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Key takeaways
- The application process for a startup loan may differ from other types of business loans.
- When business documentation is limited, lenders may request personal financial documents and a business plan for startup loans.
- Business plans can provide clarity and direction, attract investors and help you secure financing.
Startup business loans can help entrepreneurs secure funding for equipment, inventory and other costs to get their business off the ground, but securing funding can be challenging for younger businesses. In fact, the 2023 Small Business Credit Survey by the Federal Reserve Banks revealed that 26 percent of firms two years old and younger are denied business loans. Yet getting a startup business loan is possible.
Because startup businesses have a limited financial runway, the application process may differ from a conventional business loan. For example, the document requirements for a startup business loan will likely focus more on your personal financial history to assess creditworthiness. Document requirements vary by lender for startup loans, but in general, here are the documents required to obtain a startup business loan.
Documents about yourself
Assuming there is limited documentation available about your business, lenders may require substantial documents about your personal finances and business plan before issuing a startup business loan. Background information you will want to have on hand include:
- Your name
- Your address (and, if different, your business address)
- Social Security number
- Date of birth
- Personal bank statements
- Personal tax returns
Documents about your business
Lenders want to know your business is legitimate and that you own it. They’ll also look for early signs your business is heading for success. Documents you’ll want to gather for your startup business loan:
- Business tax returns (if available)
- Business bank account statements (if available)
- Receipts from quarterly tax payments
- Profit and loss statements
- EIN (Employer Identification Number): This acts much like a Social Security number for payments and tax documents. You can apply for one online through the IRS.
- Business licenses and permits, if applicable
- Foundational documents, including articles of incorporation
- Outstanding invoices, especially if you’re applying for invoice factoring
Business plan
Writing a business plan can help you develop a clear vision for the path ahead and can help build confidence and buy-in from potential investors. A good startup business plan will include the following elements:
An executive summary: This introduction provides an overview of your business, its objectives, and why you will be successful. Keep this section brief: ideally, two pages or less. Introduce information about:
- Your business and its products or services
- The target market being served
- Your key qualifications as a business owner
- Information about the organizational structure of your business
- Pertinent background information about your business and/or market sector
- Funding information: Any capital dedicated to date and its sources, as well as your plans for future funding
Your company description: This section gives a brief overview of your business’s details. You’ll want to outline your business entity and its management structure here. You’ll also want to include your mission or vision statement in this section.
Value proposition: Think of this as your elevator pitch. What problem is your business solving? What differentiates it from competitors in the field?
Market research: Show your understanding of the current market conditions; underscore any noticeable themes from successful businesses in your industry.
Your product or service: Go into more detail here than was provided in your executive summary about how your product works, how it helps customers and who it serves.
Marketing plan: Describe how you will build and retain a customer base.
Funding request: Go into detail here about why you are requesting funds and how this money will be used.
Other documents
Other document requirements for your startup business loan include:
- Collateral information: Documents related to any assets that belong to the company. This can include equipment, technology, vehicles, real estate and bank accounts. You may need to include an appraisal to prove the asset’s worth.
- Personal guarantee: A clause in your loan agreement stating you take personal liability for the debt.
- Business loan proposal: This document outlines the financial needs and repayment plan if a business secures a loan.
Bankrate tip
Not every loan will require these — ask your lender if you’re unsure. Secured loans are more likely to require collateral, while most small business loans require a personal guarantee and loan proposal.
Documents for a startup SBA loan
In addition to the documents listed above, applications for Small Business Administration-backed startup loans require extra documentation. Be prepared also to provide:
- Financial plan: Describe your projections for the next one to five years. This should inspire confidence in lenders about the stability of your business.
- Appendices: Any supporting documents that may strengthen your funding request and provide more context about your business.
- SBA forms: The SBA has its own application forms you must complete. Requirements will vary by the type of SBA loan. For example, 7(a) loans require Form 1919 and SBA Form 413.
- Business debt schedule: The SBA will want to see a list of other debt obligations your business has, unless you’re applying for an SBA Small Loan.
- Business valuation: If you’re purchasing an existing business, the lender and SBA will want to see documentation of the business’s value.
- Purchase agreements: The SBA will want to evaluate the assets and stocks acquired when purchasing an existing business. It may also request the seller’s financial statements.
Bankrate insight
Many entrepreneurs require financial support to kickstart their ventures. If you’ve just launched your business and need financing, consider working with a lender specializing in startup loans, such as:
You can also check out our guide on getting a business loan with no money.
The bottom line
Lining up the documents you need to apply for a business startup loan can ensure a straightforward application process. Having the information handy can also demonstrate your readiness to secure funding and grow as a business.
Once you collect this paperwork, you can use these documents to apply for other kinds of business loans and business lines of credit.
Frequently asked questions
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The minimum credit score required for a business startup loan is usually in the 600 range, but this requirement varies by lender. Traditional lenders like banks and credit unions may want to see a higher score, such as 670 or higher.
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Each lender determines the requirements for a business loan. That said, lenders typically consider the same factors, including credit score, age of business and annual revenue. Many online lenders will work with businesses with six months in business and low revenue and personal credit scores. You will need to compare multiple lenders when looking for a business loan for a brand new startup, or you can look into other forms of startup financing.
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Obtaining a startup business loan can be challenging due to the perceived risks associated with new ventures. However, if you meet the lender’s requirements and present a strong business plan demonstrating the business should succeed, securing startup funding could be easier.
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