As a small business owner, you know that it takes money to make money. In order to help your business reach its true potential, you might find yourself needing to take on a loan to expand your customer base, increase your offerings, strengthen your workforce, or patch up temporary cash flow snags. And the good news is that there are more and more options now for small businesses that might not get approved for traditional bank loans. The bad news? All those options can be overwhelming, especially if you’re just starting out in the world of alternative lending. There are so many steps in the loan application process, from understanding your business's financials to researching the right lenders and loan products—how do you know where to begin? This checklist is a pretty good place to start, if we do say so ourselves. If you're looking to finance your business, learn more about the steps you'll need to take to get there!

2. Expand your customer base?
Increase your offerings?
Strengthen your workforce?
Patch up temporary cash flow snags?
If you don’t qualify for traditional bank
loans, there are many alternatives
to consider. Too many, in fact. Use our
Small Business Loan Search Checklist
to save time and focus on the funding
that’s right for you.
What would you do
with a cash infusion?
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3. Keep these answers in mind
while you go through the next steps.
1 What’s the purpose
of your loan?
Ask yourself:
Why do I need the loan?
What’s my strategy for using the money?
How much increased revenue do
I stand to gain if this plan works out?
How will I mitigate the damage
if it doesn’t work out?
How will the loan support my sales
and marketing efforts?
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4. In basic terms, these will help you understand whether you can afford
the loan and what you can gain from it.
2 How much should
your loan payments be?
Don’t start shopping until you know what you can afford!
You’ll need to know two numbers:
1. Your debt service coverage ratio (DSCR).
The ratio of your revenue and your future loan payments.
2. The potential revenue increase you expect from the loan.
Perform a small business loan performance analysis to find out.
Use our templates to help.

5. 3 Know your credit score
Both your business and personal credit scores are incredibly important.
They tell lenders how risky you are.
Visit AnnualCreditReport.com or CreditKarma.com to check your score.
CREDIT SCORE
Safe bet Risky gamble
HIGH
LOW

6. It depends on the kind of loan you’re looking for, but generally speaking:
How high does your credit score need to be?
Your score can be easily improved.
Check out our blog to find out how.
800350
500 650to qualify
to get great offers

7. 4 Which loans are best
for your situation?
If you have excellent credit…
Bank loan: The hardest to obtain and the lowest rates.
Not often offered to small businesses.
SBA loan: Designed for small businesses with great credit.
The money still comes from the banks but the government
partially guarantees repayment.
If you have poor credit…
Short-term loan: 3- to 18-month term. Higher interest
and more regular repayments — sometimes daily!
Merchant cash advances: The easiest and most expensive
loan. Repay a lump sum through your daily credit card sales.

8. If your business relies on invoices…
Accounts receivable financing: Outstanding invoices are
used as collateral. Ideal for helping with cash flow issues.
If you need a loan to purchase new equipment…
Equipment financing: Equipment is leased (like renting)
or loaned (like a mortgage). The equipment purchased
acts as the loan’s collateral.
If you need the loan for frequent short-term purchases…
Line of credit: Works like a credit card. Great for recurring
short-term purchases like office supplies, payroll,
or seasonal expenses.

9. 5 Explaining fees
and interest rates
Interest Rate
The extra amount you’ll have to pay
the lender for their service.
If you borrow $50,000 and the interest
rate is 10%, you’ll pay back $55,000.
APR
Annual Percentage Rate combines interest
rate and other fees. It’s a comprehensive way
to measure how much a loan will cost you.

10. Other possible fees include:
Application fees
Late payment fees
Origination fees
Guarantee fees
Check processing fees
Prepayment fees
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11. 6 Beginning your application
You’ll need different paperwork for different loans.
Here’s everything you’re likely to come across.
Bank statements (financial history)
Business tax returns
Recent balance sheet (current assets, liabilities, and equity)
Profit and loss (P&L) statements
Business debt schedule
Business credit report (A good business credit score is above 80)
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1. Business Financial Statements

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2. Personal Statements
Personal tax returns
Personal guarantee
Resume detailing your business credentials
3. Legal Documents
Articles of Incorporation paperwork
Business license and registration
Commercial lease
Franchise agreements
Relevant contracts with third parties or suppliers
Landlord Subordination Agreement

13. 7 Putting it all together
With a small business loan,
it’s not a good idea to “wing it.”
The better prepared you are, the better
your chances of receiving a loan quickly.
Organize and complete all the necessary
documents before you apply for the loan,
then submit them all at once.
Use the questions in Section 1 to create
a first-rate business plan to submit along
with your documentation.

14. 8 Questions to ask yourself
and your loan officer
“Can you make these
loan payments easily
and comfortably,
on time, every time?”
“What fees are
associated
with this loan?”
“If you’re responsible
with this loan, will you
be able to get a better
one from the lender
in the future?”