owner will need to provide both business and personal tax returns.
Personal Financial Statements
You will most likely be asked to complete a personal financial statement form (PFS) which provides certain details on your personal finances should you be required to provide a guarantee on your commercial loan.
When applying for commercial loans, as the business owner, you should provide a copy of your business plan and any other documents which highlight specific details about your company, and how you intend to use the business loan to grow your business. This provides a financial institution with a bit more context for your vision, growth objectives and how that translates into your commercial lending needs. If available, it is highly recommended that you provide this plan provide this detailed plan upfront to the financial institutions it will help to demonstrate your confidence and command of your business.
Depending on the type of bank loan products you choose, there are more specific pieces of information that you will be required to provide to help paint a picture of your business finances, build your case and help you qualify for a commercial loan. For example, if you are looking to get a commercial real estate loan or use your commercial property as collateral, you will need to provide term sheets, contracts and or appraisals as backup information.
This may seem time-consuming and overwhelming, but here’s the good news – everything above can be easily captured, organized, and managed within the Foro platform. So, give it a try and register your business today!