Applying for a Business Loan? Make Sure Your Personal Information Is Protected.

Before you apply for a loan, you should know your financial picture and gather all of your financial statements ahead of time. However, lenders do not need to see this information until you receive a loan proposal — I suggest you only share these documents on a need-to-know basis. After you receive a loan proposal, you should be prepared to show three years of business tax returns, three years of personal tax returns, including applicable K-1 schedules, two months of business bank statements, two months of personal bank statements, profit and loss statement, balance sheet and an accounts receivable aging report. It’s best to be prepared in case the lender asks for specifics.

Pro tip: If you’re acquiring a business, be sure to also review the financial history of the business including tax returns, cash flow statements and outstanding debts. The lender will want this information too.

Answer all of the questions as honestly and thoroughly as possible. It is a waste of time to hide any blemishes that may disqualify you for a loan because the lender will eventually find out when they do their due diligence. This is an opportunity to sell yourself and why you are qualified for the loan and capable of running the business. However, it is best to keep your personal info (SSN, bank numbers, etc.) private and only provide it when necessary.

Pro tip: I strongly encourage borrowers not to provide a personal phone number either because a majority of the lending websites make money by collecting and selling your personal information to lenders. Many of the lenders that purchase your information are known to pursue the loan by aggressively calling and/or emailing.

Be aware that your personal and business credit will generate two different credit scores. A personal credit score ranges from 350–850, whereas a business credit score ranges from 0–100. Additionally, a business credit score does not follow the same algorithm, so the score may vary from bureau to bureau. Oftentimes lenders use Experian, Equifax, FICO or Dun & Bradstreet, which issues a D&B D-U-N-S number to check a business credit score.

Pro tip: If a lender requires you to provide your Social Security number, you may want to check how secure its process is. Many lenders collect this information and do not dispose of it properly by shredding or destroying it, leaving you vulnerable to identity theft.

Pro tip: Do your due diligence on the owner(s) and the business itself before you apply for the loan. The value of the business can be determined by the history of the business, name recognition, viability and goodwill of the industry, along with other factors such as inventory that is included and/or a transferable lease.

Shop and compare the terms of the loan from different lenders. Oftentimes, well-qualified borrowers will go with the first lender who approves their loan. If you qualify for a loan with one lender, generally you will qualify with multiple lenders. Did you know banks are constantly re-balancing their loan portfolios? This can mean the same lending institution, possibly in different locations, may offer completely different rates. One location may have too many business loans so it will offer competitive rates on home loans. Shopping loans is the best way to ensure you find the best rates available.

Pro tip: Don’t forget to secure the digital rights such as web domains, email accounts, social media accounts and passwords.

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