Small Business Loans in Louisiana: What Entrepreneurs Need to Know

Gather all essential business formation documents including Articles of Organization/Incorporation, Operating Agreement or Bylaws, and Certificate of Good Standing from the Louisiana Secretary of State. These documents prove your business's legal existence and structure, which lenders require to verify your authority to enter into loan agreements.

Ensure your business has all required licenses and permits to operate legally in Louisiana. This may include state business licenses, local occupational licenses, professional licenses, and industry-specific permits. Louisiana requires most businesses to register with the Louisiana Department of Revenue for tax purposes and may require additional licenses depending on your industry.

Compile comprehensive financial statements including balance sheets, income statements, cash flow statements, and projections for at least 2-3 years. Louisiana lenders typically require detailed financial information to assess your business's ability to repay the loan. Include tax returns for the past 2-3 years and an accounts receivable aging report if applicable to your business.

Create a detailed business plan that outlines your business model, market analysis, competitive landscape, management team, and financial projections. Louisiana lenders use this to evaluate the viability of your business and your ability to generate sufficient revenue to service the debt.

Carefully review the loan agreement provided by the lender. Pay special attention to interest rates (Louisiana has usury laws capping interest rates), repayment terms, default provisions, and any covenants or restrictions. Louisiana follows the Louisiana Civil Code rather than common law for contracts, which may affect certain provisions.

Review the promissory note which contains your promise to repay the loan. In Louisiana, promissory notes are governed by the Louisiana Civil Code and must contain specific elements to be enforceable, including the principal amount, interest rate, and payment schedule.

Understand the legal implications of signing a personal guarantee, which makes you personally liable for the business debt. Louisiana law allows creditors to pursue personal assets if the business defaults. Consider whether multiple guarantors should share liability and understand the specific enforcement mechanisms available to lenders in Louisiana.

Examine the security agreement that identifies which business assets will serve as collateral for the loan. In Louisiana, security interests are governed by both the Louisiana UCC and Civil Code provisions. Understand which assets are being pledged and any restrictions on selling or transferring those assets.

Understand that the lender will likely file a UCC-1 Financing Statement with the Louisiana Secretary of State to perfect their security interest in your business assets. This public filing puts other creditors on notice of the lender's claim to your assets. Verify the accuracy of the collateral description before the lender files.

Secure all insurance policies required by the lender, which may include general liability, property, business interruption, key person, and specific industry insurance. Louisiana lenders typically require that insurance policies list them as an additional insured or loss payee on collateralized assets.

If not provided by the lender, draft a comprehensive loan agreement that complies with Louisiana law. Include all material terms such as loan amount, interest rate (complying with Louisiana usury laws), payment schedule, default provisions, and remedies. Consider Louisiana-specific provisions related to choice of law, venue for disputes, and Civil Code requirements.

Prepare a promissory note that complies with Louisiana law. The note should clearly state the principal amount, interest rate (within legal limits), payment schedule, maturity date, and default provisions. In Louisiana, promissory notes are governed by specific Civil Code provisions that may differ from common law states.

If required by the lender, prepare a personal guarantee document that clearly outlines the guarantor's obligations and the extent of personal liability. In Louisiana, personal guarantees must be in writing and should explicitly state the guarantor's intent to be personally bound for the business's debt.

Prepare a security agreement that identifies the specific business assets serving as collateral. The agreement should comply with Louisiana UCC Article 9 requirements and clearly describe the collateral, the secured obligations, and the lender's rights upon default.

Draft a UCC-1 Financing Statement to be filed with the Louisiana Secretary of State. This document must accurately describe the collateral and include the legal names and addresses of both the debtor (your business) and the secured party (lender). In Louisiana, these filings are made with the Secretary of State's office.

Prepare current financial statements including balance sheet, income statement, and cash flow statement. Louisiana lenders typically require these documents to be certified by the business owner or, in some cases, reviewed or audited by a CPA.

Ensure your business is properly registered with the Louisiana Department of Revenue for state tax purposes. This registration is required for most businesses operating in Louisiana and may be verified by lenders as part of their due diligence process.

File the UCC-1 Financing Statement with the Louisiana Secretary of State. In Louisiana, filing fees apply and the statement is effective for five years. Maintain proof of filing as this establishes the lender's priority in the collateral.

Create a system to track and comply with all loan covenants and reporting requirements. Louisiana lenders typically require periodic financial reporting, maintenance of certain financial ratios, and notification of significant business changes. Failure to comply with these requirements could trigger default provisions.

If your business extends credit to customers, prepare a current accounts receivable aging report. This document categorizes outstanding customer invoices by age (e.g., current, 30 days, 60 days, 90+ days) and is often required by lenders to assess the quality of your receivables, especially if they will serve as collateral.