How To Write A Business Loan Proposal

As a small business owner, you know the need for external funding.

It’s important to familiarize yourself with all the most promising ways to gain extra capital for your business — from crowdsourcing, to grants, to the best business loans. And when it comes to loans, we have a guide to walk you through the process of writing a business loan proposal.

In this article, we’ll go over the specifics of a business loan proposal, what you need to include, and when you would need to write one.

What Is A Business Loan Proposal?

A business loan proposal is your opportunity to explain to a potential lender why they should take on the risk of lending to you. Think of it as a persuasive essay to convince the bank you are a viable business that will not default — you will paint that picture both with a narrative about your business and your profit/loss metrics.

Any face-to-face or phone meetings you have with your lender are most likely going to be brief. You may not have an opportunity to present your business in a more personal or nuanced manner, and that is where the proposal comes in.

Business loan proposals are a way to share the human side of your business, and they act as a brief overview of your business’s financial and performance history.

But how do you actually write a business loan proposal? Let’s go over the steps below.

What Do I Need For A Business Loan Proposal?

Before we get into the actual writing, let’s first go over what kind of information/materials you will need in order to write your business loan proposal.

Business Information

Any lender is going to need to know:

• The name of your business
• The structure of your business (Corporation, LLC, Sole Proprietorship, etc.)
• The amount of time you’ve been in business
• Your current annual revenue
• Your current number of employees (if any)

Some extra information that you’ll want to be sure to provide is your basic business model.

• Who is your typical customer?
• How does your business serve these customers?
• What’s your ideal market?
• How healthy is your industry? Where do you fall in that growth?
• Who is your competition?

All of these questions are things you have probably included or considered in your process of writing a business plan or starting your business. Include your business plan in your application materials.

Cash Flow Projections

These projections will be based on last year’s cash flow reports, profit and loss (P&L) statements, and your most current balance (statement of your business’s assets, liabilities, and owner’s equity).

You’ll need to have all of this information ready to properly write your business loan proposal.

Make sure you also have your tax returns, bank statements, and credit reports from the past two years or more.

Information About Existing Debt

If you have any other loans, traditional long-term or otherwise, you’ll need to collect their information to include in your proposal.

For any lenders you currently have a loan with, you’ll need to give your new potential lender its:

• Individual/company name
• Mailing/business address
• Contact information
• The amount of the debt (principal and whatever is remaining)

Team Background Information

You will need to share financial information for yourself, any other owners/business partners, and/or your management team. While this one may seem a little personal, it’s just another way lenders will assess your risk as a customer.

Include:

• Full names
• Mailing addresses
• Contact information

Online Presence

This one is a very 21st-century addition. A common theme in this list is that lenders want to make sure they’re going to get paid. Just about everything in a business proposal is designed to show a lender that you can and will pay back your loan in a timely manner.

One way you can prove that your business is a good investment is to show that you are actively marketing yourself.

Lenders may want to know that you’re proactively trying to find new customers. You can prove this by listing your social media handles and website URL. If you use other methods of advertising (posters, emails, industry-specific groups, etc.) make a list of these as well.

How To Write A Business Loan Proposal

With all of your information in hand, you’re ready to write your proposal.

Keep in mind that you’ll want to write this proposal like an essay, not a list. Tell the story of your business while still meeting all of the requirements.

What To Do If You Don’t Get Approved For A Loan

Sometimes, after all that work, your loan might still be denied. Don’t lose hope!

Some common reasons why a loan might be denied include:

• A bad credit history
• The bank is overextended with loans
• You don’t meet the criteria
• There is incorrect information in your application

You can also ask a loan officer for the reasons why your loan was denied to help you further understand if there is any other information you can include next time.

However, a stellar business loan proposal can decrease your chances of being denied, so take your time and present as much positive information about your business as you are able — paint a picture of how your small business is thriving and how you intend to pay back the loan.