I received a lot of positive responses from a previous post about increasing your chances of obtaining a loan and some requests to elaborate and put some “meat and potatoes” on what one needs when applying for a personal or small business loan.  Thus, the following is a non-exhaustive checklist with some commentary on what you need to do in order to obtain a loan.  As I mentioned previously, I use to sit on a loan review committee as a community volunteer (yes, I need a life if this is my hobby…) and my general comment from that experience is that preparation and an understanding of what the lender is actually looking for goes a long way in obtaining personal and small business loans. I apologize if some items on this checklist appear to be patently obvious but it is sometimes the obvious that gets overlooked.

Documents about you

• Social Insurance Number
• Work history (yes, it is asked for; lenders want to see stability and job hoppers scare them); get a letter from HR on how long you have worked, current salary etc; They write these often so they know the format.
• Notice of assessment from the tax authorities for last 3 years (this a one page document which is sent to you showing your taxable income and amount of taxes paid); they can be obtained quite quickly by calling the tax authorities.
• Calculate your net worth
• Run your own credit score (here’s a primer on how to obtain your credit score in the U.S. and obtaining your credit score in Canada)
• For small businesses, a business plan is needed in certain circumstances (i.e. government backed programs) but not in others. The newer the business, the more likely a business plan is required.

All of the above apply to small business loans as well since most small business loans are backed by personal guarantees.
I suggest you run your own credit score since financial institutions have a funny habit of running your credit score as soon as you say you are interested in obtaining a loan. The more your credit score is checked, the lower it gets (an often complained about deficiency in how a credit score is determined). The institutions shouldn’t do this but they do.

If you tax returns show a blip (you income dipped one year; you were laid off, took time off between jobs, back-packed through Asia), immediately put in a cover letter why this occurred. Remember always to deliver the bad news first.

Reference Letters

• Bank reference letter (shows you how long you have been with them, approximately balance, whether they have been any defaults, over-drafts above allowable limit and, generally, whether you are a good customer). Only needed if you are shopping around for a loan because it costs money to obtain these (unless you know the branch manager)
• Employment letter (addressed above)
• For small business loans, get a letter from a supplier indicating you pay on time all the time. This gives comfort to the lender. Also get a letter from customers indicating they are happy to use your service in the future (tells the lender you are getting cash into the business).

The Soft Stuff

• Introduce yourself to your branch manager and/or assistant branch manager before you are going to apply; tell them you are going to apply for a loan and ask them what they need (in other words, tell them implicitly that you will make their job easier). Ask them if they are interested in loan money to you.
• If the branch has a loan officer, make sure you are introduced to them and repeat the above.
• Remember to dress professionally- treat this like a job interview (you are applying for money after all)
• If you are shopping around for a loan, don’t just walk into any old branch. Ask someone if they have obtained a loan from the same institution and ask for an introduction to the person who reviewed or administered the loan. In other words, network until you find a loan officer you can work with.
• Always get two quotes. There is no such thing as “home field advantage” in lending; you have to push your own bank to match the competitor.
  

This is the most overlooked part of the loan process. Lenders are human too; connect with them on a human level. I have seen situations where borrowers are perfectly acceptable on paper but, upon meeting them, the lender begins to form doubts based on things like being unprofessional (these were business loans so this was particularly important), being arrogant during the process and saying the wrong things during the process (“…the first thing I am going to do after getting this loan is to take a three week vacation…” This makes the lender think you are spending their money on the wrong thing).

What most lenders do not tell you is that they have the discretion to charge lower rates, go above their loan book (how much they can lend out in certain categories of loans) and extend loan terms. These items being discretionary, it pays to be nice to the lender since it could save you thousands of dollars.

Did I miss anything?