10 Financial Documents Every Business Should Have Ready Before Applying for a Loan

Tax returns are the most reliable proof of your financial history. Lenders want to confirm revenue, profitability, and IRS compliance. They also look for trends over multiple years to assess stability.

Preparation Steps:

1. Gather the last 2–3 years of signed business and personal tax returns.
2. Ensure numbers match your P&L, balance sheet, and cash flow statements. Discrepancies can raise red flags.
3. Review for missed deductions or errors and correct them before submission.

Common Mistakes:

• Submitting returns that don’t match accounting records.
• Forgetting to include all required schedules (like Schedule C for sole proprietors).
• Filing incomplete or unsigned returns.

Pro Insight: Lenders want consistency. Showing three years of consistent revenue and growth can make the difference between approval and denial.

Seasonal Tip: Prepare returns in December. Doing so helps uncover year-end tax-saving strategies and ensures your loan application can go in early January, when lenders often have more flexible terms.

The P&L statement shows whether your business is actually profitable and how well you manage expenses. Lenders use it to see trends, seasonal fluctuations, and unusual expenses.

Preparation Steps:

1. Update your P&L monthly, not just annually.
2. Highlight seasonal spikes, one-off expenses, or major changes in revenue.
3. Ensure totals reconcile with tax returns and cash flow statements.

Common Mistakes:

• Using outdated software or spreadsheets with errors.
• Forgetting to categorize one-time expenses separately.
• Submitting statements without explanation of irregularities.

Pro Insight: Lenders care more about trends than single months. If you show steady improvement over the last 12 months, it makes your business look reliable for lending purposes.

Seasonal Tip: Year-end P&L statements should reflect holiday sales, bonuses, and supplier payments. Lenders like to see how these affect cash flow and profitability.

The balance sheet is a snapshot of what your business owns, owes, and the equity left over. Lenders use it to assess your financial stability and borrowing capacity.

Preparation Steps:

1. Update current and long-term assets (cash, accounts receivable, inventory, equipment, property).
2. Update current and long-term liabilities (loans, credit lines, leases).
3. Ensure equity and totals reconcile with P&L and cash flow.

Common Mistakes:

• Leaving off assets or liabilities that affect your borrowing capacity.
• Using outdated equipment valuations.
• Confusing personal and business assets.

Pro Insight: Updating asset values before applying can make your balance sheet look stronger and improve loan terms.

Seasonal Tip: Pay down debts in December if possible. Even small reductions improve your Debt-to-Equity ratio, which lenders notice.

Profit doesn’t always equal cash. Lenders want to know if your business has enough liquid cash to cover loan payments, operating expenses, and unexpected costs. A cash flow statement separates operating, investing, and financing activities to give a clear picture of money movement.

Preparation Steps:

1. Use our accounting software for accurate, automated reports.
2. Include monthly cash inflows and outflows for the past 12 months.
3. Reconcile totals with P&L and balance sheet.
4. Separate one-time cash events from recurring income or expenses.

Common Mistakes:

• Ignoring seasonal fluctuations in cash flow.
• Forgetting to include large one-time purchases or tax payments.
• Mixing personal and business transactions.

Pro Insight: Even profitable businesses can be rejected if cash flow looks unstable. Lenders want assurance that the business can consistently make payments.

Seasonal Tip: During December, account for holiday sales, year-end bonuses, and supplier payments. Showing positive cash flow during cash-heavy months reassures lenders.

Aging reports measure how efficiently your business collects from clients (AR) and pays vendors (AP). Healthy aging reports indicate strong working capital management and financial discipline.

Preparation Steps:

1. Categorize invoices in 30/60/90/120+ day brackets.
2. Highlight overdue invoices and include collection strategies.
3. Reconcile vendor balances with AP to avoid discrepancies.
4. Keep documentation ready for any large outstanding amounts.

Common Mistakes:

• Submitting reports with unverified overdue invoices.
• Ignoring client disputes that delay payments.
• Not explaining why certain invoices are delayed.

Pro Insight: Lenders prefer a proactive approach. Showing that overdue invoices are being collected improves your credibility.

Seasonal Tip: End-of-year collections improve cash flow and demonstrate financial control. Prioritize following up on overdue accounts before submitting loan applications.

Bank statements provide a real-world snapshot of cash flow, showing deposits, withdrawals, and consistency of income. They verify that your books reflect reality.

Preparation Steps:

1. Provide 3–6 months of statements.
2. Keep business and personal accounts separate.
3. Avoid unusual large withdrawals or deposits prior to submission.
4. Reconcile bank statements with accounting records to prevent discrepancies.

Common Mistakes:

• Mixing personal and business transactions.
• Missing statements or gaps in records.
• Depositing large, unexplained cash sums.

Pro Insight: Consistent deposits and absence of overdrafts make your business look stable. Lenders notice irregularities.

Seasonal Tip: Avoid pulling large cash sums in December or just before application; explain any large deposits that are seasonal or one-time.

Lenders need proof that your business is legally authorized and compliant. Without valid licenses, funding can be denied.

Preparation Steps:

1. Gather current business licenses, permits, and Texas registrations.
2. Verify all documents are valid and renewed.
3. Keep digital and physical copies ready for submission.
4. Include any industry-specific permits that show compliance.

Common Mistakes:

• Expired licenses.
• Missing local, state, or federal permits.
• Submitting unofficial copies.

Pro Insight: A complete compliance package signals professionalism and reduces lender risk.

Seasonal Tip: December is a good time to review your compliance calendar and ensure licenses are renewed for the new year.

A debt schedule shows all existing obligations and helps lenders calculate Debt Service Coverage Ratio (DSCR), which indicates if your business can handle additional debt.

Preparation Steps:

1. List all loans, leases, and credit lines with balances, interest rates, and monthly payments.
2. Separate short-term vs. long-term obligations.
3. Include maturity dates and collateral associated with each debt.

Common Mistakes:

• Omitting smaller debts like credit cards or equipment leases.
• Providing inaccurate balances.
• Failing to explain refinanced or consolidated loans.

Pro Insight: Transparency builds trust. A complete debt schedule can improve approval odds.

Seasonal Tip: Consider paying down high-interest debts before applying. A stronger DSCR improves lender perception and may result in better loan terms.

A business plan shows lenders you think strategically about growth and repayment. Financial projections indicate whether your business can meet future obligations.

Preparation Steps:

1. Include executive summary, market analysis, operations plan, and financial projections.
2. Base forecasts on historical data, realistic assumptions, and market research.
3. Address potential risks and mitigation strategies.

Common Mistakes:

• Overly optimistic projections without supporting data.
• Outdated plans that don’t reflect current operations.
• Ignoring competitor or market analysis.

Seasonal Tip: Update your plan in December; it serves as both a loan-ready document and roadmap for the new year.

For small businesses, owner financial health matters. Lenders use personal financial statements to evaluate risk, especially if the business is a sole proprietorship or closely held entity.

Preparation Steps:

1. List personal assets: real estate, investments, retirement accounts.
2. List personal liabilities: mortgages, credit cards, personal loans.
3. Include income sources and current credit score.
4. Reconcile personal debt-to-income ratio.

Common Mistakes:

• Omitting liabilities or income streams.
• Using outdated account balances.
• Submitting statements without signatures.

Pro Insight: Even small improvements in personal debt ratios can increase approval odds.

Seasonal Tip: Pay down smaller personal debts before year-end to improve your debt-to-income ratio for upcoming loan applications.

While the 10 documents above form the foundation of any strong loan application, lenders may also ask for:

• Collateral Documentation: If the loan requires security (real estate, equipment, or vehicles), provide proof of ownership and valuation.
• Credit Reports: Both business and personal credit reports are reviewed. A strong credit score (generally 680+ for SBA loans) improves approval chances.
• Insurance Certificates: Required for high-value or high-risk loans.
• Letters of Reference or Vendor Contracts: Optional, but sometimes requested to verify your business relationships and operational credibility.

Pro Tip: Pull your personal and business credit reports in advance. Dispute errors early to avoid surprises during underwriting.

Applying for a business loan doesn’t have to feel overwhelming. With these 10 documents, plus collateral and credit reports where needed, you’ll present your business as organized, transparent, and loan-ready. The more complete and accurate your application, the smoother the approval process will be.

At LBS Business Solutions, we help Texas business owners prepare for success with tax preparation, bookkeeping, business compliance services, and Texas business registration support. Our experienced CPAs make sure your financials are accurate, compliant, and positioned to impress lenders.

Schedule your consultation today to get your business loan-ready before the end of the year!

👉 Call us at (210) 714-8299 EXT 1 or schedule your consultation.