I'm a financial planner — if you have a small business, I have 7 essential documents you need to get funding (2024)

I'm a financial planner, and I've identified seven documents that small business owners should have — especially if you need a small business credit card, grant, or a business loan. To ensure your small business is well-prepared to secure funding, it is essential to have the following financial documents in place.

1. Business credit report

Understanding and managing your business credit score is essential to secure funding. There are three primary business credit bureaus: Experian, Equifax, and Dun & Bradstreet. To establish a credit profile with Dun & Bradstreet, you must apply for a free DUNS number. A DUNS number is also required to apply for federal grants. Unlike Dun & Bradstreet, Experian and Equifax automatically generate business credit profiles.

One effective strategy to start building your credit profile is to acquire a business credit card. It is important to use your business credit card responsibly, make payments on time, and keep your credit utilization low.

Establishing a good business credit profile can lead to lower interest rates on loans, higher credit limits, better terms with suppliers, and increased access to funding.

Remember to check your business credit report periodically for fraud and errors. There are many great credit monitoring services available, such as the three bureaus themselves.

You can order a copy of your credit report from Dun & Bradstreet, Experian, or Equifax.

2. Profit and loss statement

A profit and loss statement, also known as an income statement, is a key financial document that summarizes your income and expenses over a specific period, often annually or quarterly. A P&L statement is critical to investors, lenders, and suppliers because it provides them with a sense of how profitable your business is over time.

Providing a P&L statement to stakeholders helps to establish credibility, which is essential to securing funding and attracting investors. Be sure to leverage this document to make your business more attractive to stakeholders.

If you are using bookkeeping software, you should be able to generate an income statement easily.

3. Balance sheet

Another document your bookkeeping software can generate is a balance sheet. A balance sheet is another key financial document that summarizes what you own (assets) and what you owe (liabilities) at a specific point in time to determine your equity (value).

A balance sheet is useful to stakeholders because it provides them with a snapshot of your company's financial health and solvency status. For example, a lender may be interested in learning about your debt-to-equity ratio to determine your creditworthiness.

4. Bank statements

Often, stakeholders will be interested in evaluating your bank statements. For example, lenders may use bank statements to assess your cash flow patterns and account balances to evaluate repayment ability and risk. This will help determine the financing terms offered by the lender.

You can normally access your bank statements online or by visiting a local branch. You should regularly review and reconcile your bank statements to check for accuracy.

5. Income tax returns

Income tax returns play a critical role in securing funding. Stakeholders often require tax returns to verify your business income, financial stability, and compliance with regulations. Tax returns tell a comprehensive story of your business profits and losses over a specific period.

It is important to ensure that you maintain accurate and up-to-date tax records to support your funding applications.

6. Insurance documents

Insurance is a necessity for small business owners. Insurance protects your business and personal assets from an array of potential risks, such as lawsuits, liability claims, property damage, and more.

Another important reason to purchase insurance for your small business is to signal to stakeholders that your business is both compliant and protected. Stakeholders, including investors, suppliers, and lenders, typically seek proof of adequate insurance coverage. Therefore, you should carefully evaluate your insurance needs, maintain adequate coverage, and regularly review and update your insurance policies.

The type of insurance coverage needed is dependent on the type of business you have and where it is located. Some examples of the most common types of insurance for small businesses include general liability insurance, professional liability insurance (also known as errors and omissions insurance), business owner's policy, and product liability insurance.

7. Financial forecasts

Financial forecasts are tools that project future revenue, expenses, and profits over a specific period, providing insights into the trajectory of your business. These financial forecasts play a key role in securing funding such as loans, investments, or grants. Stakeholders often rely on this information to assess your company's growth potential, repayment ability, and financial stability.

By investing time into developing financial forecasts, you can substantially increase your chances of securing funding.