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Business Loan Proposal
Applying for a small business loan can be exciting and yet
stressful at the same time. For the best results and to heighten
your level of confidence, be prepared when you visit the lender
you've chosen for your business loan interview. After you have
your business plan prepared, start preparing for the loan by
writing a loan proposal to present to the lender.
The loan proposal should state some crucial information, and
many details, about both yourself and your business or business
idea. It should state who you are, how much money you need and
where the money will be spent, how you intend to repay the loan,
and what you plan on doing in the even that you cannot repay the
loan.
The following are key elements to include in your loan proposal.
1. Summary. This should be listed first in your proposal, but
will be written last. It should contain clear, concise,
accurate, inviting information about your business or your
business ideas. It should summarize how the proposed loan will
be used, how it will be repaid, and how it will benefit your
business. Remember your competition in the summary of your loan
proposal, and point out features of your business that are
different from your competitors.
2. Management Profiles. The management profile section of the
loan proposal should explain, most importantly, who you are. Be
prepared to reveal everything about yourself and your
experience. Have a current resum included as part of the loan
proposal, as well as a summary of your skills, qualifications,
and other credentials for yourself, as well as for all other
owners and key members of your management team.
3. Business Description. It's not necessary to state the same
information mentioned in your business plan as in your loan
proposal. However, you do need to present a solid description of
the business. Include a brief history of the business in your
loan proposal, and detail the current activities. If it's a new
business, explain the details of the business that will be
developed. Your goal will to be to clearly demonstrate that you
fully understand your markets, your competitors, and the
industry, including current trends or risks and how you plan to
overcome those potential dilemmas. If the loan is for an
existing business, include literature that details your products
or services, such as current sales sheets, brochures, or
catalogs. Include attachments to your loan proposal for this
section, such as letters from suppliers, customers, or other
business references. Demonstrate through these letters that you
provide excellent customer service, and that you pay back your
creditors.
4. Business Projections. Create at least two years' worth of
projected income statements and cash flow statements. Your
projections should be clearly stated and, most importantly,
realistic in nature. Generally, you probably won't need to
present the "worst case" or "best case" scenario unless the
lender asks for you to write the projections that way. You
should, however, be prepared to answer questions pertaining to
what you'll do if some of your projections don't work out as
planned. For example, if you anticipate obtaining a large, new
contract or customer based on improvements made with the
business loan, and that contract never goes through, it could
change your loan proposal projections drastically.
5. Financial Statements. Your loan proposal should include both
business and personal financial statements. Be aware that the
lender will fully analyze the history of your financial
statements, calculating all ratios. Be prepared to point out any
significant trends you've shown in an introductory paragraph.
6. Loan Purpose. One of the most important parts of your loan
proposal is a detailed description of how you will use the loan
proceeds. Have a good understanding of the type of 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. 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 terms you want, and prepare for negotiations with
the financial institution. The lender will consider a number of
factors as they review the overall risk of lending you the
money. Understandably, this will impact the repayment terms that
they are willing to offer for your business.
Especially if your credit is good, and even if your credit is
not so good, remember that in your loan proposal, you are
offering the bank a deal that will make them money. Don't go in
asking the lender for an "allowance." Instead, enter the
interview with your loan proposal objective in mind; namely,
focusing on how much money you'll need, and remove the idea of
going into the meeting wondering how much they're willing to
lend. Never go into a meeting asking for a loan, wondering
whether or not they'll lend to you. If this first lender won't
approve your loan proposal, have confidence that a different
will.
About the author:
Rebecca Game is the founder of Digital Women ®, an online
community for women in business. A 30 year entrepreneur and
dedicated to helping other women find business loans. Visit her
site: Loans
for Women
http://digital-women.com http://loans.digital-women.com