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Module 6: Financing Options

Small business financing checklist

The purpose of this tool is to encourage entrepreneurs to work with bankers, small business counselors and technical assistance providers or other expert advisers to help them make informed decisions when seeking financing and before signing financing agreements or loan contracts.

1. Business Financing Opportunities

a. Is your small business eligible for a federal, state, or local government loan guarantee or other small business programs?
b. Which lenders offer such programs?*
c. Have you conducted a reputational search of the lenders you are seeking financing from, or have they been recommended by trusted advisers?

Note: Seek expert advice to evaluate all financing options.

d. Do the lenders offer business training or have you asked for their recommendations for technical assistance?

2. Financing Agreement/Loan Contract

a. Have you discussed potential financing terms with the lenders, including rates, duration, and covenants to expect in a loan agreement?
b. Have you felt pressured by any lender to make a quick decision on accepting and signing financing documents without understanding them?

Note: Insist on enough time to get the information and advice you need.

c. Are the lenders available to answer your questions? Do you have their customer service contact information?
d. Do you have a certified public accountant, business mentor, or another professional who can help you review the documents?

3. Loan Cost

a. Do you understand the loan repayment schedule and breakdown of the principal and interest amounts due over time?
b. Are any financing options short-term (less than six months)? If so, have you analyzed other options carefully by comparing the costs of different loans?
c. Do you know the interest rate on each proposed loan, whether it is variable or fixed, and how it is calculated into your payments
d. What other loan fees are there, including origination, late or prepayment fees?
e. Do you understand the total amount required to pay off the loans at any time during their terms?

4. Payment Terms

a. Do the loans require monthly payments or a different type of schedule (for example, daily or weekly)?

5. Type of Financing

a. Are the offers a loan, a merchant cash advance, or something else?

Note: An advance is not debt but provides upfront funds in exchange for a portion of future credit and debit card sales.

b. If obtaining an advance, are you aware of the repayment process, restrictions and total cost?

6. Ability to Repay

a. Do the lenders require information to assess your ability to repay the loans?
b. Are the lenders asking how you will repay the loans?
c. Do you know if your projected cash flow will accommodate projected loan payments?
d. Do you understand what happens if you are unable to repay the loans?
e. Do you understand the risks of losing property that you pledge as collateral if you don’t repay the loans?

Loan readiness checklist

Considering these questions can make it easier when you apply for a loan. If you don’t know the answer to a question, don’t worry! Lenders will generally work with you to get the information needed to evaluate your application. Provide detailed explanations where appropriate. If your business ownership is divided among various people, each owner should complete the checklist questions marked with an asterisk (*).


  1. Do I have the past 2–3 years of personal tax returns? Am I delinquent or indebted to the U.S. government?

Note: If you are delinquent or indebted, this could be a disqualification for participating in government programs.

  1. Do I know how much cash and the value of personal assets that I have contributed to my business (i.e., owner’s equity value on the balance sheet)?
  2. Have I reviewed my personal credit reports for inaccuracies? What is my personal credit score?
  3. Do I know what payments my business I can afford toward a business loan considering all my other income and expenses, and whether I can afford to cover any business shortfalls?


  1. Do I have a full and short version of a business plan?
    Note: Lenders typically expect 5–10 pages
  2. Do I have the past 2 to 3 years of business tax returns (including supporting schedules)?
  3. Do I have 1 to 2 years of business financial statements and other financial projections?
  4. Do I have documentation of business ownership and changes to ownership over time, if applicable? What percentage of the business belongs to each business partner, including investors?
  5. Do I know what business structure my business is registered as (sole proprietorship, LLC, S-Corp, C-Corp)? Do I have my business incorporation documentation?
  6. Do I have a succession plan or life insurance policy?
  7. Have I reviewed my business credit reports for inaccuracies?
  8. Do I have all other information and documentation a lender may request?


  1. Do I constantly need money to cover production/services costs that my cash flow can’t cover?
  2. Do I have an existing relationship with one or more lenders?