Whether you are starting a business or already have a business, in order to get funds, you need a good business loan proposal. This key document helps you get the loan with good interest rates and other conditions.
However, even the best of businesses sometimes have trouble writing one. So, if you want to create great business loans, make sure that you follow these rules:
Identify financing sources
Getting a loan might prove to be more difficult than you think, so it might be a good idea to be aware of all of the financing sources that could potentially help you in your venture. Just sticking with one financing source is a mistake, especially if you wait until the first one declines your request.
It’s best to come prepared and secure than to be desperate that this one financing source has to accept you.
Check with the SBA to see if you can apply for any of their loan guarantee programs.
Prepare business records
The financing source will need a lot of information and that will mean that you have to gather all sorts of records that vouch for you. This goes for when you ready have a business and you are asking for a loan. You already have some history with your business and they want to see how successful you were. Depending on how good your records are, you can rely on this being a great thing.
Include several types of information like:
- Business credit – This includes credit reports, Dun & Bradstreet information and any other information that they might require. You can prepare for this by asking about it beforehand.
- Tax returns – You will need to bring tax return documents for the past three years of your business existing. If it doesn’t have tax returns for three years in total, you can bring as many as you can.
- Profit and Loss reports and balance sheets – These documents should also be captured for three years but if you don’t have all of them, you can bring everything you have. Young businesses usually don’t have all of these documents and it’s possible to get accepted without them.
- Current debt – Bring a list of everything that you owe to other businesses or institutions. Payment history on those debts is necessary as well.
- Business assets – This is a list of all of your business assets as well as the fair value of these assets.
If you are a startup or a new small business, you won’t have to bring these documents but rather a pro forma or projected version of them. Create these documents based on research and facts.
Create a business plan
Almost every business is aware of what a business plan is. Likewise, you can’t expect the bank to give you a loan unless you provide them with a solid, professional business plan.
Business plan is what all of the lenders no matter the type want to see. But this is not the only reason to create it. A business plan can help you in various situations as well as staying on track when it comes to your goals and plans.
You don’t have to create a huge plan with 30 pages, but a version of it will work, especially for lenders.
You need them to know how much money you need, what you will use it for and how you plan on paying them back. However, your business plan can be full blown and impressive if you add other sections like:
- Executive summary
- Company description
- Team experience
- Financial data
- Marketing plan
- Production plan
- HR management
Just remember that the business plan is an important part of your loan proposal and you should definitely do your best creating it. This proves that you have a serious business and that you are committed.
Wrap it up in a proposal
Your proposal is a sum of all of these documents and you should pay special attention to it.
For one, you need to use good writing practices. Simple language always beats jargon and complex words. Your proposal should be well-structured and easy to read and comprehend. It should also be well-designed and styled. This may not play such a big part in this but it’s definitely a plus and provides a sort of branding that you could benefit from.
Show your company at it’s best. This means that you should try to keep a steady tone throughout the proposal – show that you will succeed and provide proof. Also, show that you have gone through different scenarios and that you have found solutions for the majority of the possible problems.
Get ready for the questions
The bank will ask you a lot of questions and you should be ready to answer them all if you want to get that loan. What you wrote about isn’t going to be enough and you need to be prepared to show just how great and trustworthy your company is by answering questions.
Check if there is anything missing
“Make sure that all of the necessary documents are there. You don’t want to get to the bank without having an important piece of documentation. So, create a checklist of documents that you need and go through it before you leave to see a lender,” says Jorden Amos, a business consultant.
Creating a business proposal can seem complex but when you have all of the right documents, you’ll have no trouble compiling a compelling loan proposal. Hopefully, these tips will help.