Writing
Small Business Loan
Proposal
How to write a Winning Small Business Loan Proposal
Writing small business loan proposal
may decide the outcome of your application to small business loan.
After you have finish your detailed convincing small business plan.
You can start writing a small business loan proposal to the lender.
Before submitting your loan proposal, you should also write a cover
letter with your loan proposal. This should be a brief introduction
to your company, the size of the loan requested and the purpose of
the loan.
Then, you can start writing your winning small business loan
proposal by the step as follows:
1: Write a Summary of your small business
loan proposal
This should be first content in your business loan
proposal. But you can write it at the last after you finish other
content in your loan proposal.
You of course need to give some general information,
including the company name and address, owner names and Social
Security numbers of the principals, legal structure of your
business, the purpose of the loan, the exact amount of money needed
and what will be done with the money.
Then you should summarize how the proposed loan will be used,
how it will be repaid, and how it will benefit your business.
Precisely present your winning business idea to the lender by
focusing on your business uniqueness in the competition, and explain
the unique features of your business that will make your business
winning from your competitors. .
2. Management Profiles of your business
Prepare management profiles for all your business owners and
key employees. The management profile section of the loan proposal
should explain, most importantly, all the owners' experience,
education background, skills, qualifications, credentials, track
record of related field achievement, etc.
This is to give an impression to lenders that
you are working with a group of highly skill responsible
professional, capbale, effective and serious committed business
partners. All of you have ever work successfully a team before to
achieve any task will add merit to your loan proposal.
You have to present why you chosen as
leader in this group of people and how you can lead them effectively
to achieve your business goal.
3. Business Description
You need not prepare as details of business as your business
plan. But, you do need to present a solid description of the
business. Give a brief history of the business general information
in your loan proposal, and detail the current activities. If it's a
new business, explain the details of the business that you want to
develop.
State your business goal and demonstrate clearly that you
fully understand your markets, your competitors, and the industry,
including current market trends or risks. Prepare a recovery plan
for all the potential dilemmas and how you plan to overcome them.
If the loan is for an existing business, then you have
to include your business details, including your products or
services, current sales sheets, brochures, or catalogs. Attach all
related documents to your loan proposal for this section, such as
letters from suppliers, customers, or other business references.
Demonstrate through these letters that you have been providing
excellent customer service and they become your repeated client.
You also can provide complete market information.
Identify your competition and explain how your business stacks up.
Submit details on your current customer base.
4. Business Projections
Create at least 2 year projection of your small business
income statements and cash flow statements. Your projections should
be clearly stated and, most importantly, realistic in nature. Just
bear in mind, you won't need to present the "worst case" or "best
case" scenario unless the lender ask you to write the projections
that way.
You should, ready for the answer pertaining to what you'll do if
some of your projections don't work out as planned.
5. Financial Statements
Your loan proposal should include both business and personal
financial statements for your last 3 years. Please take note that
the lender will fully analyze the history of your financial
statements, calculating all ratios.
6. Loan Purpose
One of the most important parts of your loan proposal is a
detailed description of how you will use the loan for your loan
purpose. Before applying the loan, you should understand all the
types of loan and choose the most suitable loan for your business
loan purposes. You must have a good understanding of the loan that
you need, and remember to include the proceeds of the loan in your
cash flow projections, as well as the interest in your projected
income statement.
7. Repayment Plans
This is very important as lenders will want to know how you
prepare to repay the loan. You have to convince them the risk factor
of loan you money is much low compared to other competitor with you
repayment plan.
Repayment plans should also be stated in your financial
projections section of the loan proposal, but details of repayment
plans should be detailed separately.
Propose the loan terms you want, and prepare for
negotiations with the financial institution. The lender will
consider some factors and they review the overall risk of lending
you the money. Hence, this is a very important step in your business
loan proposal.
8.Review your business loan proposal
Read again your loan proposal for few
times and modify it to be more convincing loan proposal. Double
check all the spelling, grammar, and the facts contained in the loan
proposal. And remember to keep a copy for yourself before you submit
to the lenders.
For the best results and to heighten your level of confidence, be
prepared when you visit the lender you've chosen for your small
business loan interview.
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