How to Prepare a Business Loan Proposal

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How to Prepare a Business Loan Proposal

The approval of your request for a business loan is based on the way you present your financial needs, your business, and of course yourself. The best method to enhance your chances of getting a business loan is to put together business plan or business loan proposal in writing. This is important because lenders look at your loan proposal to see if your business has strong experience, management, and a complete comprehension of the marketplace in which it is going to operate.

Credit History

Lenders will also ask for certain financial details that display your ability to pay back the loan. To determine this, they will obtain a copy of your business and personal credit reports from any of the three credit bureaus: Experian, Equifax, or TransUnion. Hence, even before you consider framing a loan proposal, you should first check for the accuracy of your credit report and apply to correct the mistakes, if any. You can contact credit report agencies to perform this correction.

Business Loan Proposal

There are four basic things you should clearly address in your business loan proposal. These include:

  • The amount of money you need
  • The ways in which your business will use the money
  • The way in which you will repay the loan
  • What will be done on your behalf if your business fails to repay the loan

A loan proposal can be written in different formats. Before you choose a specific format to use, it is better to contact the lender to know about the format preferred by them. In general, following are few elements that must be included in your loan proposal:

  • Executive summary: This should be the beginning part of your proposal and should be simple and direct. Briefly and clearly describe about yourself, the background and nature of your business, and how the loan amount will be used for the success of your business.
  • Business profile: This should include the history of your business, including its current activities and outcomes. You should also describe your industry, your customers and your market.
  • Management experience: This part should contain the qualifications, experience, and skills of every owner of the business.
  • Loan request: This should contain the amount of money you need and the way in which you came up with this amount.
  • Loan repayment: Describe the rate of interest and other terms you hope to receive from the lender. Use cash flow and sales projections to describe how you can fulfill the repayment schedule.
  • Collateral: The collateral you would be able to pledge in order to obtain the installment loans online.
  • Personal financial statements: Financial statements of all owners who have more than 20 percent of interest in the business.
  • Business financial statements: Entire business financial statements for the past three years.
  • Equity investment: The amount that can be invested by the owner to obtain loan for the business.
  • Projections: Projected cash flow and income statements for a minimum of one year.

In addition, you can also include the lease, franchise agreement, purchase agreement, partnership agreements, articles of incorporation, etc.