The Executive Suite: Small business loan documentation requirements for medical practices

Applying for a loan can be an overwhelming experience that requires lots of documentation about you and your business.The type of lender and the type of funding you’re applying for impacts the loan documentation required—traditional lenders like the Small Business Administration (SBA) and banks have strict and thorough documentation requirements, while alternative lenders typically ask for less paperwork and have a more streamlined process.

In this loan documentation checklist, we’ll outline what you’ll need to apply for a small business loan from any type of lender, including the SBA, banks, and alternative lenders.

Loan documentation requirements for SBA 7(a) Loans

SBA loans have the most comprehensive loan documentation requirements. This is what you’ll need to apply for an SBA 7(a) loan:

1. Borrower information form (SBA Form 1919)

This form profiles the loan applicant(s). It includes contact information, identifying company qualities, loan intent, business principles, and an overview of previous or outstanding loans.

This form is required for: Everyone who owns 20% or more of your business, all officers and directors, managing members, day-to-day operations managers, and anyone guaranteeing the loan.

2. Personal background and financial statement (SBA Form 912 and SBA Form 413)

These forms—which include a list of assets and liabilities—confirm your personal credit is strong and give your lender an idea of your net worth and investment history.

These forms are required for: All partial owners, general partners, proprietors, and managing members of your business.

3. Business financial statements

Required business financial statements include:A profit and loss statement current within 180 days of application, including supplementary schedules for the last three fiscal years.
Projected financial statements, including a detailed one-year projection of income and finances with a written explanation of your goals and how you’ll achieve them.
Year-end balance sheet for the last three years, including a detailed debt schedule.
Reconciliation of net worth

Interim balance sheet
Interim profit and loss statements

4. Ownership and affiliations

Including a list of names and addresses of any subsidiaries and affiliates, concerns in which you have a controlling interest, and concerns that may be affiliated by stock ownership, franchises, proposed merger, or otherwise.

5. Business certificate or license

You’ll need to supply the original business license or certificate of doing business. If you are a corporation, stamp your corporate seal on the SBA Borrower Information Form (SBA Form 1919).

6. Loan application history

Include records of any previous loan applications.

7. Income tax returns

Include signed personal and business federal income tax returns for the last three years.

8. Resume

Include personal resumes tailored to the loan application process for each principal.

9. Business overview and history

Supply a brief history of your business, an explanation of why you’re seeking an SBA loan, and how it will help your business.

10. Business lease

If your business has a brick-and-mortar location, include a copy of your lease or a letter from your landlord outlining the lease terms.

If you are purchasing an existing business, include:Its current balance sheet and profit and loss statement
Its previous two years of federal income tax returns
Proposed bill of sale, including terms of sale
Asking price with schedule of inventory, machinery and equipment, furniture, and fixtures

Lenders have grown more conscious of loan security during the COVID-19 pandemic. As a result, you may have to provide a plan for how you’ll cope with the effects of the pandemic and answer questions like “what if this business needs to operate at 50% capacity?”

Loan documentation requirements for bank loans

Banks, credit unions, and other traditional lenders also have lengthy paperwork requirements. When applying for funding from a bank, it’s prudent to prepare the same documentation needed for an SBA loan.

Loan documentation requirements for alternative lenders

Alternative lenders have streamlined online application forms that require less extensive paperwork. Applying for funding from these lenders typically begins with a form that collects information including:How much funding you’re seeking
Monthly revenue
Time in business
Company name
First name, last name, and contact info of applicant
Depending on the age of your business, up to three years-worth of signed personal and business federal income tax returns may be expected.
The three most recent bank statements for business and personal accounts.
Cash flow statements including a balance sheet and profit and loss statement.
Personal identification (social security, driver’s license, or any current government-issued photo ID)
If your business has a physical location, include a copy of your lease or a letter from your landlord explaining the lease terms.

Conclusion

Applying for a small business loan is a time consuming and challenging undertaking—the lender always seems to need just one more document. That’s why having all of your documents ready before you apply for funding often speeds up the approval process and helps decrease stress.