How To Write A Business Loan Proposal
Businessmen are always on the lookout for good tips on how to write a business loan proposal. However, these tips can only help in providing more ideas as to how to approach this important document. This is because everyone has his/her own unique way of presenting an idea. This means that a borrower should consider what type of lender he/she would be dealing with before trying to write a business loan proposal.
When it comes to banks and other financial institutions, there are only two types of businesses that they will ever have open for loan negotiations. They are the first category of business that any bank or other financial institution will have and the second is the second category. In most cases, the second category will consist of businesses that have at least five years of experience in their industry. This is because these types of businesses are usually proven money managers and therefore have already established themselves as worthy business candidates. This is why you as a business owner should also prepare your business loan proposal based on your own business’ history.
If you are still in the process of making up your mind as to which type of bank or financial institution will offer you business financing, then you should take into consideration a few things first. The very first thing that you need to do is to decide on how you intend to use the money from the business. You should already have a firm idea on how you plan to make use of the business funds. It is only through this that you will be able to write a convincing business loan proposal. You can either present your business plan in terms of a financial projection or you can show how your company plans to use the money it receives from the loan. The former will be more convincing and is recommended because it will provide you with a clear picture of where the company would eventually end up.
Aside from having a clear idea of how you will use the money received from a loan, another important aspect on how to write a business loan proposal should be represented in your proposal. You have to convince the lender of the viability of your business. You may use your business’s projected income to show how your business is not just another start-up company that will flounder away after a few months. Instead, you have to show how your business is not only sustainable but also how it plans to continue to generate profits. A good way on how to write a business loan proposal is to provide projected sales figures for your business for at least the next three years.
On your loan application, you have to be extremely thorough and honest about all details that appear on the forms. The more information you give, the better will be the chances that your lender will approve you for a loan. Your application will have to contain detailed information about your business. It must include the nature of the business, the products or services that you will be offering, your estimated annual earnings and the total amount of money you plan to loan to the business. Your financial statements, if available, are very important in evaluating your business’s viability. The lender is not interested in your personal financial situation, but the business itself.
You have to remember that a good business plan is what will separate you from the other applicants vying for a loan. A well-written business loan proposal will not only address your qualifications to receive a loan, but also how you plan to pay for it. For example, how you intend to pay the interest should be highlighted. It would be a waste of time to apply for a loan if your projected cash flow does not allow you to do so.
An ideal way on how to write a business loan proposal is to have an accountant draft it and you can then review it with a lawyer before submitting it to the lender. It is important to know exactly how much you are planning to lend to your business. The total cost of establishing and running the business should be clearly stated, as well as the operating costs you may incur during the first six months of operation. The financial statements and business plan should include an audited financial statement of your business that presents a detailed summary of all the business’s assets, liabilities, revenue, and expenses as well as projected cash flow for at least one year. If your business is still in its earliest stages, you may want to consider obtaining a shorter-term loan that can be refinanced as your business gains momentum.
There is no specific art or skill in writing a business loan proposal. The key is to make sure that everything has a purpose and that you have included all relevant information about what you can provide them with. A well-written document will most definitely increase your chances of approval. The lender wants to be assured that they are providing the maximum amount of money available to you and that they won’t be losing out on any potential profits if they lend the money to you.