How to prepare a winning business loan application

Preparing an effective, well-documented commercial loan proposal is the first step toward getting the money your business needs from a bank.

Your small business loan proposal will often be the first contact a banker has with your company. So you need to craft a document that presents your business in the best possible light.

The goal is to persuade the banker that you’re ready and able to make a success of your business and repay the loan.

Your business plan is key

The key part of proposals for small business loans is the business plan. Take the necessary time to do a thorough job of preparing it, ensuring it covers the following sections.

• Executive summary—This section provides a concise overview of your business. It briefly describes your company, its industry, and its competitive advantage. It should also describe the business need or project that requires financing, as well as the amount of money needed.
• Description of the company—In the main part of your business plan, you should more fully describe the history, current operations and strategy of your business.
• Management team experience—Show the skills, experience, and qualifications of each member of the management team. Your banker needs to know they have what it takes to make your project work.
• Key financial data—This section shows the financial strength of your business. Provide financial statements as well as forecasts for the next 2 to 3 years. Your banker will examine this information closely in an effort to understand your track record and capacity to repay the loan. As in every part of your small business loan proposal, make sure you are completely honest and transparent.
• Marketing plan—Provide a marketing plan to answer these key questions: Is there a proven market for your product or service? Who are your competitors and what are their strengths and weaknesses? What is your client profile? What is your key competitive advantage?
• Production plan—Your banker will want to know if you have the operational capacity to handle your projected sales.
• Human resources management—Demonstrate that your business has the ability to recruit, develop and retain the right people to move your business project further.

Include supporting documents

You should bolster your commercial loan proposal by including documents that support, explain and boost the credibility of your plan, including:

• market studies or other research supporting your conclusions and forecasts;
• documents to support financial data (e.g. copies of leases, subcontractor estimates, letters of credit);
• client testimonials; and
• media reports about your company.

The purpose of the supporting documents is to show your proposal is based on facts.

Tips to write an effective commercial loan proposal

• Use simple, plain language. Avoid technical terms and acronyms. Your proposal should be clear, well-structured and easy to read.
• Don’t forget that your proposal’s purpose is to show your company at its best. Sell yourself!
• Throughout the proposal, focus on showing why your venture will succeed. Demonstrate that you’ve thought of multiple possible scenarios and that you have contingency plans.
• Image counts. Consider working with a professional to help you to layout the document. If writing isn’t your strength, ask for the help of a professional copywriter or editor.