Getting a startup business loan can be challenging if you are not prepared. New business owners can improve their chances by choosing the right amount of financing, knowing their credit scores, and highlighting the strengths of their business. Here’s how you can get ready to apply for a startup business loan.

Before You Apply for a Startup Business Loan

1. Understand Your Options

Choosing the right lender is as important as choosing the right loan. Working with Fidelity Bank will help build a relationship which can give you more flexibility in the future.

2. Understand Your Cash Flow Needs

Fidelity Bank has solutions to help you pay vendors, collect receivables, and view account activity so you will understand your financial position on a daily basis.

3. Build and Maintain Good Credit

Lenders look at your credit score when deciding whether to approve your loan. Your credit score shows your lending history, including how many credit lines you have open, if you pay your bills on time, and if you use your credit responsibly. Other factors lenders consider include your industry experience and reputation with customers and competitors.

4. Prepare Your Documents

Good financial records are very important when applying for a loan. You should keep track of your assets, revenue, debt, and expenses. For a loan, you’ll need to show proof of cash flow and accurate financial projections. Lenders want to see your financial reports and realistic forecasts that include the loan to estimate your future revenue and expenses.

Since startups have limited financial history, the documents needed will focus more on your personal financial history to assess creditworthiness. Requirements vary by lender, but having these documents ready can save time and help you answer any questions the lender has.

Personal Documents:
If your business has limited documentation, lenders may want to see detailed information about your personal finances and business plan, including:

• Personal bank statements
• Personal tax returns

Business Documents:

• Business tax returns (if available)
• Business bank account statements (if available)
• Receipts from quarterly tax payments
• Profit and loss statements
• EIN (Employer Identification Number)
• Business licenses and permits, if applicable
• Articles of incorporation
• Outstanding invoices, especially if you’re applying for invoice factoring

Business Plan:
A thorough business plan helps you and your banker understand your future goals and build confidence in your business. Connect with the Small Business Development Center for help in developing your business plan.

Market Research:
Show that you understand the current market conditions and highlight successful trends in your industry.

Marketing Plan:
Explain how you will attract and keep customers.

Funding Request:
Detail why you need the funds and how you will use the money.

Collateral Information:
Include documents related to any assets the company owns, such as equipment, technology, vehicles, real estate, and bank accounts. You may need an appraisal to prove the asset’s worth.

Personal Guarantee:
This is a clause in your loan agreement stating that you take personal responsibility for the debt.

Business Loan Proposal:
This document outlines your financial needs and repayment plan if you get the loan.

Note: Contact your Fidelity Banker to ask about documentation requirements to speed up the application process.

5. Best Practices

Avoiding mistakes in the application process is crucial for your financial future. Here are some best practices:

Think Like a Lender: Review your loan application from the lender’s perspective to make sure you’ve included everything they need to see to approve your loan. This is your chance to show you are a reliable borrower.

Be Accurate: Like applying for a job, exaggerating on your loan application can hurt your chances. Lenders want to work with trustworthy borrowers. Make sure your financial documents accurately reflect your business’s finances, earnings, and growth potential.

Be Prompt and Thorough: If the lender needs more documents, send them as soon as possible. Lenders review many applications, and delays can affect their decision. Provide more information than requested if you can to avoid delays.

6. Review the Loan Estimate

When you get your loan estimate, compare the potential loan terms with your business’s other financial obligations to determine what you can afford. If the loan estimate is more than you can manage, consider lowering your loan amount or looking for a different loan option.