Applying for a small business loan
can be exciting and yet stressful at the same time. For the best results and to
heighten your level of confidence be prepared when you visit the lender you've
chosen for your business loan interview. After you have your business plan
prepared, start preparing for the loan by writing a loan proposal to present to
the lender.
The loan proposal should state some
crucial information, and many details, about both you and your business or
business idea. It should state who you are, how much money you need and where
the money will be spent, how you intend to repay the loan, and what you plan on
doing in the event that you cannot repay the loan.
The following are key elements to
include in your loan proposal.
This should be listed first in your
proposal, but will be written last. It should contain clear, concise, accurate,
inviting information about your business or your business ideas. It should
summarize how the proposed loan will be used, how it will be repaid, and how it
will benefit your business. Remember your competition in the summary of your
loan proposal, and point out features of your business that are different from
your competitors.
The management profile section of
the loan proposal should explain, most importantly, who you are. Be prepared to
reveal everything about yourself and your experience. Have a current resume
included as part of the loan proposal, as well as a summary of your skills,
qualifications, and other credentials for yourself, as well as for all other
owners and key members of your management team.
It's not necessary to state the same
information mentioned in your business plan as in your loan proposal. However,
you do need to present a solid description of the business. Include a brief history
of the business in your loan proposal, and detail the current activities. If
it's a new business, explain the details of the business that will be
developed. Your goal will to be to clearly demonstrate that you fully
understand your markets, your competitors, and the industry, including current
trends or risks and how you plan to overcome those potential dilemmas. If the
loan is for an existing business, include literature that details your products
or services, such as current sales sheets, brochures, or catalogs. Include
attachments to your loan proposal for this section, such as letters from
suppliers, customers, or other business references. Demonstrate through these
letters that you provide excellent customer service, and that you pay back your
creditors.
Create at least two years' worth of
projected income statements and cash flow statements. Your projections should
be clearly stated and, most importantly, realistic in nature. Generally, you
probably won't need to present the "worst case" or "best
case" scenario unless the lender asks for you to write the projections
that way. You should, however, be prepared to answer questions pertaining to
what you'll do if some of your projections don't work out as planned. For
example, if you anticipate obtaining a large, new contract or customer based on
improvements made with the business loan, and that contract never goes through,
it could change your loan proposal projections drastically.
Your loan proposal should include
both business and personal financial statements. Be aware that the lender will
fully analyze the history of your financial statements, calculating all ratios.
Be prepared to point out any significant trends you've shown in an introductory
paragraph.
One of the most important parts of
your loan proposal is a detailed description of how you will use the loan proceeds. Have a good understanding of the type of loan that you need, and
remember to include the proceeds of the loan in your cash flow projections, as
well as the interest in your projected income statement.
Repayment plans should also be
stated in your financial projections section of the loan proposal, but details
of repayment plans should be detailed separately. Propose the terms you want,
and prepare for negotiations with the financial institution. The lender will
consider a number of factors as they review the overall risk of lending you the
money. Understandably, this will impact the repayment terms that they are
willing to offer for your business.
Especially if your credit is good,
and even if your credit is not so good, remember that in your loan proposal,
you are offering the bank a deal that will make them money. Don't go in asking
the lender for an "allowance." Instead, enter the interview with your
loan proposal objective in mind; namely, focusing on how much money you'll
need, and remove the idea of going into the meeting wondering how much they're
willing to lend. Never go into a meeting asking for a loan, wondering whether
or not they'll lend to you. If this first lender won't approve your loan proposal, have confidence that a different will.
Rebecca Game is a 30 year
entrepreneur who founded the online community for women in business at lendingformymerchants.com
It provides resources and tools for women and man starting a business of their own.
Please visit her site: Digital Women - Loans for Women and Men
