5 Key Steps to Getting Your First Business Loan

posted 1/10/2019 in Business

business loan, loan process, credit score, collateral

Your business needs capital in order to grow and you need to figure out what option is best for you and your company down the road. On one hand, you could sell some of your equity to an investor, but that means giving up some control over the business. On the other hand, you could take out a business loan to fund your business's needs without giving up any control. If you're applying for your first business loan, there are five key steps you need to take to ensure the process goes smoothly and to increase your chances of approval.

Step 1: Gather Financial Documents

Before you begin the process of applying for a business loan, you need to have a clear picture of your business's financial health. You also need to make sure that you have a good grasp on your personal financial situation. Collect all of your financial documents including bank statements, loan documents, taxes, assets, and any investments. You'll also want to produce a profit & loss statement and a balance sheet for your company. Since you're the owner of the company, your personal financial and tax information are also going to be important.

Step 2: Assess Your Cash Flow

With your financial documents all in one place, you'll be able to see exactly where your money is coming from, how much of it is coming in, and what your expenses are. By taking these numbers into consideration, you can evaluate your ability to make payments on a loan. It will also reveal ways you could potentially save money by reducing expenses, consolidating operations, or some other move that would improve cash flow. Taking this step now will make it easier to convince a lender to make the loan when you're ready.

Step 3: Look at Your Potential Collateral

In some cases, you may be required to provide some form of tangible collateral in order to secure a business loan. Very often, this is the case with larger loan amounts, or when the borrower has limited cash flow. Collateral can take many forms including equipment, machinery, and other property that holds adequate value to cover the loan amount should you default. The lender places a lien on the collateral which is released once the terms of the loan have been met. What that means is that the lender attaches a notice to your property that you owe them money and that they are entitled to your property if you don't pay it back.

Step 4: Research Your Credit History

Even if your numbers look good for your business, meaning you have a profit margin and regular revenue, lenders look at credit history. If you, or your company, has a blemished credit history, it can result in a declined application. Obtain a copy of the credit report from the three main credit reporting agencies for the company and your own personal credit report as well. Be sure to review the reports carefully and address any errors, or issues before speaking to a lender.

Step 5: Prepare a Business Plan

Perhaps the most important, step towards obtaining a business loan is to prepare a compelling business plan. Lenders want to know that you have a great idea that's well thought out and that you have a solid plan for executing your ideas. Include every relevant fact, figure, and tidbit of information you can about yourself, your partners, your business idea, competition, pricing strategies, marketing ideas, everything. In your Executive Summary, express your passion for your ideas and your commitment to success.


If you're a business owner in Iowa and you need capital, don't worry, we've got you covered. Just follow the five steps above and then contact us at Lincoln Savings Bank to get the loan process started. Just complete the form with some basic information about your business, your capital needs, and your financial situation. Our experts will review your information, and help you find a loan that's right for business's unique needs.  

Lincoln Savings Bank, Member FDIC
Want the latest and greatest from our blog straight to your inbox?
Blog and News
We use cookies to improve your online experience. If you continue on our site, you agree to our cookie policy. Learn more about how we use cookies by reviewing our privacy policy. I agree