How to Properly Apply for a Small Business

Like any other small business owner, you’ve discovered it’s time to apply for a small business loan. You’ve already invested everything into the business, but for maximum efficiency, it wasn’t enough. You really need more money, and you don’t have the credit to be denied multiple times. Where do you start?

You know your business needs funding. Small business owners apply for small business loans all the time, and there are plenty of benefits in addition to the money. So whether it’s time to start your business, time to expand your business, time to buy some equipment, time to hire some fresh talent, or simply time to have the capital to invest, a small business loan is an excellent option. Properly applying for this loan can be broken into three major steps: preparation, finding the right lender, and the actual application process, the last of which is straightforward, but we offer some tips later on.

Preparation is the bulk of the work. However daunting it may seem, remember that the more prepared you are, the better your chances are of being approved. Think of proper preparation for a loan application as studying for a final exam.

Finding the right lender can be tricky, but a little bit of guided research should find you the right one. Determine why you need the loan first, and find out which lenders specialize in that field of small business loans. Second, determine how quickly you need the money. The time periods can vary greatly between lenders. Third, be realistic when it comes to what you will qualify for. Play to your credit score and market standing. Last, determine what interest rate is best for you, and shop around.


Most of the preparation for applying for a small business loan is compiling paperwork. We suggest you have the following three major documents ready. However, before doing any paperwork, you’ll want to know what small business loan lenders look for.

What do lenders look for?

All banks and lending institutions differ in both requirements and preferences, but generally speaking, you’ll want to own a legitimate and reliable-sounding business. Avoid pyramid schemes and/or gambling-related ideas. The business as well as the owner(s) should be presentable and of good character.

Lenders also look for the ability to repay a loan, which consists of both having good financial history and having invested personally into the business already. (This is called ‘having skin in the game’). Now that you know lenders will only approve sound, logical businesses, and that personality and appearance play a role, it’s time to do some paperwork.

Application Preparation Document

Take a sheet of scrap paper and do yourself a favor. Write an app-prep document. Any format can be used, whether it’s a list or a paragraph, or just some chicken-scratch. This document will be the heart of the application process. Have the following written down as a guide:

  • Why you’re applying for a small business loan
  • How you’re going to use the money
  • What exactly needs to be purchased and from where you’re purchasing
  • What other business debt you have, and from which lender(s)
  • Members and credentials of your management team/staff?
  • Your personal background as relatable to the business, including prior addresses, prior names, criminal record, and any other applicable data
  • Resume

It’s a given that you’ll attach a resume to your application, but make sure you highlight the areas that would assist you in being approved for a loan. For example, list any and all management experience on the resume. If you were never a manager, any business experience will help. Show the lender you are familiar with how a business operates. Tailor the resume for loan approval.

Your resume is your place to brag. Show the lender why they need to approve you for a loan. Make yourself stand out. Did you make the Dean’s List in college? Show them that. Have you ever received any awards? Here is the place to prove you are a worthy loan recipient.

Business Plan

This is the big one, the most important piece of all. The business plan serves as evidence your business will be run smoothly. Your business plan shows you have a viable business with a strong team. It shows you have an understanding of the business market. Most importantly, it shows you have a plan to repay the loan, leaving room for variables. Let’s build one:

  • Cover letter. Begin the business plan with a concise cover letter. Explain who you are, what the business is, and how the loan will assist your business in succeeding.
  • Summarize the history of your business, your market, your customer base, and your standing in your industry.
  • Team experience. List your team members, along with their skills, qualifications, and credentials. A strong team can mean a strong business.
  • Loan Request. State the amount of money required, how you came across this figure, and specifically what the loan will be used for.
  • Loan Repayment Plan. Lay out the terms and conditions you desire for the loan. What is your ideal interest rate? What is the ideal amount of time to have for repayment? While your exact specifications may not be met, at least you will know what you want. Also, explain how your ideal payment schedule can be met, using current sales figures and sales projections.
  • Both Credit Reports. Your own personal credit score says a lot about how you run your business. Your business credit score shows exactly how you run your business. Have both reports prepared.
  • Tax Documents. A very common mistake made when applying for small business loans is handing in incomplete tax forms. The previous three years of forms are typically required for a startup loan application. Check with an accountant before submitting anything to ensure completeness of the forms.
  • You’ll want to have bank statements and financial statements ready. For everyone with 20% stake or more in your business, have the following documents prepared:
  • Bank Statements – Have printouts of the last three years of bank activity, including checking and savings accounts.
  • Balance Sheets – Have a printout showing assets, liabilities, and net worth. Prepare this for both the business and each applicable stakeholder.
  • Income Statement – Have a printout the business’ financial performance over a period of time, ideally the last three years. Regarding the stakeholders, only provide an income statement if a separate business is owned.
  • Collateral Statement – Have a printout showing all personal and business property that can be used to back up the loan.
  • Legal Documents. Create a folder for all of your business-related legal documents. These will include any and all licenses, registrations, articles of incorporation, third party contracts, franchise agreements, commercial leases, and any necessary insurance forms. Organize this folder neatly to ensure the lender can access the information quickly.


Now that you know what lenders want in their borrowers, and you have all your documents prepared and organized, it’s time to choose a lender.

Banks and credit unions are the most popular choices, as they offer a personal relationship, a fixed rate of repayment, and generally tend to approve business owners who qualify. If you’re not already familiar and comfortable with a bank, definitely check credit unions. The Small Business Jobs Act of 2010 gave community credit unions $3.5 billion collectively for investment in small businesses.

The Small Business Administration is a national leader of small business loan sourcing as well. They provide tools that allow you to find which lender might be optimal for you and your business. An enormous number of online lenders exist, all with different terms and conditions. State agencies and many non-profit organizations offer small business loans also.

Regardless of which lender you choose, make sure they are either a certified or a preferred small business loan lender. This is essentially the business-world version of having good consumer reviews. If the lender has a good history with small business loans, that is definitely a plus. By now you should know what qualifications the loan must have, and so the research is up to you.

Once you have a list of potential lenders, speak with each institution’s managerial staff. See how each institution feels about startup companies. See how they feel about companies within your industry. Get a feel for any other variables that may affect your loan application outcome. Only submit loan applications to those who take to the idea of a startup in your field well.

Your relationship with your lender will likely last years, so it’s important you are comfortable with them. Also be aware of their business values and other services they can offer. Reap the benefits as well. Many lenders offer incentives for early payoff.


Make a checklist of information needed on the loan application. You will obviously need your basic information like business name, address and tax identification number. You will also need the following:

  • Type of business
  • Date business was established
  • Bank name & address of business accounts
  • Number of employees before and after (possible) approval
  • Info for any other current loans (borrower, amount, date, status, balance)


Now that you’ve narrowed your search down to a handful of lenders, start applying! Don’t forget to tweak your resume accordingly for each lender. Also, find out beforehand if the individuals you’re meeting with have any special preferences. It’s always nice to know a little about them – just like in a job interview. You’ve got your documents all ready to go, and you know exactly what the actual small business loan application will ask for. Good luck!

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