It does not matter whether you are borrowing money for a mortgage, for your business, or to buy a business, the borrowing process most frequently goes off the rails due to lack of preparation. Nothing gets a transaction shoved to the far corner of the desk faster than incomplete documentation.
Here is the list of documents you will need to get a loan approved fast.
- Description of the business and website address. You are the only provider of this information but a website that clearly explains the nature of your business and the type of customer you want shows some substance. It is the first place that a lender will look to see that you are real.
- Completed application form. Again, you are the only provider of this information but when you state the value of an asset or liability or income, you will need to prove it with 3rd party documents. Provide a copy of the tax assessment for land and building values. Provide copies of credit card statements or mortgage documents to show liabilities.
- Owner profile. Who are you? What are your qualifications for running this business? When considering a business loan, the credibility of the management team is paramount, so get all the experience and skills and training on the table.
- Last 3 years’ financials from an accounting firm. This is the first of the 3rd party verifications you will need. Your accounting firm stands behind your financial statements. A lender may ask for interim statements that are produced by you, so have them on the table, too. If you really want to wow your lender, pay for Review Engagement Statements that are more robust than the cheaper Notice to Reader, and thank your stars that you don’t live in Quebec where audited statements are the norm.
- Last 6 months’ bank statements. Your bank statements verify income and expenses – your cash flow.
- NOA (notice of assessment) GST, PST. Are you current with the government for any taxes? for GST? for PST, for source deductions? These third party documents are absolutely required by a lender’s underwriter.
- Photos of the business. A set of great photos gives your file sex appeal.
- List of assets. List assets like vehicles with age and serial numbers and get a value from a credible source on the internet.
- Copies of mortgages, liens, leases or judgments against the business. If the money provided is to solve a problem, get the documentation on the table that shows dates and penalties and amounts. They will appear on a credit investigation anyway, so better to be up front.
- Describe use of funds. How much do you need? And what are you using it for? It is astonishing how many borrowers stumble on this point and cannot give a cogent answer. Write it down! And don’t forget legal and broker fees
- Business plan if available, otherwise a description of plans for the business that includes markets and resources needed. If you are borrowing to grow a business you must be able to demonstrate how the money will make a difference. Ditto for a business facing challenges. And in a business plan, your target market and how you get your product or service to them is the most important facet. Telling a lender that you are looking for a 10% share of a multi-billion dollar market makes most underwriters roll their eyes. You have just said that you have no plan to get your first sales. So get a real plan of action.
Brokers love deals that have been refused by the banks because the borrower typically arrives with a thick file with all of the above documents. The weeks and months expended on getting all the documents to the lender make all the players jaded and a jaded lender is not a willing lender.