Loan Proposal: Several Things You'll Need

Creating a successful loan proposal requires not only technical information, but is often times creative. First and foremost, the loan proposal will be stating what the purpose of the financing is. The lender needs to know the justification for the loan, as well as the means to repay it.

Loan Proposal Necessities

When filling out a loan application, there are several components necessary to putting together a successful proposal:

  • Business Plan - This is like a handbook of what the business will entail and how it will be run. It includes a breakdown of the management profile and duties, the main purpose of the business, and criteria of management strategy. A complete business description should be included, outlining services and products provided by the business. The business plan will also show what the cash flow projections are intended to look like over a multi-year span. The business plan can also show comparable businesses, and description of potential   growth in the market. Listing demographics of customers, analyzing the completion, and noting any market trends for the area will assist. Advertising and promotional information will also be helpful. Overhead costs such as payroll, utilities, rent, inventory, and other related costs should be outlined.
  • The Amount of Loan Request - This is a detail of how much money will be needed, and should provide information on how the funds will be used. This section may also show what collateral the borrower can provide as a repayment term.The amount being requested needs to be justified by potential success of the business. The overall business plan needs to reiterate why it is or why it will be an asset to the community involved.
  • Financial Statements - Often financial statements are the key to a successful proposal. This shows any financial backing, past financial responsibility and credit reports, the businesses current sources, bank references, and personal financial statements. These statements will be the source of information to the lender that shows why or why not this venture is a good (or bad) risk.
  • Repayment - This information shows how the borrower intends to repay his loan. It will discuss cash flow options, and re-emphasize any use of collateral. Long term projections can help provide insight as to the intended cash flow.
  • Additional Supporting Information - This final section will include any business licenses, insurance information, partnership agreements, and any other information necessary to support the loan request.
Creating a well thought out, thorough loan proposal takes time as well as intense knowledge of the immediate market. The more information provided to the bank or lender, then the better odds of receiving the requested amount. Business owners need to provide as much information as possible, and be highly knowledgeable of the data being presented in order to give value to the loan proposal.