Put all the pieces together to create your most compelling business loan application

Funding is crucial for starting or expanding a business — but securing a loan can feel daunting. This challenge can prove especially difficult for entrepreneurs from underrepresented communities.

Lenders often evaluate loan applications based on hard numbers: your company’s cash-flow statements and balance sheet, your personal income, debts, credit scores, and the like. But because of wealth disparities, some entrepreneurs start out with less liquid capital than others. Black and Hispanic households in the U.S. have, on average, about 15% to 20% as much net wealth as their white peers.1

But don’t let how much money you have, or don’t have, in your bank account keep you from applying. Lenders also consider other vital information, from your business plan and career background to compelling research on your customers.

Here are four tips to help small business owners frame that information and provide additional details to strengthen a loan application. Our accompanying worksheet(link opens in a new tab) will help ensure you’re well organized to help improve your chance of securing the cash your company needs.

Making your best impression

Focus on these key areas to strengthen your application

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Business plan

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Payback plan

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Your team

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Your story


1. Start with your business plan

Lenders will look carefully at your business plan, along with your income and debt statements. It’s one of the best ways to shine because there’s so much you can put into it. (See our step-by-step guide to writing a business plan for more information.)

  • Use big-picture sections like the executive summary to sell your vision for your business. Tell the story of why you launched it and what market gaps or societal needs it answers, especially if you serve an underrepresented customer base. Back all of that up with industry research that demonstrates your business case, laying out the size of the target market, customer base, and growth potential.
  • Next, dive into the financials. Lay out every detail you can in current income statements and balance sheets, as well as cash-flow and income projections. You’ll build an impressive, realistic financial road map showing exactly where your company is now and where you intend to take it.


2. Describe how you plan to use the loan — and pay it back

Another great tactic is to put yourself in the lender’s shoes. Prepare detailed answers for everything they might ask about how their financial assistance will help your business succeed. Provide details about how you plan to use the capital. You may be looking to buy new equipment, for example, or move your company to a more profitable location.2

  • Also be ready to describe how you plan to pay the money back. Depending on the length of your loan, prepare a yearly projection plan that lays out details on projected sales and a payment plan for each year. Provide a list of key customers, as well as customer demographics and any advantages you may have in catering to your customers. The more sharply you can bring your clients into focus, the more assurance the lender will have that you know your market and will use their money well.3
  • Consider collateral, too. If you’re applying for a loan that requires it, map out every asset you have to help secure the loan.2 If you don’t have that kind of capital, there are other options. The Small Business Administration’s SBA 7(a) loans don’t require collateral for loans up to $25,000. Just be sure to do your research so you understand the full range of options and their conditions.


3. Pitch yourself and your team

Don’t just introduce lenders to your business: Let them get to know you, too. Use a résumé to show, through concrete examples, that you have the experience to run a thriving business and manage the loan well. While these details may not directly affect a lender’s decision on your loan, they can help you build relationships with your banker.

  • It can also help to include a personal background document that walks lenders through any other basics they might want to know: addresses where you’ve lived, degrees and qualifications you’ve earned, and name changes, for example.
  • If you have one, be equally thorough about your team. Highlight individual strengths and any special expertise that gives your business a competitive advantage. You’re introducing the lender to more people they can trust.


4. Telling your story builds trust and confidence

The more supplemental details you provide to potential lenders, the better. In addition to showing that you’re honest and thorough about your financial position, they also give you the chance to put those numbers in valuable context and start a dialogue with lenders about your company. Preparing that information will also hone your sense of what loan type and amount works best for you.

Rejection is always possible, but it doesn’t mean the end of the road. If a lender declines your application, ask if they’ll share why or need additional information from you. You can also look for alternatives to traditional loans, such as crowdfunding and community-focused grants. For example, some businesses serving local communities are eligible for loans through a federal program called the Community Development Financial Institutions Fund.

Financial details will always be a primary factor in a loan application. But with careful preparation, you can bring lenders a compelling pitch that accurately represents the full scope of your business as it stands today — and where you plan to take it in the future.

1. Federal Reserve, Wealth Inequality and the Racial Gap
2. Minority Business and Development Agency, Business Loan Application Checklist
3. Fundera, The Complete Business Loan Application Checklist