How to Write a Loan Proposal

Posted by: Rod Kurtz on June 1, 2009

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.

Aaron Jackman
Commercial Loan Officer
Family First Federal Credit Union
Orem, Utah

Reader Comments

Chris Dahi

August 17, 2009 4:45 AM

Aaron,
Thanks a million mate, you sure gave me some guidelines on how to get about it. However, the loan I seek is quite a huge one, infact it is in millions of US dollars for the purchase of machinery for a government ministry in Africa. We are asking the loan from an interested bank in Europe. I have been called upon by our firm to word the loan application to be lender friendly, and I am totally at sea at how to get about it.
If you can give me more tips I will highly appreciate it
Thanks
Chris

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