Documents you need for a startup business loan

Key takeaways

• Unsecured loans don’t require collateral but still have an underwriting process and documentation requirements.
• The documents for unsecured business loan applications usually include a current balance sheet and the company’s tax returns.
• Unsecured business loan requirements usually include personal info, like proof of identity and personal tax returns.

When a loan gets backed by collateral, it’s called a secured loan. That collateral offsets risk for the lender because they can seize it if you stop repaying your balance. They can then sell that asset to recoup their losses.

However, not everyone has assets that can be used as collateral or simply don’t want to risk anything that way. In that case, business owners can explore getting an unsecured business loan.

Without collateral in play, lenders take extra steps to confirm your likelihood of repaying what you borrow. That means asking you to provide a wide range of documents for unsecured business loan applications. Here’s a look at the paperwork that usually falls under the list of unsecured business loan requirements.

Documents about your business

When you apply for unsecured business loans, lenders will want to take a look at your company’s financial situation and history. You’ll need to have these documents for unsecured business loan applications:

• Balance sheet: Lenders usually ask for this document to see a full picture of your business’s assets and liabilities. They want to see that you’re not deep in debt and that you have at least decent financial health.
• Business formation information: Details like your company’s employer identification number (EIN), ownership and business structure are always part of unsecured loan requirements. This documentation ensures your company is legitimate and you’re representing it properly.
• Business plan and projections: Needing these documents is less common, but some lenders will ask for them, especially if you want a large or long-term loan or your company is quite new. Even if they’re not part of your unsecured business loan requirements, having a strong business plan and reasonable projections can help give the lender confidence that your company will become or remain profitable.
• Credit report: The lender will obtain your business credit report on their own. But you may want to check your business credit before applying to see how your company will look in the lender’s eyes and whether you can improve your credit.
• Financial statements: Lenders will commonly ask for the most recent bank and loan statements for your business to make sure you can afford the new loan. Most lenders want to see statements from a business bank account.
• Tax returns: If you’ve been running your business for a year or more, lenders will ask for these to check long-term performance. A history of steady or rising revenue and profit is good.

Bankrate insight

Banks often have stricter unsecured business loan requirements than alternative lenders, which operate exclusively online. You may need more documents for an unsecured bank business loan than you would with an alternative lender, so double-check the list of necessary paperwork before applying. Missing or incomplete documents will result in delays or possible rejection.

Information about yourself

To get an unsecured loan or line of credit for your business, you’ll need to prove that you’re the company’s owner and authorized to borrow on its behalf.

If you’re getting an unsecured loan, the lender will also likely check your personal credit and finances, especially if it’s demanding a personal guarantee for the loan. This way, the lender can assess how you handle your personal finances to determine whether you’re a good candidate for a business loan.

Be ready to provide the following details and documents for unsecured business loan applications:

• Contact information: You may need to provide both home and business addresses and phone numbers.
• Personal bank statements: This is less common, but lenders may ask for bank statements if they’re requiring a personal guarantee. Having strong personal finances backs up your promise to pay the loan if your business can’t.
• Proof of identity: Unsecured loan requirements always include identification that lists your birth date — like a passport or driver’s license. Every lender will want this to make sure you’re who you say you are.
• Social Security number: Banks will need your SSN to confirm your identity and link your loan with your credit report.
• Tax returns: Lenders may want to see how much you make personally to determine if you could repay the business loan if your business can no longer make payments.

The lender will pull your personal credit report, so you don’t need to have a report ready yourself. Because your personal credit score is an important factor in determining your eligibility for small business loans, check your score before applying to understand which loans you may qualify for.

Bankrate insight

A personal guarantee is a legally binding promise to use your personal assets to repay a loan if your business defaults on it. It’s common on both secured and unsecured loans.

How to apply for an unsecured business loan

Getting an unsecured business loan involves a few important steps. Here’s a quick overview of how to apply for an unsecured business loan.

• Research loan options: Explore the types of unsecured business loans and choose the one that suits your business needs.
• Select a lender: Determine which lenders offer the type of unsecured business loans you want. Consider key factors like interest rates, fees and terms, as well as the lending requirements for each unsecured business loan.
• Apply: Submit your application and the required documents for the unsecured business loan.
• Get approved: Await the lender’s decision, which can take a minimum of one day to several weeks. If approved, review the loan terms, sign the loan agreement and receive your funds.

The bottom line

Unsecured business loans come with some upside. You don’t need to put up collateral, and they’re often faster to fund. The main drawback is that their interest rate is usually higher than with secured financing.

If you go this route, it’s important to compare the best lenders of unsecured business loans to get the lowest rate possible.

Frequently asked questions

What are the requirements for an unsecured business loan?

Unsecured loan requirements usually include a good credit score, sufficient time in business and revenue at or above a certain threshold. You won’t need collateral for an unsecured loan, but you will need to prove business ownership and supply a variety of financial and personal documents.

Do banks give unsecured business loans?

Yes. Many banks offer unsecured business loans. Keep in mind that they often have stricter requirements for approval than an alternative lender. The underwriting process is also longer.

What documents should be included in a business loan request?

Each lender has their own unsecured business loan requirements, but typically requested documents include tax returns, balance sheets, a business plan, a credit report and personal and business financial statements.