What lenders look for before they say yes
Maybe you want to build out a suite, add a room, or buy equipment. Lenders decide with a handful of questions. Requirements vary by lender and loan type, so ask for their checklist, but these come up often.
What lenders usually look at
- Time in business. Many lenders want a year or two of history.
- Income on your tax returns. They usually go by what you reported, not what you earned in cash.
- Profit and loss statements and bank statements. These show whether the numbers hold together.
- Credit. For sole proprietors, your personal credit matters.
- Existing debt compared with your income.
- Your plan. What you will spend the money on and how it will pay for itself.
A tradeoff worth planning for
Claiming more deductions lowers your taxable income, which also lowers the income a lender sees. If you plan to borrow in the next year or two, talk to a tax professional about the right balance before you file.
A 90-day getting-ready plan
- Use a separate business account for everything.
- Produce a simple profit and loss each month.
- File your returns on time.
- Pay down card balances where you can.
- Keep a cash cushion for slow months.
- Write a one-page plan: what you will buy, what it costs, and how it earns money.
Where to get free help
Small Business Development Centers offer free advising to small business owners, and community lenders and microloan programs exist for businesses that are too small for a bank. Ask a local SBDC to point you to one.
This is general education, not tax or legal advice. Rules change and every situation is different. A licensed tax professional can tell you what applies to you.
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