In addition to standard loan documents, a lender expects to see a written proposal when someone applies for a business loan. This is your chance to highlight the most exciting and promising aspects of your business and to prove to your lender that you’re a prime candidate for a loan.
Submit a cover letter with your proposal. This should be a brief introduction to your company, the size of the loan requested and the purpose of the loan.
Begin your proposal with general information, including the company name and address, names and Social Security numbers of the principals, the purpose of the loan, the exact amount of money needed and detailed plans for what will be done with the money.
Describe your business in detail. Include information on prior and projected performance, unique aspects of your business and the legal and ownership structures.
Provide complete market information. Identify your competition and explain how your business stacks up. Submit details on your current customer base.
Prepare management profiles for all owners and key employees. Highlight their education, past accomplishments and qualifications.
Submit complete information concerning your last three years of operations. If you’re just starting out, provide projected balance sheets and income statements. Also include personal financial statements from all the owners and information on any collateral that will be pledged as security for the loan.
Proofread the document, double-checking spelling, grammar and the facts contained in the proposal.
Submit your proposal with each copy of the loan package you are required to return. Remember to keep a copy for yourself.
Tips & Warnings
Even if a proposal is not requested in the loan application package, take the initiative and prepare one anyway. This step will show the lender that you’re professional and savvy about the loan process.
If you’ve already prepared business and marketing plans, use them as a source of information for your proposal, but check to make sure that the data is current.
Be realistic and honest. Don’t inflate your projected profits, and come clean about any serious difficulties your company has experienced in the past. The facts in your proposal are easy to check, so any misstatements will most likely come back to haunt you.
Make sure your information is complete, but don’t write a book. Lenders are extremely busy, so unnecessary fluff included to create an impressively thick document might work against you.
Have an objective friend read the proposal and play the role of the lender. Have him or her keep an eye out for any inconsistencies and holes in your proposal.
Let your attorney and accountant have a look at the proposal before you submit it.