What “bank ready” actually means

Many business owners apply for a loan because they need money. Lenders approve loans because a business shows it can pay the money back. Being “bank ready” means closing the gap between those two things before you apply.

Here is what a lender looks for in the first review of your file.

1. Proof that the business can repay

The first calculation a lender makes is whether your cash flow covers the new loan payment, with room to spare. This is called debt service coverage. For small SBA 7(a) loans, lenders look for cash flow of at least 1.10 times your total loan payments, and many want more.

A rough version you can do today:

• Take your average monthly revenue.
• Subtract every business expense and every existing debt payment.
• What is left is the money available for a new loan payment.

If the answer is close to zero, no amount of paperwork will get the loan approved. Fixing margins comes first.

2. Financial statements that match everything else

Lenders ask for a profit and loss statement and a balance sheet for the last two to three years and the year to date. They then compare those numbers with your tax returns and bank statements.

Statements that do not match your returns are one of the most common reasons files stall. If your books are owner-prepared, have a bookkeeper or CPA reconcile them before a lender sees them.

3. Filed tax returns, with nothing owed

Lenders verify your returns directly with the IRS using Form 4506-C. Unfiled returns stop an application. Taxes owed are usually acceptable only if you are on a formal payment plan and current on it.

4. Clean separation of business and personal money

When personal spending runs through the business account, a lender cannot tell what the business really earns. Open a dedicated business account, run everything through it, and give it a few clean months before you apply.

5. A clear request

“I need $150,000 to grow” is not a loan request. A lender wants to know:

• The exact amount
• What each part of it pays for, ideally with quotes or invoices
• How much of your own cash you are putting in
• How the loan will be repaid

For startups and business purchases, SBA requires at least a 10% cash injection from the owner. Know your number before the first meeting.

The other checks

Behind these five sit the rules every SBA applicant must meet: the business must be for-profit, located in the U.S., small under SBA standards, not in an excluded industry, and owned by U.S. citizens or nationals. You must also be current on any federal debt. These are yes-or-no checks; a strong score cannot make up for failing one.

How to know where you stand

The AceTheSBA Readiness Report scores all of these areas the way a lender would, flags the issues a lender will raise, and gives you a 30, 60 and 90-day plan to fix them. It takes about six minutes.