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.
