Bank Loan Documentation

Bank Loan Documentation

Applying for a loan requires a considerable amount of documentation about your business and yourself. The documents required vary greatly by the purpose of the loan, and if the loan is for a startup or an existing company.

A bank will typically want the following documentation for a startup:

A personal financial statement
Personal federal income tax returns
Startup cost projections
Projected balance sheets for at least two years
Projected income statements for at least two years
Projected cash flow statement for at least the first 12 months
Proof of ownership interests in assets and collateral
A complete business plan that includes:
A explanation on the specific use for the requested funds
How the money will help the business
How the borrowed funds will be repaid
When the borrowed funds will be repaid
The assumptions used in creating the projected financial statements
Your resume
Letters of reference that recommending you as a reliable businessperson

Most lenders will also want to see a breakeven analysis. A breakeven analysis shows where/when the company's expenses will match the sales or service volume. The breakeven point is usually expressed in terms of dollars or units sold.

A bank will typically want the following documentation for an existing business:

Income statements for the past three years
Balance sheets for the past three years
Projected balance sheets for the next two years
Projected income statements for the next two years
Projected cash flow statements for at least the next 12 months
Personal and business tax returns for the last three years

There are other items that you may need to include. If the money you requested is for working capital, your documentation should include the amount that will be used for accounts payable, the amount that will be used for inventory, the amount your cash balances will be increased, and the amount of contingency equal to at least 10 percent but typically about 25 percent. If the money is going to be used for machinery or equipment, you should include when the assets will be available, the price of the assets, how the installation will be performed, whether the installation will interfere with current production, and the cost of any interruptions in production. The documents needed for a land acquisition should include the real estate's cost, location, size, intended use, and how much, if any, of the land is being set aside for future expansion.

Return to Items Banks Look For