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Why Giving More Documentation Is Often Better for Loans

When a borrower applies with a lender for a business loan, they are often asked to provide more documentation.

Most applicants do not want to provide more than a one page application and are unhappy when asked to do so.

Giving more information helps the applicant and strengthens their request, making it more likely they will get what they are applying for.   Why?

It will help your business get approved and for more money!

The scenario is familiar with a commercial loan request.   Borrowers complete applications and are told they will hear back soon.   The lender calls and ask for more information.

Most common requested loan documentation

Business Tax Returns
Financial Statements
Personal Financial Statements
Business Bank Statements
Documentation:

Financially strong companies should offer this information.

If this information is on hand and it shows strong financials,  then the owner should see it as a positive and offer it.  It is not an extra burden because tax returns that show a flat or increasing gross and net income will help the request.

Personal financial statements showing a substantive net worth will also help the request.  In some cases, the most recent business bank statements are requested as part of the review.  Strong company cash flow is an excellent reason to provide more documentation.

Applicants feel that they should not have to offer more documentation even if it is favorable and makes their company look stronger.  Lenders have the right to request this information and have good reasons to do so.

Why do Lenders want this information?

Lenders want to have a strong comfort level that the company they are lending to will have the financial strength to repay the loan. This has been a long standing conflict between lenders and applicants.   Investors request information and borrowers often don’t want to provide it.   Debtors often immediately complain without considering that giving the information could greatly help them.   Financial statements tell the lender much more than the 1 page application.

Tax Returns show the company’s cash flow in the last 2 years.  The Personal Financial Statements shows the owner’s financial strength.  In small companies, the owner’s personal financial condition is directly ties to the strength of the business.
The financial condition of the owner mirrors that of the company.

Business bank statements show the company’s most recent cash flow telling the lender what the company’s revenues are right now.  Satisfactorily performing companies should gladly give financial information if a lender requests it.

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