More and more businesses are looking to business loans in order to ease working capital, or to purchase assets amongst various other reasons. When we’re approached by businesses looking for a business loan, we’re often asked what information they will need to provide. Below we set out what information lenders are likely to ask for;
Business bank statements
Lenders will want to review Business bank statements to understand the income and the expenditure of your company. They will be looking to see that the company can operate their bank accounts within the agreed parameters so ideally with no unauthorised overdraft usage or returned payments. In most cases, lenders will only require the last 3 months bank statements although some may require 6 months.
Financial accounts are necessary for the lender to understand the financial performance for the company for the full financial year. They allow lenders to see the overall picture of the company in terms of its turnover, profitability and strength in terms of assets and liabilities etc. They also allow lenders to compare performance with previous years, so be prepared for questions if turnover or profitability as dropped. They will want to understand why.
Financial Accounts are often outdated by the time they are available for viewing. Some lenders will therefore request to see Management accounts up to the most recent period available. These are useful for a lender to determine what the next set of Financial Accounts might look like and if there has been a deterioration in the latest filed accounts, they will be looking to see if the position has been rectified. Management accounts normally include and up to date profit and loss of the business and a balance sheet. If your company uses an accountancy package such as Quickbooks, Sage or Xero, then assuming you keep records up to date, these reports are easy to produce. Some lenders may also request to see cashflow forecasts in order to consider an application.
VAT returns, which are usually updated every three months are often used as an alternative to management accounts as they give a good indication of the turnover and expenditure for the period.
The majority of lenders will require either an online application or application form which is filled out by yourself or a broker. Usually this require a brief synopsis of the business – what the business does, how it does it and its USPs. The application form will require details of all Directors and significant shareholders. (In most cases, Directors will need to provide a Personal Guarantee to support the loan)
An application form will also require you to declare any other borrowings within the business. If the company already has loan payment commitments, then these will need to be taken into account when the lender is assessing the affordability of the new loan.
Proof of ID and address
Lenders will usually need at least one form of Photo ID, in the form of a driving licence or a passport. A proof of address will also be required in the form of a utility bill or personal bank account statement. Provision of ID is to enable lenders to verify directors / borrowers are who they say they are and try to prevent any fraudulent activities. As searches will be carried out against Directors personally, it’s also a good idea to check your credit report beforehand.
If you are considering a business loan and are still unsure about what documents you need, please get in touch. We’re more than happy to answer any questions that you may have.