How to Apply for a Small Business Loan

Meredith Wood

Meredith Wood

Editor-in-Chief at Fundera
Meredith is Editor-in-Chief at Fundera. Specializing in financial advice for small business owners, Meredith is a current and past contributor to Yahoo!, Amex OPEN Forum, Fox Business, SCORE, AllBusiness and more.
Meredith Wood

Applying for a small business loan can be stressful. Buried beneath piles of paperwork, the details can be overwhelming. Here’s the good news: Different lenders may ask for information in slightly different ways, but it all boils down to two things — they want to get to know your business and understand your ability to repay debt.

Let’s break down this seemingly huge process into manageable sections. That way, it will be easy to gather the information you need and cross each piece off your list when the time comes.

By the time we’re done, you’ll know just how to apply for a small business loan. So let’s get started!

Step 1: The “Getting to Know You” Phase

Who Are You?

The lender wants to meet you. You might need:

1. One Form of ID

This one’s easy. Just make sure you bring along your license or government-issued ID proving you are who you say you are. You’re on your way!

Who Are Your Customers?

The lender wants to know who your customers are. You might need to prepare:

1. Customer List

Pull a list of your customers to show who they are, including contact information and website addresses, if applicable. If you have a more complex database that includes their industry, number of employees, and revenue, include that information as well. If not, stick with the information you do have, that’s fine! The key is to provide proof that you have a customer base for your business.

2. Latest AR Aging Statement

Your latest Accounts Receivables (AR) Aging Statement will clue the lender in on how long your invoices go unpaid. This points to your customers’ financial health and thus, to your cash flow. Nothing too terribly detailed is necessary, but it should look something like this:


If you don’t already have an AR Aging Statement ready to go, you can create your own, or use any number of templates available online. You’ll need to show how much each customer owes in total, then break out into current invoices due, and those still outstanding from the past months.

Microsoft Office has their own template for Excel. Another option is a free downloadable template from The SpreadsheetShoppe. It includes an example, the template, and a video tutorial on how to set it up.

Are You Legit?

If you are applying for a business loan, the lender will want to verify your business is legit. You might need:

1. Business License

Be sure to bring along any and all licenses and permits you are required to have for your business. State, local, professional, anything that you need to do what you do.

2. Proof of Ownership

Depending on the type of business you have, there are several different ways to prove ownership.

  • Sole Proprietorship: As the sole proprietor, your business is tied to your social security number. Your tax returns with the business’s Schedule C should suffice, and/or the “Doing Business As” (DBA) filing from your city/county that states you established the business name.
  • S Corporation: If you are the sole owner of an S Corporation, your tax return is tied to your social security number, so your return with business’s Schedule C shows ownership. Your articles of incorporation also work.
  • C Corporation: Your articles of incorporation that show your name as an original owner. If you have a share certificate, that will also prove ownership.
  • Limited Liability Company (LLC): Whether you’ve created an employer identification number or tied your taxes to your social security number, your articles of organization should show your name as a member who established the business (similar to the articles of incorporation for a corporation).

3. Franchise Agreement (if applicable)

If you own a franchise, you’ll also want to bring along your franchise agreement.

Step 2: Understanding Your Ability to Repay Debt

Are You Financially Healthy?

We get asked all the time about how to apply for a small business loan. Of everything, the most important part of any application is to prove you are financially healthy. You might need:

1. Tax Returns

You will need to provide a few different tax returns:

  • Personal, most recent
  • Business, last two fiscal years

If you are a sole proprietor or have set up your Limited Liability Corporation (LLC) to be tied to your social security number, you won’t have a separate set of business tax returns. Instead, with your personal taxes, be sure to include all of the forms and paperwork tied to your business (such as your Schedule C). If you have not yet filed your most recent personal taxes, you should be able to prove your extension with paperwork, and they will probably ask to see the previous year.

2. Balance Sheets

You will need to provide balance sheets (also known as “statements of financial position”) from a few different dates:

  • Year-To-Date (YTD), updated within 60 days
  • Last two fiscal years

For example, if you are applying for a loan in November of 2014, you will need a balance sheet from, say October 31, 2014. If your fiscal year ends July 31, you will need a balance sheet for July 31, 2014 and July 31, 2013.

A balance sheet is a snapshot of your company’s assets, liabilities, and capital at any given moment. Be sure to include any relevant notes that accompany the balance sheets (such as potential liabilities or losses and commitments made by the company).

You can either pull balance sheet reports from your accounting software, such as QuickBooks, or put them together yourself in a spreadsheet (you can use our free balance sheet template to do so). If you’re starting from scratch, there are countless resources out there to guide you, such as those on the Accounting Coach website. Here’s a sample from Accounting Coach:



3. Profit & Loss (P & L) Statements

You will need to provide profit & loss statements (or “income statements”) from a few different dates:

  • Year-To-Date (YTD), updated within 60 days
  • Last two fiscal years

For example, let’s say your fiscal year ends July 31 and you’re applying for a loan in November of 2014. Your most up-to-date P & L Statement would be for “The Three Months Ended October 31, 2014” (which is from August 1 through October 31, 2014). Then your P & L Statements from the last two fiscal years would be for “The Fiscal Year Ended July 31, 2014” (August 1, 2013 through July 31, 2014) and “The Fiscal Year Ended July 31, 2013” (August 1, 2012 through July 31, 2013).

A P & L Statement shows revenues, expenses, gains, and losses for the given period (it does not include cash in and out).

You can either pull P& L statement reports from your accounting software, such as QuickBooks, or put them together yourself in a spreadsheet. Or, if you need to create one yourself, it’s easy to find resources on the web. Accounting Coach outlines the components of a P & L Statement on their site.

Depending on what works best for you, you could create a single-step P & L Statement, or a multi-step. Single-step uses only one subtraction to get the company’s net income (or loss). Here’s an example from Accounting Coach:


Multi-step has a few more subtractions in order to separate out operating revenues and expenses from the non-operating revenues, expenses, gains, and losses. This is a bit more complex, but has the advantage of a more detailed statement. Here’s an example from Accounting Coach:



Who Else Do You Owe?

When applying for a small business loan, the lender will want to know if there is anyone else you owe money to. You might need:

1. Rent/Real Estate Schedule

You may be asked to provide a schedule of income and expenses associated with any property your business owns or rents.

Many banks and mortgage brokers have their own specific forms to fill out, but they all essentially ask for the same information:

  • Property address
  • Type of property (office space, single-family home, townhouse, etc.)
  • Status (owned, rented, sold, pending sale, etc.)

If Owned:

  • % of ownership (or owned free and clear: 100%)
  • Market value
  • Mortgage lien holder
  • Mortgage balance
  • Monthly mortgage payment
  • Tax payments
  • Rental income, if renting property out

If Rented:

  • Gross annual rental payment
  • Monthly rental payment


  • Insurance payments
  • Another other financial obligations (management fees, dues, etc.)

Be prepared to provide supporting documents that verify property taxes and insurance costs, rental income earned, monthly principal and interest mortgage payment, proof that property is owned free and clear.

2. Business Lease

Provide a copy of your business lease. If you do not yet have a lease (for example, if this loan is to help secure a lease), you could ask the landlord to provide the proposed terms.

Be prepared: Some lenders will call your landlord to verify you’re in good standing.

3. Latest Accounts Payable Statement

There should be an accounts payable (money that the company owes on bills and invoices from vendors) on your balance sheet, but an accounts payable statement breaks things down further.

To stick with our QuickBooks examples, you can pull accounts payable reports under Vendors & Payable Reports. To create your own statement, you would need to put together a report of all of your company’s outstanding invoices and bills, in a similar format to the AR Aging Statement you put together earlier.

4. Business Debt Schedule

A business debt schedule shows all of your company’s outstanding loan and credit amounts and monthly payments. A quick Excel spreadsheet, like this one, should do the trick:


What Collateral Do You Have?

In a small business loan application, the lenders wants to know what collateral you have. You might need:

1. Real Estate/Inventory/Equipment Valuation

Which assets are you willing to pledge as collateral for your loan? In other words, what are you willing to lose if you can’t repay the lender? You could pledge real estate if you own property, equipment used for the business (which could be anything from a delivery truck to a computer), or even inventory used for your products.

Regardless of what you choose to pledge as collateral, you will need to prove the value (not just the cost or price, but the value.) It doesn’t hurt to have a basic understanding of valuation methods and processes, but you should hire a professional, certified appraiser to give your documentation the appropriate credibility. The cost of a professional varies greatly depending on the time it takes to complete the appraisal and their level of expertise. Be sure to get a quote before you start the appraisal process.

If you have additional real estate you’re willing to pledge, you may also need to provide a recent environmental report (or “Phase 1 Environmental Site Assessment”).

What is Your Liquidity?

The lender wants to know your liquidity. You might need

1. Business Bank Statements

Provide at least four months, six if you have them, and 12 if your business is seasonal. Some will even ask for the past 2 years. Include all pages of the bank statements for each month.

2. Voided Business Check

This should be from the same account as your bank statements. This is where the wire or Automated Clearing House (ACH) deposit will go if the loan is approved.

3. Credit Card Processing Statements

Include all pages from your credit card processing statements (or “monthly credit card sales”) for the last six months. This shows how much money you are bringing in via credit card sales.


So there you have it! When businesses ask how to apply for a small business loan, it shouldn’t be just about where to go, but what to expect along the way.

All of this can seem overwhelming, but by breaking down the process into different sections, you’ll be able to conquer them one at a time. When you step back to put them all together, you’ll have everything you need to apply for that loan that will take your small business to the next level.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
Meredith Wood

Meredith Wood

Editor-in-Chief at Fundera
Meredith is Editor-in-Chief at Fundera. Specializing in financial advice for small business owners, Meredith is a current and past contributor to Yahoo!, Amex OPEN Forum, Fox Business, SCORE, AllBusiness and more.
Meredith Wood

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