Financing Your Small Business in 4 Easy Steps

Starting a small business is enthralling. It’s a chance to focus on your passion and make a profit. Small business, especially ones that need working capital, may need to apply for a small business loan at a financial institution at some point.

Banks like NexTier Bank specialize in funding existing businesses with things like working capital, equipment loans, and more. If your business is looking for funding, you’ll need to gather a few things first.

Step One: Build your credit score.

Credit scores are important to obtain a loan from the bank. As a small business owner, your personal credit history has a significant impact on loan approval. Improving your credit score requires you to pay your bills on time and limit the amount of debt you have.

You can also boost your credit score by decreasing your credit use ratio, i.e. outstanding balances to available limits. Add positive payment experiences to your credit file by paying down debt early, decreasing credit card use, or opening a new line of credit. If possible, dispute any errors or inquiries before they impact your score. Inaccuracies or blemishes on your business credit report can hurt your chances of getting approved for a loan.

Step Two: Understand loan qualifications and requirements.

Most lenders will look for the “Five Cs” of credit to help qualify businesses for loans: capacity, collateral, capital, character, and conditions. Lenders want to make sure your business can repay the amount you borrow. Every lender analyzes credit applications and weighs categories differently. Some lenders may review only financials to assess risk, but community banks like NexTier Bank review prospective customers in their entirety.

NexTier business bankers get to know their customers first and assess each application through a loan committee. “We like to go out and see a client in their business. We want see the business in action, interview them, learn about them, and how they operate,” Dan Sullivan Vice President and Business Banking Group Manager at NexTier Bank said.

Step Three: Gather financial and legal documents.

Like any loan application, you’ll need to gather financial and legal documents to complete a loan application. You will most likely be asked to answer a few questions justifying your reason for application.

The small business loan application may ask for things like:

  • Why are you applying for this loan?
  • How will the loan proceeds be used?
  • What assets need to be purchased?
  • Who are your suppliers?
  • Who are the members of your management team?
  • What is your personal background?

For loan applications, you’ll need to include income tax returns (personal and business for previous three years), financial statements, accounts receivable and accounts payable, business license or registrations to conduct business, articles of incorporation and, if applicable, copies of third party contracts, franchise agreements, and commercial leases. NexTier Business Bankers are experts who can help guide you through the application process.

Step Four: Provide proof of collateral.

Loans with a higher risk factor will most likely need substantial collateral. Your lender can help guide you through the lending process, but it is always helpful to be prepared. You may be asked to submit a proof-of-collateral letter – a legal document describing the nature of the collateral for the loan in question.  


NexTier Bank, N.A. does not endorse or guarantee the products, information or recommendations provided by linked sites. NexTier Bank is not liable for any failure of products, services or information provided through third party sites. Third party linked sites may have privacy policies that differ from NexTier Bank; and linked sites may or may not provide the same level of security.