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Loan Proposal Elements
Like a business plan, loan proposals must be thorough; this guide will take you step by step. Generally, the loan proposal is comprised of the following elements!
Contact a Loan professional today to learn more about the details to for a successful loan proposal
Loan Proposal Comprise These Elements:
- Loan Summary
- Top Management Profiles
- Business Description
- Projections
- Financial Statements
- Purpose Of The Loan
- Amount Of Loan
- Repayment Plans
Loan Summary:
Comes first; written last. This should be clear, concise, accurate, and inviting. You want to summarize how the proposed loan will be used, how it will be repaid, and how it will benefit your business. Remember that you are competing with many others, so you'll also want to point out some of the distinguishing features of your business.
Top Management Profiles:
The key issue here is: who are you? Be prepared to come under close scrutiny. You will need resumes as well as a summary of experience, qualifications, and credentials for all owners and key members of your management team.
Business Description:
You don't need to repeat all of the information contained in your business plan, but you do need to present a solid description of your business. Include a brief overview of the history of your business plus a summary of current activities. Make sure you clearly demonstrate that you understand your markets and industry (current trends and risks). Include literature showing your products or services. It is also helpful to include letters from suppliers, customers, and other business references.
Projections:
Include projected income and cash flow statements from the past two to three years. Your assumptions should be clearly stated and realistic. Generally, you don't need to show best case and worst case unless the lender asks you to do so, but do be prepared to answer questions (in quantifiable terms) about what happens if some of your assumptions don't come true. For example, if you anticipate obtaining a major new contract or customer as a result of newly expanded capacity, can you estimate the impact on your income statement if that customer decides to take his/her business elsewhere?
Financial Statements:
The loan package must include both business and personal financial statements. Make sure that you fully understand the story that your statements tell. Be assured that your lender will fully analyze your historical financial statements and calculate all the ratios; prepare in advance and point out any significant trends in an introductory paragraph.
Purpose Of The Loan:
Present a detailed statement of how you will use the loan proceeds. Don't forget to include the proceeds of the loan in your cash flow projections (and the interest in your projected income statement).
Amount Of The Loan:
Remember that you are offering the lender a deal that will make them money - you are not asking for an allowance. The attitude you should take is to ask, "How much money do you need, and how much will they lend?" and not, "Will they lend it?"
Repayment Plans:
You will have to make some assumptions about the terms of the loan in your proposal. (Obviously, this is necessary to prepare the initial financial projections.) In the first package, you will propose the terms that you want, but ultimately this will be a point that will be negotiated with a loan professional. The loan professional will consider a number of factors as they assess the overall risk of the loan; this will impact the repayment terms they are willing to give you.
Contact a Loan professional today to learn more about the details to for a successful loan proposal
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