Before You Apply: Understanding Lender Expectations

Lenders evaluate funding applications based on several key factors. Understanding these factors before you apply can significantly improve your chances of approval. This checklist covers the essential preparation steps most funding sources require.

Credit Requirements Checklist

Personal Credit

• Review your credit reports from all three bureaus (Equifax, Experian, TransUnion)
• Check for errors and dispute any inaccurate information
• Know your credit scores - Most SBA lenders look for 650+ personal scores
• Reduce credit utilization - Aim for under 30% of available credit
• Avoid new credit applications for 90 days before applying
• Ensure all accounts are current - No late payments in the past 12 months

Business Credit

• Establish business credit profiles with Dun & Bradstreet, Experian Business, and Equifax Business
• Obtain a DUNS number for your business
• Open business accounts that report to business credit bureaus
• Pay business obligations on time or early to build positive history
• Separate personal and business finances with dedicated business accounts

Documentation Checklist

Business Documents

• Business tax returns (2-3 years)
• Profit and loss statements (year-to-date and prior years)
• Balance sheet (current)
• Cash flow statements
• Business bank statements (3-12 months)
• Business licenses and permits
• Articles of incorporation or organization
• Operating agreement or bylaws
• EIN confirmation letter
• Lease agreements (if applicable)

Personal Documents

• Personal tax returns (2-3 years)
• Personal bank statements (3 months)
• Government-issued ID
• Proof of address
• Personal financial statement
• Resume or CV (may be required for some loans)

Financial Health Checklist

• Positive cash flow - Monthly revenue exceeds expenses
• Debt service coverage ratio - Income to cover existing debt plus new payment
• Revenue consistency - Stable or growing revenue over 12+ months
• Profit margins - Healthy margins appropriate for your industry
• Working capital - Sufficient reserves for operations
• Accounts receivable - Aging under 60 days (if applicable)

Business Operations Checklist

• Time in business - Most lenders require 1-2 years minimum
• Annual revenue - Meet minimum thresholds (varies by lender)
• Business plan - Clear, realistic plan with financial projections
• Use of funds statement - Specific, documented purpose for the loan
• Industry standing - Not in a restricted or high-risk industry
• No bankruptcies - Clean record for 3-7 years (varies by lender)

Collateral Considerations

Some loans require collateral. Be prepared to document:

• Real estate holdings and equity
• Equipment and machinery values
• Inventory value
• Accounts receivable aging report
• Vehicle titles

Next Steps After Preparation

1. Research funding options - SBA loans, conventional loans, lines of credit, alternative lenders
2. Compare requirements - Different lenders have different criteria
3. Pre-qualify when possible - Get preliminary feedback before full application
4. Prepare your pitch - Be ready to explain your business and funding needs
5. Apply strategically - Too many applications can hurt your credit