What Documents Do I Need to Apply for a Business Loan?

Applying for a business loan doesn't necessarily require a large amount of paperwork.

For many established businesses, a lender can make an initial assessment using a relatively small amount of information. Technology such as open banking and electronic credit searches has also made it easier for lenders to obtain and analyse information without asking applicants to provide numerous documents manually.

However, requirements vary between lenders and can depend on the size and complexity of the loan.

Knowing what you are likely to need before applying can help avoid unnecessary delays.

What information will I normally need for a business loan application?

Most lenders will initially need some basic information about the business and the funding requirement.

This will usually include:

• business name and company number;

• trading address;

• nature of the business;

• how long the business has been trading;

• annual turnover;

• amount you want to borrow;

• purpose of the loan;

• details of directors or shareholders; and

• information about existing business borrowing.

For a limited company, much of the basic corporate information can be obtained from Companies House.

The lender will then normally require financial information to assess whether the proposed borrowing is affordable.

Do I need to provide business bank statements?

Usually, yes.

Banking information is particularly important because it gives the lender a current view of the business.

Traditionally, lenders asked applicants to provide PDF copies of their most recent business bank statements.

Increasingly, this information can be provided using open banking, where the business gives permission for the lender or its service provider to securely access relevant account information.

A lender might review three, six or sometimes more months of banking activity depending on its requirements and the circumstances of the application.

The information can help establish:

• current turnover;

• cash balances;

• existing finance repayments;

• overdraft usage;

• returned payments;

• payments to HMRC; and

• general cash-flow patterns.

You can read more in our guide to What Do Business Lenders Look for in Bank Statements?

Do I need to provide company accounts?

It depends on the lender.

For limited companies, filed accounts are publicly available from Companies House, so a lender may obtain them directly rather than asking you to provide copies.

However, statutory accounts can be significantly out of date.

For example, a company's most recent filed accounts might relate to a financial year that ended many months before the loan application.

If the business has changed significantly since then, the lender may ask for more recent financial information.

Will I need management accounts?

Possibly.

Management accounts provide a more current view of the company's financial performance than its statutory accounts.

They can be particularly useful where:

• the latest filed accounts are old;

• turnover has increased significantly;

• the business has recently become more profitable;

• historical accounts showed a loss;

• there has been a material change in the business; or

• the loan requested is relatively large.

A lender might ask for a recent profit and loss account and balance sheet.

For straightforward or smaller applications, management accounts may not always be necessary.

Will I need a cash-flow forecast?

Not for every business loan.

A lender may request a forecast where future cash flow is particularly important to the lending decision.

For example, this might be relevant where the business is:

• expanding rapidly;

• opening a new location;

• undertaking a significant new contract;

• experiencing a temporary cash-flow problem;

• investing substantially ahead of expected revenue; or

• seeking a larger facility.

A useful cash-flow forecast should be based on realistic assumptions.

An extremely optimistic forecast unsupported by the company's historic performance is unlikely to provide much comfort to a lender.

Do I need to provide proof of identity?

Yes, lenders will normally need to verify the identity of relevant individuals as part of their customer due diligence and anti-money laundering procedures.

This will commonly include directors, shareholders or guarantors.

Depending on the lender's process, you may be asked to provide or electronically verify documents such as a:

• passport; or

• driving licence.

You may also need to verify your residential address.

Many lenders now use electronic identity verification systems, meaning the entire process can often be completed online.

Will the lender carry out a credit search?

Usually.

A lender will generally conduct a credit search on the business.

Depending on the type of facility and the lender's criteria, searches may also be carried out on directors or proposed guarantors.

Credit information can help a lender identify existing commitments and adverse credit events such as County Court Judgments or previous defaults.

The lender should explain what searches it intends to undertake and obtain any consent required for the relevant searches.

Do I need details of my existing business loans?

Yes, you should expect to provide accurate information about existing borrowing.

The lender may need to know:

• who the existing lenders are;

• original loan amounts;

• current balances;

• repayment amounts;

• repayment frequency; and

• remaining terms.

Some of this may be visible through bank transactions or credit searches, but providing accurate information at the outset can make the application easier to assess.

Existing borrowing doesn't necessarily prevent you from obtaining another business loan.

The lender needs to understand the company's total financial commitments when considering whether additional borrowing is affordable.

What if the loan is secured?

Secured lending normally requires additional information.

If property is being offered as security, the lender may require details such as:

• the property address;

• estimated value;

• existing mortgage balance;

• ownership information; and

• details of any other charges over the property.

A valuation may be required, and solicitors may need to become involved in documenting and registering the security.

As a result, secured business loans can involve more documentation and take longer to complete than straightforward unsecured lending.

Do I need a business plan?

Established businesses don't necessarily need a formal business plan to obtain a business loan.

A company that has traded successfully for several years already has a financial track record that a lender can assess.

A business plan may be more relevant where the lender is being asked to rely heavily on future developments rather than historic trading.

For example, it could be useful for a new venture, a major expansion or a significant change in the company's business model.

Even where a formal business plan isn't required, you should still be able to explain why you need the money and what the borrowing is expected to achieve.

What if there is something unusual in my application?

Tell the lender.

Providing an explanation can often be more helpful than hoping an issue isn't noticed.

For example, you may want to explain:

• a recent fall in turnover;

• a large one-off expense;

• returned payments;

• a historic CCJ;

• an HMRC payment arrangement;

• recently taken borrowing;

• a major new customer or contract; or

• why the latest accounts don't reflect current trading.

None of these automatically means that a business can't obtain finance.

But if something requires explanation, providing the context early can help the lender understand the application.

Can open banking make a business loan application quicker?

Potentially, yes.

Open banking allows a business to authorise secure access to its banking information without manually downloading and sending statements.

For lenders, it can also make transaction analysis faster.

Instead of relying solely on static PDF statements, lenders may be able to analyse revenue, balances, existing finance commitments and other transaction patterns electronically.

It doesn't change the fundamental underwriting decision, but it can make the collection and analysis of information more efficient.

How can I make my business loan application quicker?

One of the simplest things you can do is provide complete and accurate information from the beginning.

Before applying, it is useful to know:

How much you want to borrow. Don't simply request the maximum available if you don't need it.

Why you need it. Be able to explain the commercial purpose of the loan.

What you already owe. Have a clear understanding of existing business finance commitments.

What has changed recently. If current trading differs materially from your filed accounts, explain why.

Anything that may need explaining. It is generally better to provide context for an issue than wait for the lender to discover it during underwriting.

A well-presented application is easier for a lender to assess and can reduce the need for repeated requests for additional information.

Applying for business finance with Adelpha Capital

Adelpha Capital provides business finance to established UK SMEs.

The minimum information required for an Adelpha Capital unsecured loan is 6 months of bank statements and the latest prepared financial statements (if applicable). We aim to keep information requirements proportionate while obtaining what we need to properly assess the business and proposed borrowing.

If you're looking for business finance, you can apply online or contact the Adelpha Capital team to discuss your requirements.