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A Cautionary Tale: Build a Solid Foundation Before Applying for a Small Business Loan


When Should I Start Thinking About a Small Business Loan?

The right time to prepare for a small business loan is well before you need the money. Many small business owners fail to maintain financial documentation because they’re so focused on day-to-day operations or believe they will never need a loan. Then, they face a major problem when they urgently need funding and discover that these documents are required as part of the small business loan application process. They end up feeling frustrated or rushing to pull their documentation together, which can result in mistakes or inconsistencies that cause further delays.

Angella Aizire, a loan officer at Baltimore Community Lending, sees this a lot. “Some entrepreneurs don’t fully anticipate what they need to grow, so they get turned down when they apply for a small business loan.” That’s why Angella recommends that startup or emerging small businesses prioritize speaking with a mission-based lender, such as a community development financial institution (CDFI), first thing. The lender can help you determine the right time to apply for a small business loan based on factors such as your business goals and how much capital is available to you now and in the future.

What Should I Do Before Speaking With a Lender?

Angella advises preparing the following documentation in advance of speaking with a lender:

  • Business plan

A business plan demonstrates that you’re knowledgeable about how to make your business successful. It helps you and your lender understand how the business will stay afloat and eventually grow, so you’ll be able to pay back the loan. Startup businesses can follow these tips to begin writing their business plans.

  • Financial documents

Keeping up with financials allows you to see the business’s historical, current, and forecasted financial position. You should maintain documents such as a balance sheet, profit and loss statement, and cash flow projections. This video can guide you in creating your financial documents.

  • Your credit report

Federal law allows you to access your credit report for free every 12 months, so you can ensure the information is accurate and be aware of any derogatory marks. While every lender applies their own standards when evaluating credit reports, Baltimore Community Lending uses them as a guideline for conversations with applicants rather than deciding based on the report alone.

If you need help preparing this documentation or guidance on your small business loan needs, Baltimore Community Lending is available to help. Now is the time to start building a relationship – before your small business gets blown in. You can contact us in the following ways:

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