Small Business Loans in Virginia: What You Need to Know

Gather all necessary business formation documents including Articles of Organization/Incorporation, Operating Agreement/Bylaws, EIN documentation, and any amendments. Lenders need these to verify your business's legal existence and structure. Ensure all documents are current and properly executed.

Confirm your Virginia business license is current and complies with state and local requirements. Virginia businesses typically need licenses from both the State Corporation Commission and local authorities. Some industries require additional specialized licenses. Ensure all licenses are renewed and fees are paid.

Compile comprehensive business financial statements including balance sheets, income statements, and cash flow statements for at least the past 2-3 years. Virginia lenders typically require these to assess your business's financial health and loan repayment ability. Ensure statements are accurate and professionally prepared.

Gather business and personal tax returns for the past 2-3 years. Virginia lenders typically require these to verify income and assess tax compliance. Ensure all returns are filed and any outstanding tax liabilities are addressed before applying for a loan.

Develop a comprehensive business plan that includes market analysis, competitive positioning, growth projections, and how the loan will be used. Virginia lenders, especially SBA-affiliated ones, require detailed business plans to assess viability and risk. Focus on realistic financial projections and clear loan utilization plans.

Generate a current accounts receivable aging report that categorizes outstanding invoices by time periods (current, 30, 60, 90+ days). This demonstrates your business's cash flow health and collection practices to lenders. Ensure the report is accurate and reflects your actual receivables situation.

Verify all business insurance policies are current and provide adequate coverage. Virginia lenders typically require general liability, property, and sometimes key person insurance. Specialized businesses may need additional coverage. Gather all policy documents and ensure premiums are paid.

Carefully review the loan agreement provided by your lender. Under Virginia law (Code of Virginia § 6.2-300 et seq.), pay special attention to interest rates, which are capped for certain loans. Also review repayment terms, default provisions, and any prepayment penalties. Consider having an attorney review before signing.

Examine the promissory note which is the legal document promising repayment of the loan. Verify the principal amount, interest rate, payment schedule, and maturity date. In Virginia, ensure the interest rate complies with state usury laws (generally capped at 12% for most business loans unless specific exceptions apply).

Understand the implications of signing a personal guarantee, which makes you personally liable for the business loan. In Virginia, personal guarantees are enforceable contracts that can put your personal assets at risk. Consider negotiating limitations on the guarantee if possible, and consult with an attorney before signing.

Carefully review the security agreement which identifies collateral securing the loan. Under Virginia law, this creates a security interest in specific business assets. Understand which assets are being pledged and any restrictions on selling or transferring these assets during the loan term.

Understand that your lender will file a UCC Financing Statement (UCC-1) with the Virginia State Corporation Commission to perfect their security interest in collateral. This public notice establishes the lender's priority claim to the collateral. Verify the accuracy of the collateral description before filing.

Consider registering with Virginia's Department of Small Business and Supplier Diversity (SBSD) to access additional resources and potential loan programs. Virginia offers specific programs for small, women-owned, and minority-owned businesses that may provide favorable loan terms.

If your business serves consumers, ensure compliance with the Virginia Consumer Protection Act (§ 59.1-196 et seq.). This may affect how loan proceeds can be used in your business operations and marketing practices. Non-compliance could create legal issues that affect loan standing.

Create a system to monitor ongoing compliance with loan covenants and reporting requirements. Virginia lenders typically require periodic financial reporting and notification of significant business changes. Set up calendar reminders for reporting deadlines and regular reviews of covenant compliance.