When you apply for a small business loan, first thing that lenders want to be sure is how you will repay it. Banks and brokers prefer to take as little risk as possible. They assess whether your business is promising and if you have solid business background.

What are major things that lender will look at when you apply for a small business loan?

1. Your personal credit history is one of the basic criteria lenders look at for grant of a loan. This is reflected in credit score obtained form credit reporting agencies. Before starting loan shopping get credit reports from all 3 reporting agencies: Experian, TransUnion and Equifax.

2. To apply for a small business loan your applicants should have reasonable self investment amount in business. This gives confidence to lenders that you will be sincere in making your business successful. The amount should at least be 20% of your loan amount.

3. When you apply for a small business loan, lenders also look for cash flow and collateral as two sources of your repayment. They ask for personal tax returns of past three years, business financial statements and accounts payable and receivable aging.

Collateral is required for all SBA loans. Lenders also seek your personal guarantee for loan repayment.

When you apply for a small business loan, four documents must be submitted to lender for review viz. business plan, loan request, personal financial statements and other documents such as tax payer ID number, articles of incorporation etc. Being prepared can save your time in approval of loan.