Key takeaways
- Start with the lender's actual list, not a generic checklist.
- Bring the books current before the application, not after the lender asks.
- Make the financial statements, the tax returns and the bank statements agree.
- Give the lender a complete package with a clear use of funds and a repayment plan.
Start with the lender's list
Every lender has its own list. Ask for it in writing before collecting anything. The list decides the order of the work and the documents the firm does not need to prepare.
A bank loan, an SBA loan and an equipment finance agreement ask for different documents. An SBA loan usually asks for more history and a personal financial statement; an equipment lender may focus on the asset and the down payment.
Put the lender's list into one checklist with an owner and a due date. A package assembled from three lists is a package with three gaps.
Bring the books current
A lender will compare the financial statements, the tax returns and the bank statements. A large difference between them is a common reason an application slows down.
Reconcile every bank, card and loan account through the most recent month. Record the missing expenses and the owner's draws. A current close is easier to explain than a year-end reconstruction.
If the books need a cleanup, scope it before the application. A cleanup that starts after the lender asks for statements is a delay the client did not plan for.
Prepare the financial statements
The lender usually wants the last two or three years of year-end statements and the current year's interim statements. The interim statements should be dated and should match the bank statements.
Include the profit and loss, the balance sheet and the cash flow statement. A profit and loss alone does not show the debt or the equity the lender is underwriting.
Add the accounts receivable and accounts payable aging at the interim date. The lender uses them to understand the working capital.
Organize the tax returns
The lender usually wants the business returns for the last two or three years and the owners' personal returns for the same years. Include all schedules and K-1s.
Check that the returns match the financial statements. A difference in revenue or owner compensation is a question the firm should answer before the lender asks.
If the returns are not filed yet, ask the lender whether an extension or a draft is acceptable. Do not assume an unfiled return is fine.
Build the collateral and debt schedule
List every loan, line of credit, lease and credit card with the balance, payment, interest rate and maturity. The lender uses the schedule to calculate the debt service.
List the collateral the business or the owners can offer, with the purchase date, cost, current value and any existing lien. A collateral item with an undisclosed lien is a credit problem, not a paperwork problem.
For real estate, include the deed, the appraisal and the mortgage statement. For equipment, include the invoice or a dealer quote.
Write the use of funds and projections
The lender wants to know what the money will pay for and how the business will repay it. A simple sources-and-uses table is more useful than a long narrative.
Prepare a twelve- to twenty-four-month projection with the assumptions behind it. The projection should connect to the historical financial statements, not appear from nowhere.
Show the monthly debt service the business can support. A projection that ignores the new payment is a projection the lender will discount.
Submit a complete package
Send the package in the order of the lender's list, with a cover sheet that names each document. The lender should not have to search for the tax return or the debt schedule.
Keep a copy of everything submitted and a log of what was sent and when. A second request from the lender is easier to answer with a complete record.
Follow up on the open items in one email, not one email per item. The lender is managing many applications; a clear list is easier to answer.