Common Errors To Avoid When Submitting A Small Business Loan Application

Submitting a loan or an equipment lease application can be rather nerve racking.  We try to do everything perfectly in order to obtain the best results, but sometimes its the small little mistakes that sink the ship!  Here are some common errors that I’ve seen business owners make on their loan application and how to fix them!

Most Common Small Business Loan Application Mistakes

  • Not Checking Your Personal Credit Report.  The first thing you should do for any type of financing is to check your personal credit. As a start up business owner, your business doesn’t have any credit yet.  So the lender will base their decision on your personal credit.   As the owner of the business, your personal credit history is also at stake. Be sure small business loan application errorsto order a copy of your credit report from each of the three major credit bureaus and check it for possible errors or incorrect information. If you find any, request for correction immediately by sending a dispute letter to the bureau that issued your report.
  • No Business Plan.  Believe it or not.  A lot of people walk into the bank with nothing in their arms.  Our website clearly stated the documentation we required and although it said bring your business plan (optional)  It really wasn’t optional!  Even though we only really wanted to look at the financial proforma and the background of the borrower.  It was an unwritten rule that if the business owner didn’t take the time to write out a through business plane…watch out!  The only exceptions were people who were purchasing franchises.  Even though you should still have a business plan to help guide you as your grow your business, the franchise company has strict guidelines that will help you run your business.

Those Who Fail To Plan….Plan to Fail !!

  • Unclear Purpose Of Loan. This goes with not having a clear business plan.  Know how you want to spend the money!  How it will be spent, and how the loan will be repaid.  Make sure your numbers are REALISTIC.   Don’t forget to add a “cushion” for unforeseen expenses.
  • No Financial Documentation: Regardless of whether you have good or bad credit, you will need to make sure you have a personal financial statement, your most recent tax return and sometimes they want a few months of bank statements from the account  where you have the working capital you have already raised or will be pulling the down payment / security deposit from.
  • No Collateral. Some of the smaller loans will not require collateral.  But once you start looking at numbers above $20,000 the banks start looking for additional collateral.  ESPECIALLY if you have bad credit.  Be prepared with a current value of the items you plan to use as collateral.  Most banks will accept, CD, equipment and real estate.  Some will even accept the title to your vehicle.
  • Research Your Lender . Starting your business is exciting.  But you still need to do your research. Are they direct lenders or brokers?  What are the fees they charge for approving your small business loan?  When are the fees due?  Do they guarantee you will get funded BEFORE you have to pay them?  Be careful of anyone needing upfront fees.
  • Not Reading The Fine Print.  Before you sign anything, read the fine print!  Don’t let the excitement of the moment cause you to accept a deal from a predatory lender.  The only way you can avoid such lenders is be aware of the Terms and Conditions in your contract.  Look out for balloon payment loans or loans that charge a fee if you pay them off early.

Irish Taylor is a business loan consultant with Startup Business Loans and has been providing consumers and business owners with startup business financing since 1992. For years she has helped people with credit and loan problems especially pertaining to business start up, SBA loans and Unsecured loans.


  1. I didn’t realize they look at personal scores! Ugh I think it’s best for me if I clean up my credit first I would hate to have to ask for a co signer.

    • Yes, asking someone to co-sign is getting harder and harder! But you can’t really blame someone if they don’t want to be on the hook for someone elses loan. I think there have been too many horror stories. Luckily there are more and more bad credit lenders offering competitive loan products.

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