Writing a powerful, well-documented business loan proposal is the first step toward getting the cash your small business needs from a lender. Your small business loan proposal will regularly be the primary interaction a lender has with your small business. Therefore you need to create a document that presents your business in the best possible light.
The main objective is to convince the lender that you are all set to make a success of your business and repay the loan.
- Prepare a Business Plan
The important part of proposals for small business loans is the business plan. Take the necessary time to do thorough job of preparing it, confirming that it covers the following sectors.
No business loan can expect to be effective without some sort of business plan. You need a business plan, not just almost every lender wants to see it; however because it allows you plan and a ramification of different reasons. No, you don’t always need a full 20+ page plan, you do need some written documentation answering the 3 major questions that every lender must ask:
- How much cash do you need?
- Where you want to infuse it?
- How will you pay it back?
In case you can answer those major questions in 2-3 pages, it is recommended to go for it. Just make sure that you have something in hand before you go to the lender.
- Get Ready for Questions
With all this details, you think you were ready? Not quite. Before you go to lender, you need to make certain that you can offer answers to their questions about these three important factors for small business loans:
- Credit: Your business and personal credit score
- Collateral: Cash or something equal to the value of loan amount
- Capital: Business assets that you can pledge to get a loan.
In case you don’t have enough collateral or capital to meet the lender’s requirements, consider finding a co-signer who can give you those important pieces of funding.
- Executive Summary
This part of business plan provide a short review of your business. It briefly defines your business, its specific industry and its competitive advantage over others. It ought to also define the business need or endeavor that requires funding, as well as the amount of cash required.
- Company Description
In the major part of your business plan, you need to completely describe the history, current operations and your business strategy.
- Experience of Management Team
Display the skill set, experience and qualifications of each member of your management team. Your lender needs to know that they have what it takes to make your project work.
- Important Financial Data
This part of plan indicates the financial strength of your small business. Give financial statements in addition to projections for the next 2-3 years. Your lender will check and evaluate this detail closely in an effort to know your track record and ability to pay off the small business loan.
- Business Marketing Plan
Provide a marketing plan to answer these questions:
- Is there a proven and established market for your services or products?
- Who is your competition and what are their weaknesses and strengths?
- What’s your client profile?
- What makes you superior in your competition?
- Business Production Plan
Your lender will need to know that if you have the operational capacity to manage your projected sales.
- Human Resources Management
Show that your business has the potential to hire, develop and keep the right type of employees to move your business mission to the next level.
- Supporting Documents
You should strengthen your business loan proposal by including documents that support your loan request, describe and improve the reliability of your business plan, such as:
- Market research or different studies supporting your projections
- Documents to help business financial statistics
- Customers’ testimonial
- Media reports about your business.
The objective of including the supporting documents is to show your lender that you are running a business on statistics based facts. These all are general business proposal steps. There are some lenders who can ask you for more, but it depends on the type of lender and loan. Follow these steps and create a solid financing proposal to get small business loans today.