Business loans play a crucial role in the success of any bakery. But the process of applying for one isn’t exactly the easiest part. One of the most critical aspects of loan applications is submitting the correct documents. 

The whole point of the document requirement is to give the lenders an inside look at what your bakery business looks like. It also allows them to gauge your business’ potential for success. For that reason, they may look at different aspects of your business, including your financial and credit background along with your plans. 

Loan Application Form

The first step of the loan application process is to submit a loan application form. The forms will vary depending on the lender and loan you’re applying for. However, they essentially ask for the same information. You’ll need to fill in the key business specifics, including:

• Personal background of the owner and partners (i.e., addresses, educational background, criminal record, etc.)
• Legal business name
• Trade name or Doing business by (DBA)
• Business owners’ names
• EIN
• Tax ID #
• Phone numbers

Besides your basic information, the form might also include some questions regarding the loan application. Be prepared to answer questions like:

• How much do you need?
• What is your reason for applying for this loan?
• Where will you use the loan proceeds if approved? 
• Who are the people involved in the management?
• Do you have other debts? If so, who are your creditors?

Be sure to fill in every field in the form to avoid delays in the loan application process.  

Business License

Your business license is proof that you’re legally allowed to operate your business within a particular city or area. It also acts as proof that you own the company. Early on, you should have an idea of what licenses your business needs. For instance, since you run a bakery, the state will have to perform an inspection to ensure that you meet the health standards and ensure that the food you produce will not harm your clients. 

Not only will your license assure your clients, but it will also assure lenders that you have passed the state’s standards and your business meets the federal and state regulations regarding safety, cleanliness, and honesty. Noncompliance not only results in penalties, but it can also affect your chances of loan approval. 

Financial Statements

Lenders, especially banks, want to make sure that if they extend credit to a business, the business will be able to pay them back. By examining your financial statements, the lenders will know your business' financial health, and whether or not you’re fully capable of repaying the loan without sacrificing your cash flow health.

Depending on the lender, they may require you to show a financial projection. It can either be a separate copy or incorporated into your business plan. It’s always a good practice to have these prepared, so you can submit them immediately if needed. 

Other than financial projections, you’ll also need to submit the following documents:

• Balance sheets
• Profit and loss statement
• Income statement
• Cash flow statement

Bank Statements

On top of your financial statements, some lenders may require at least six months (three months for many alternative lenders) of bank statements as part of their documentation requirement. They want to make sure that you have a separate bank account for your business and that your cash flow is enough for the monthly repayments if ever you’re approved for the loan. 

Tha lender will also want to see if you have a checking account, so be sure to prepare that on top of your bank statements.

Income Tax Returns

Like your financial statements, your tax returns act as the lender’s basis for your business’ financial health. Your tax returns verify your annual revenue, which is the key determinant of whether or not lenders will grant you the loan. Additionally, it can show your character as a borrower. If you have delinquent or unpaid taxes, this will reflect poorly on your character    

When applying for a loan, be ready to submit at least three years’ worth of tax returns. They may also require you to submit a copy of your personal tax returns, so you might also need to prepare at least three years’ worth of that. 

Business Credit Report

Your credit report summarizes all your credit transactions, including payments to suppliers and lenders. It will show your credit score, which is a number that measures your creditworthiness. Essentially, the higher your credit score is, the more creditworthy you are, and the more likely you are to receive credit from the banks and other lenders. When applying for a business loan, the business owner is not required to provide details about their business credit score or report, however it is important to understand that the financial entity that you are requesting financing from will pull this information and use it to determine next steps and qualifications. 

Business Plan

Business plans are basically a roadmap for your company. It outlines your bakery’s goals, objectives, operations, industry standing, market standing, financial projections, and other important business information. Lenders, especially banks, will look at the information to know whether or not your business will yield a positive return.

Your business plan doesn’t necessarily have to be several pages long. But it should be well-written and detailed enough to convince the lenders why your bakery is worth investing in. 

At the very least, your business plan should include the following sections:

• Executive summary
• Business description
• Marketing strategies
• Competitor analysis
• Product development and design
• Management plan
• Financial statements, including cash flow, profit and loss, and forecasts 

Business Owners’ Resumes

The success of your business will largely depend on the decisions of the owners and/or managers. Naturally, the lenders will want to look at the credentials of those steering the ship. To that end, you may want to submit a detailed resume outlining your experience and that of your partners (if any). If you’ve attended culinary school, seminars, training, etc. You’ll also want to mention any specific training or apprenticeship in your resume. 

Like applying for a job, you’ll want to impress the lenders and show them that you’re fully capable of leading your company to success. If you have partners or investors, the lenders will want to see the resumes of those who hold more than 20% of the company shares.   

Other Legal Documents

Depending on the loan type and lender you work with, you may have to submit additional legal documents for further verification. In general, the lenders will require the following legal documents:

• Articles of incorporation
• Contracts for equipment leases, if you’re leasing bakery equipment
• Franchise agreements
• Commercial space leases
• Contracts with third-party companies

The Bottom Line

As much as you’d like to focus on creating beautiful cakes and satisfying people’s sweet tooth, you have to remember that you’re also a business owner. As such, you’re responsible for making the right financial decisions for your growing business. 

Business loan applications can be a tedious process, but it’s vital for your company’s success. The documents outlined above are the main documents you’ll need when applying for financing. You can start collecting them as early as possible, so you’ll be ready when it’s time to apply. Some of the lenders may also need you to submit additional documents, so be sure to ask what they are beforehand. The faster you can submit the required documents, the quicker the loan application process will be. 

About the Author 

Matthew Gillman is a business financing expert with more than a decade of experience in commercial lending. He is the founder and CEO of SMB Compass, a specialty finance company providing education and financing options for business owners.