Before you borrow: a business financing checklist

A useful financing conversation begins with a specific purpose, amount, and timing. This checklist is a preparation tool rather than an approval standard. Work through it with the person who manages your books and cash flow.

Use actual collections and payments to prepare a forecast. Keep a downside case and a reserve plan next to the expected case. Make assumptions explicit so the model can be challenged before money is borrowed.

A headline rate cannot describe a full financing agreement. Request a written summary and compare the cash your business receives with every obligation it takes on.

Follow the provider's secure process and keep the exact package submitted. Assign one person to track conditions and updated document requests.

You can print this page or save it as a PDF using your browser. Update it as actual terms become available. It is more useful as a live worksheet than as a completed form filed away after approval.

Use the application guide for document preparation and the payment calculator for a fixed-rate amortization example. If a term or obligation remains unclear, ask for clarification before accepting the agreement.

A checklist works when it changes the decision, not when every box is checked mechanically. Create a small folder with the purpose of the financing, a sources-and-uses budget, a cash forecast, and the actual proposal. Keep assumptions visible. If you cannot verify an item, leave it open and name the person responsible for resolving it. A complete-looking file with unverified answers can be more dangerous than an honest list of remaining questions.

Set a decision date that allows time to obtain missing terms. If a vendor's deadline creates urgency, ask what can be reserved or phased without an irreversible commitment. Financing pressure should not replace understanding. A provider willing to answer specific questions in writing helps make the comparison reviewable.

Start with the business problem. Determine whether the request buys a productive asset, funds a customer contract, bridges collections, refinances obligations, or covers losses. Write how that activity will repay the financing. Compare alternatives such as deposits, staged purchases, supplier terms, or owner capital. The best option may be a smaller request or a different project schedule rather than a larger facility.

Record the tradeoffs of each alternative. A supplier discount may require earlier payment. Customer deposits may create delivery obligations. Owner capital may reduce personal liquidity. Grants may have restricted uses and uncertain timelines. Alternative funding is not automatically free or faster, but comparing it can reveal assumptions that a loan-only comparison misses.

Identify the legal name of the provider, whether it lends directly, and any broker or intermediary involved. Verify the communication channel before sending financial documents. Ask how applications are shared and which providers may contact you. Keep a record of consent for inquiries and submissions. Avoid assuming that a familiar brand name identifies the legal party in the final agreement.

The final contract should match the party and terms you evaluated. Review any changes between the preliminary offer and the closing documents. If a fee, repayment frequency, or guarantee appears late, pause the comparison and update the cash model. A materially different proposal requires a new decision, even if its advertised amount is unchanged.

Write down net proceeds, total payments, periodic payment amounts, interest mechanics, fees, and early-payoff terms. Identify which charges are financed and which require cash at closing. Obtain the actual schedule and use it in the operating forecast. An attractive monthly amount can conceal a long term, a balloon payment, or separate charges.

Compare offers over the same planned use period. If one facility will be repaid early and another retained longer, document why. Do not compare a factor multiplier with a nominal annual rate as if they were the same measure. Ask a qualified adviser for a consistent annualized comparison when needed, while keeping total cash cost and contractual obligations visible.

Calculate the cash remaining after closing costs, owner contributions, deposits, and the purchase itself. Test a slower opening, delayed customer payment, or higher operating expense. Define the minimum cash balance the business wants to protect. A purchase funded in full can still leave the company unable to make payroll during its first repayment period.

Choose specific response actions for a shortfall and determine whether the agreements permit them. Do not count an unapproved credit line or future refinancing as committed cash. Keep taxes, maintenance, and owner compensation in the forecast where relevant. Their exclusion can produce a flattering payment budget that does not match the real business.

Review collateral, guarantees, insurance, reporting, covenants, permitted uses, and events of default. Set reminders for recurring obligations and assign a responsible person. Ask how the provider handles a business-address change, a sale of equipment, additional borrowing, or ownership changes. These terms can affect future decisions even when every payment is made on time.

Finally, schedule a post-closing review. Compare actual spending and collections with the purpose stated in the request. Preserve the original budget so lessons remain visible. The goal is to use financing as a disciplined business tool, with terms understood before acceptance and performance measured afterward.