What A Bank Needs For A Business Loan?

If you’ve just started a business and are looking to apply at the bank for a business loan, then you won’t be able to just turn up empty-handed, you’ll also need a load of paperwork and evidence of your business to even be considered for a business loan from the bank.

Without the right documents, you may be declined for a business loan or you may not be eligible for the amount you’re applying for. 

What A Bank Needs For A Business Loan

We’ll be taking you through everything a bank will need from you when you’re applying for a business loan to make the process as stress-free and seamless for you as possible. 

Some of these things we will be discussing may vary depending on what bank you’re going to apply at and there may be some exceptions to these rules so make sure to check with your specific bank before making an appointment. 

A Watertight Business Plan

Having a business plan is not a necessity for all business loans for banks, but it will help make your business look more credible and will increase your chances of acquiring a loan.

A highly detailed business will show the bank that you are invested in the future of your business and show the direction you are hoping to take the business.

Be realistic when writing up your business plan, if your current sales are projecting you won’t break even for a while, don’t project your business to be profiting millions of dollars as the bank will see straight through this.

One key thing a bank will look at is a detailed summary of how you expect your loan repayments to go, for example how quickly you’d likely to pay them off, and show how much the loan payment from the bank will boost the growth of your business and in turn, be able to produce a considerable profit to repay it sooner. 

The bank will probably weigh their decision more heavily on the financial information included in your business plans such as your projected sales and profits for the coming months and years, however, it’s important to focus on other areas, the marketing side of things, and also hiring personnel.

If you’ve got a highly demanding business but don’t plan on expanding your personnel, then the bank may question your ability to meet sales and profit targets if you don’t have the employees to meet these demands. 

If your business plan can exemplify that you’re looking to always improve and expand your business then your bank will be more likely to give you the amount you’re asking for.

You won’t be able to get a loan just to help pay your current employees or to help you get a better salary, you’ll need to show exactly how the money will go towards improving the business and not filling your wallet. 

All of Your Business’s Financial Details

You’ll need full documentation of your business’s financial details such as any past and current debts from banks, credit cards, and investment companies, regardless of if you’re paid off these loans already. You’ll also need to provide your tax ID number, address, and contact information. 


Your business will need to have hard assets to back up your business loan application, these represent security for the bank if you become unable to make your loan repayments.

You won’t be able to pledge any old assets to get your loan, they’ll need to be worth something so the bank will be able to reclaim their money if you fail to meet the payment requirements.

Things like land, buildings, vehicles, or equipment are often used as collateral as they’ll often incur the highest values.

If you’ve got a fairly new business that hasn’t acquired many worthy assets yet, then the bank may require you to pledge personal assets to the loan like your home or vehicles.

If you’ve got good collateral then you may be able to borrow more money from the bank at a lower interest rate as there are lower risks from the bank's position.

However, if you’re going to offer personal assets for your collateral for the loan then you’ll need to make sure your finances are secure and you’re prepared for the loan as you could risk losing everything. 

Completed Financial Statements

You’ll need documentation of your financial statements going back at least three years but most importantly you’ll need the latest financial statement.

Don’t worry if your business is fairly new and you don’t have statements that date back that far, you’ll probably just need to pledge more collateral to back up the loan. 

You’ll need a balance sheet to show all your business assets, liabilities, and capital. Having audited or reviewed statements will add some additional credibility to your application as a professional has made sure all your statements are accurate. 

Personal Financial Details of Owners

Even though you’ll be applying for a business loan and not a personal loan, the bank will also require all personal financial details of you and other owners of the business. 

If you or other owners of the business have a bad credit history, then this will make you less likely to be able to get a loan, or a good loan at least, this is because you don’t look very reliable or capable of being able to make your loan repayments. 

All owners of the business will need to declare their social security numbers, net worths, assets, and other liabilities you may have like your homes, vehicles, insurances, credit cards, and loans, this will show to the bank that all owners can prove they regularly keep up with their financial payments then their application will be more credible. 

One of the worst things to do when applying for a business loan is for owners of the company to lavishly spend money on other areas of the business or in their personal lives.

If you’ve just spent $50,000 on a new business car then a bank will question how stable you are financially and how responsible you are at prioritizing your finances - plus your application looks redundant if you’re willing to splash money on less important areas of the business but you’re still applying for a business loan. 

Insurance Details and Documents

If the bank is going to give you a loan then they’ll want to ensure there is as minimum risks as possible so they may ask the owners of the business to take out insurance against the owner or fellow owners of the business, this means if something happens then the insurance will go to the bank and be able to pay back the loan. 

Completed Tax Returns

You’ll need to have copies of your previously completed tax returns to validate your income, to track losses and it also helps banks to navigate your debt to income ratio.

If you have not filed your tax returns correctly then this can reflect badly on your character as it shows you are financially irresponsible. 

An Agreement of Loan Covenants

Before you apply for your business loan you’ll need to have an agreed list of loan covenants that you are happy with.

Some of these loan covenants may allow you to achieve a certain threshold in certain financial ratios put forth by the bank, or may even be a requirement for you to provide yearly audited financial statements to the bank. 

Make sure you’re willing to maintain an agreement with these loan covenants as any violation of your agreement may void your loan and you might have to pay it back in full.

Some things are completely out of the business owner’s control that could prevent them from acquiring a business loan and that is due to the condition of the market.

If your business is within a high-risk industry or maybe the economic climate is not great then this will prevent banks from offering loans as the risks are too high.