Commercial loan application documents: a practical checklist

Commercial loan document checklist

• Current business financial statements and tax returns
• Recent Business Activity Statements (BAS) and management accounts where required
• Business debt schedules
• Latest ATO income tax & integrated client account statements where requested
• Personal assets and liabilities
• Company, trust and ownership documents
• Evidence of deposit or equity contribution
• Contract, lease, quote or acquisition documents
• Aged debtor and creditor reports
• Transaction-specific forecasts, budgets or feasibility information

1. Business financial information

For an established business, historical and current financial information is usually central to the lender's assessment. Depending on the transaction, this may include:

• Profit and loss statements and balance sheets
• Business tax returns
• Business Activity Statements
• Recent business bank statements
• Interim or management accounts
• Aged debtor and creditor reports
• Details of existing loans, overdrafts and equipment finance
• ATO integrated client and income-tax account statements where requested

The lender is trying to understand whether the business generates sufficient and sustainable cash flow to meet its existing obligations and the proposed new debt. It may examine revenue, margins, profitability, working capital, cash conversion, debt levels and material changes between reporting periods.

If performance has changed, provide context. A temporary interruption, one-off expense or deliberate investment in expansion tells a different story from an unexplained decline in revenue or profitability.

2. Personal financial information

The financial position of directors, owners or guarantors may also form part of the assessment. A lender may request:

• Personal tax returns and notices of assessment
• Evidence of salary, rental or other income
• A statement of personal assets and liabilities
• Details of home loans, investment loans, personal loans and credit cards
• Information about investment properties and other material assets
• Personal bank statements where relevant

This information helps the lender understand personal commitments, contingent liabilities and the overall position of the people supporting the borrower.

3. Existing debts and tax obligations

Prepare a current schedule of all business debts and limits, including term loans, overdrafts, debtor-finance facilities, equipment finance and credit cards. Facility statements should show the lender, limit, balance, repayment and expiry date where applicable.

Tax obligations may also be relevant. An outstanding tax debt does not automatically mean finance is unavailable, but a lender may want to understand its size, how it arose and whether an agreed payment arrangement is being maintained. Clear disclosure and supporting evidence are preferable to an issue emerging late in assessment.

4. Commercial property documents

For a commercial property purchase or refinance, the lender will need information about the property as well as the borrower. This may include:

• Contract of sale or existing loan statements
• Property details and intended use
• Current leases and amendments
• Tenancy schedule and rental statements
• Tenant information
• Rates, outgoings and property expenses
• Existing valuation information, where available
• Building, environmental or other due-diligence reports where relevant

For an investment property, rental income, vacancy and lease quality may be central. For an owner-occupied property, the lender may focus more heavily on the operating business and how the premises support its activities.

5. Evidence of what is being funded

The lender needs to understand the purpose of the loan and where the funds will be applied. Common examples include:

• Commercial property: contract of sale, lease information and property details
• Equipment or vehicles: supplier quote, invoice or purchase agreement
• Business acquisition: sale agreement, target-business financials and purchase structure
• Working capital: cash-flow forecast, budget and explanation of the funding need
• Expansion or fit-out: project budget, quotes, forecasts and implementation plan
• Refinance: statements for every facility being refinanced and a clear proposed payout schedule

The supporting material should connect the funding request to a commercial objective. For example, a warehouse purchase should be explained alongside the business's capacity requirements, growth plans, historical performance and proposed debt repayments.

6. Evidence of deposit or equity contribution

Where the borrower is contributing money, the lender will generally want evidence of the amount and source. Funds may come from business cash reserves, personal savings, retained earnings, equity in another asset or sale proceeds.

If funds have recently moved between accounts or related entities, provide documentation that allows the lender to follow the transaction and establish that the contribution is available at settlement.

7. Company, trust and ownership documents

Commercial borrowers often use companies, trusts, partnerships or multiple related entities. Depending on the structure, the lender may request:

• Company searches and constitutional documents
• Trust deeds and all amendments
• Partnership or shareholder agreements where relevant
• Details of directors, shareholders, trustees and beneficiaries
• Identification documents
• An ownership and entity structure diagram
• Information about related entities and intercompany loans

An accurate structure diagram is particularly useful where one entity operates the business, another owns the property and one or more individuals or entities provide guarantees. Establishing the correct borrower and security parties early can reduce legal-documentation problems later.

8. Guarantees and security information

Commercial lending commonly involves security and may involve guarantees from directors, owners or related entities. The lender may request information about the assets offered as security and the financial position of each proposed guarantor.

Security supports the application, but it is not a substitute for a credible repayment strategy. The lender will generally want to understand both how the debt will be serviced and what security is available if the loan is not repaid as agreed.

What if the business is new?

A newer business may not have several years of financial statements. Depending on the lender and loan type, alternative information may include:

• A detailed business plan
• Cash-flow forecasts and projected profit and loss statements
• Assumptions supporting the forecasts
• Evidence of industry and management experience
• Contracts, pipeline or confirmed work
• Details of the owners' contribution
• Available assets, equity and security

Forecasts should be commercially supportable and linked to evidence. A lender is more likely to question projections that show rapid growth without explaining customer demand, pricing, staffing, costs and working-capital requirements.

SMSF commercial property applications

An SMSF commercial property application may require documents for the fund, trustees, custodian or bare trust structure, property and operating business. The fund's trust deed, financial statements, contribution history, liquidity and proposed lease arrangements may also be relevant.

SMSF borrowing involves legal, tax and superannuation considerations. A 3LANE SMSF lending specialist (https://www.3lane.com.au/services/smsf-loans) can coordinate the finance requirements while the trustees obtain advice from their accountant, licensed financial adviser and solicitor.

Development finance requires a project file

A development-finance application generally requires more project-specific information, including:

• Development approval and approved plans
• Building contract and detailed cost plan
• Quantity surveyor reports
• Feasibility and cash-flow schedule
• Builder credentials and project team details
• Contingency allowance
• Evidence of the developer's equity contribution
• Presales or leasing information where relevant
• Previous development experience
• A clearly defined exit strategy

Learn more about how lenders assess projects through our property development finance service (https://www.3lane.com.au/services/property-development-finance).

Documents that commonly delay an application

• Financial statements that do not reconcile with tax returns
• Unsigned or outdated leases
• Old financial information without current management accounts
• Unexplained changes in revenue, margins or profitability
• Large account transactions with no supporting explanation
• Debts or tax obligations omitted from the initial application
• Unclear evidence of the equity contribution
• Outdated company or trust information
• Forecasts without transparent assumptions

These issues do not necessarily result in a decline. They can, however, lead to further questions and delays while the lender reconciles the information. Where an issue can be explained, address it clearly and support the explanation with evidence.

A complete file is not necessarily a clear application

A folder containing dozens of documents may still leave the lender without a coherent understanding of the transaction. A well-prepared application should connect the borrower, financial performance, purpose, structure, security and repayment strategy.

This is where an experienced commercial finance broker adds value: identifying what is relevant, checking for gaps or inconsistencies, selecting a lender whose criteria fit the transaction and presenting the information in a form that can be assessed efficiently.

Prepare the application before it reaches the lender

3LANE Finance helps business owners, investors and developers identify the documents required, address potential credit questions and prepare commercial finance applications for suitable lenders.

Discuss your commercial loan application today

Important information: This article provides general information only and does not constitute financial, legal, tax or accounting advice. Lending criteria, pricing and availability vary between lenders and are subject to assessment and approval.