At one time or another, most small business owners seek loans to fund their companies. Approval of a loan request often depends on how well you present yourself, your business and your financial needs to a lender. One of the ways to improve the chance of obtaining a loan is to prepare a well-written proposal that clearly states your case.
Below are nine tips that make a good loan application:
1. Complete the entire application before submitting it. The best way of getting your loan approved quickly is to have a completed loan application.
2. Make sure to fill out the loan amount that you are requesting. Don’t be shy by leaving this blank. This amount helps the banker figure out the repayment terms and the perceived risk of the loan.
3. Clearly explain how the proposed loan will be used, how it will be repaid, and how it will benefit your business.
4. Present your entire situation and be honest. Don’t surprise your banker with a request for additional funds a few months later.
5. Present a solid description of your business.
6. If you are a startup, be prepared to get financing in pieces.
7. Show two years of financial statements including tax returns, balance sheets, and income statements.
8. Lenders will want to know how you plan to repay the loan. Repayment plans should also be stated in your financial projections section of the loan proposal. If your lender thinks your loan is too risky, your chances for denial are pretty high.
9. Be prepared for additional questions, and be timely in providing the loan officer with additional information.
Commercial Loan Officer
Family First Federal Credit Union
Want to improve the way you run your business? Entrepreneurs, academics, and consultants from diverse industries offer practical advice on a variety of topics each business day.
To submit a tip for consideration, first check our archive of previous tips to make sure you're not repeating a tip someone has already contributed. Then send the tip to Small Business channel contributor Michelle Dammon Loyalka. Because of the volume of material she receives, she may not respond to each individual.