If, after considering all possible funding sources, you’ve determined that a business loan makes sense for your business, start preparing your loan proposal by assessing how much money your company needs and how you will repay it. You will also need to answer why your company is a reliable candidate for a loan and what your company will do if it's unable to repay the loan.
Your loan proposal should include the following key elements:
Executive Summary. Briefly describe your business, your market and how the loan will be used to help the company succeed. Think of the Executive Summary as your “elevator pitch.” Then, flesh out the Summary in subsequent sections.
Business Summary. Describe the history of the business, its current activity and results. Include brochures or other business identity collaterals in an Appendix. While your loan proposal should help sell your business as a viable loan candidate, be sure to present facts, not marketing materials in the proposal.
Management Profile. Lenders want to know to whom they’ll be lending money. Describe your experience, qualifications, credentials and skills, including resumes for those who are in management. Establish your credibility and track record as a business owner and as a good corporate citizen.
Financial Statements. Include business and personal financial statements. Some lenders require personal tax returns for the previous one to three years. Also be prepared to provide profit and loss statements, balance sheets and other financial history documentation. A loan proposal should include earnings projections for the next two to three years.
Purpose of Loan. Describe in detail how you will use the borrowed funds. Include written documentation, cost estimates, expansion proposals and other relevant information in this section.
Marketing Plan. Provide details on how you’ll expand the company by sourcing new customers.
Loan Repayment Plan. Describe the loan terms you hope to receive, including interest rate and length of term, etc. Show how you will repay the loan based on sales and cash flow projections.
Inventory of Collateral. List property or equipment that could be used as collateral to back your loan. You can also use personal possessions for collateral, as well.
Keep in mind that many of these elements found in the loan proposal should also be included within your business plan.
Zions Bank’s Business Resource Center is happy to assist you in preparing your business plan, free of charge. Call us for a free appointment at 801-594-8245. We are open Monday through Friday from 9 a.m. to 5 p.m. Beth Holbrook can be reached at firstname.lastname@example.org