The business loan proposal is the document which is used by the loan applicant to apply for a bank loan. The business loan proposal mentions how much you want to borrow, the purpose of the loan, the way to you want to repay the loan, the collateral you want to put up against the loan and any other essential information regarding the applied business loan.
The business loan is one of the most important documents required for a business loan. The approval or the rejection of a business loan is highly depended on the business loan proposal. This is the first document that the lender receives from a loan applicant. The loan proposal is used to gauge your business management skill, your experience and the market of your business. To make a business loan proposal attractive enough to impress the lender, you need to take care of a few points.
7 Steps to Organise Your Business Loan Proposal
- The Loan Quantum
The loan quantum or the loan amount is money you want from the lender as a credit. The loan amount must be mentioned after a lot of brainstorming as it should justify the creditworthiness of the business as well as the purpose of the loan.
- The Purpose of the Loan
In the next point, you are to mention the purpose of the loan. Here you are to mention why you need the loan. The purpose of the loan can be various such as the extension of the business, a boost in the working capital, hiring new talents, enhancing inventory, purchasing new equipment etc. The lender checks if the purpose of the loan is worth of lending money or not. Lenders generally grant a loan application only if it is satisfied with the proposed use of the loan amount.
- The Repayment Policy
Before the lender approves a loan application, the lender will like to know the repayment policy. The repayment of the loan is the thing which earns a profit for the lender. The repayment can be done in EMIs or in a flexible way. If the business loan is taken as a business line of credit, the repayment amount and the tenure are not fixed. But if the business loan is a general one, the loan repayment is done in EMIs. One can extend or shrink the loan tenure to minimize or maximize the EMI amount. So, in your business loan proposal, you are to mention the way you want to repay the borrowed amount.
- The Loan Collateral
Most of the business loans available at the present market are secured business loans. A secured business loan requires collateral to put up. The business loan collateral becomes a must if you are applying for a business loan for the first time or your business is a new one. The loan amount also depends a lot on the market value of the collateral. The collateral makes the lender secured about lending, hence the chances of approval can be enhanced by attaching collateral to the loan. One has to mention the loan collateral and market value of the same in the loan proposal to make it more impressive.
- The Personal Information
An ideal business loan proposal needs personal information of the loan applicant. If the business is a joint venture, the business loan proposal should include the personal information of all partners. The credit report and the credit history of all partners of the business are needed to be mentioned.
- The Business Records
The business records of the business for which the loan is applied has to be presented. the business records include the business turn over of previous years, the business credit report, the tax return files, the audit report, Profit and Loss Reports and Balance Sheets etc. All the mentioned documents are to be attached to the loan proposal at the time of submitting the same.
- The Business Plan
No business can earn a real success without a business plan. The loan aspirant must share the business plan of his business. If you can prepare an excellent business plan, the chances of profit increases. The business plan also includes your plan to use the loan amount and how you believe that the investment will generate good revenue for the business. The success of a business depends mostly on the business plan hence taking the advice of experts is always expected. The lender is interested in your business plan as your profit is dependent on your business plan and the loan repayment depends a lot on the profit of the business.
Along with writing an exceptional business loan proposal, make sure that the loan proposal has reached to the right lender. Choosing the right lender is as important as writing a good loan proposal. The combination of the right lender and the great loan proposal is the recipe of success in business loans.