Loan Packaging Checklist

Use this checklist to help gather your information and assemble your loan package, then be prepared to tell your story.


1. Loan Purpose

Know why you need the loan and how you'll use the funds. A lender will review financial requirements based primarily on two types of capital - working and/or growth capital.

  •  Working capital is used for short-term needs and and would typically be repaid during your company's next full operating cycle, usually within 12 months.
  • Growth capital is used to meet needs that will be repaid with profits over a select period of time - usually not more than seven years. For growth capital, have a clear explanation for how you'll use the money to generate the profits and repay the loan in the agreed-upon time frame.

2. Loan Amount
Know how much is needed to support specific business costs. Accurately and convincingly describing this support will often determine a lender’s interest.

3. Loan Maturity & Terms
Know how long you'll need the borrowed funds.

  • Working capital loans or lines of credit have short-term maturities, usually under one year.
  • An asset-based or equipment loan could have a maturity tied to the lifecycle of the asset, typically three to seven years.

4. Repayment
Know how your business will repay the loan. Can you provide financial statements and cash flow projections, or other documents, as evidence that you can service new debt with on time payments?

5. Collateral
Know what collateral is available - such as real estate, inventory, savings, stock, equipment and motor vehicles?

6. Personal Guaranty
Be prepared for lenders to request a personal guarantee.

7. Components of a Loan Package
Loan packaging is not an exact science. A good package will tell a compelling story and answer most questions a lender may have about your business and loan request. It will provide enough information and documentation so that your request is clearly understood and that your lender could discuss and defend it before a loan committee. There are three major components:

  • Statement of purpose
  • Business plan
  • Financial statements

7.1 Statement of Purpose
Include an Executive Summary that addresses:

  • Amount
  • Purpose
  • Duration
  • Repayment
  • Available collateral
  • Brief description of the business and positive outcomes as a result of the financing
  • Amount of capital that you're investing

7.2 Business Plan
A business plan is the most critical component in your narrative. It includes:

  • Business description and vision
  • Market definition and analysis
  • Description of products and services
  • Brief overview of the organization and management

7.3 Financial Statements

7.3.1 Cash Flow Statement
A cash flow statement tracks incoming and outgoing cash each month and is used to project future needs. It's used to determine the amount of cash your business will have on hand at any point in time.

  • A package should include a current, twelve-month statement; with a projection of at least six months out. The projections should be realistic and supported.

7.3.2 Income Statement
The income statement is a measure of how your business has performed over a specific period of time, usually six months or one year. It measures all income less all expenses and determines the amount of profit or loss generated by the business for the period. Include income statements for the last three years, if available.

7.3.3 Balance Sheet
The balance sheet represents the basic accounting equation: assets - liabilities = net worth. It is a snap-shot of business financial capacity at a specific point in time.

  • For new businesses - the package should include a balance sheet as of your planned opening date, and another, projected for twelve months after your opening date.
  • For existing businesses - include balance sheets for the last three years, if available.

7.3.4 Personal Financial Statement
A personal financial statement is a simple balance sheet measuring net worth. It identifies personal assets and debts to help a lender determine your net worth.
This statement is important to the overall loan request, because it helps the lender evaluate a borrower’s financial capacity and ultimately the value of a personal guaranty.

8. Loan Packaging Tips

  • As much as possible, be brief, to the point, and make it easy to read.
  • Emphasize the management strength of the business - your team has the skills, passion and expertise to be successful.
  • Add projections with realistic probabilities and substantiated assumptions.
  • Bottom line - lenders want to feel they'll get their money back in the agreed upon time frame.

9. Lender Review
How is an application evaluated and scored? Convince the lender that you and your business are a good risk. Lenders will be evaluating:

  • Character - prepare for a check on your financial status and personal credit history, including your previous loan payment record.
  • Experience in the type of business you're trying to finance, including your level of responsibility, education and business management training.
  • Capacity - is there sufficient cash flow to pay-off a loan?
  • Collateral - is there sufficient collateral to cover any default scenarios?
  • Financial awareness - can you demonstrate your overall business acumen?


Getting started … Next steps

When you're ready to move forward, talk with a TEFO representative who will listen carefully to understand exactly what's needed.

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