Planning is the best strategy to get your commercial business loan approved or even to creating a strong business loan proposal. This is regardless of whether the money is meant to start a small business or to fund a business expansion.
The ease or difficulty with which you may deal with banks on obtaining a business loan is largely dependent on how well-prepared you are. Now, if there are two crucial things you need to remember about business loan success, these are planning and preparation.
So, before you can sit down and write your business loan proposal, there are things you need to accomplish first. These are important if you want for your business loan to succeed.
Step 1 – Put Together All Your Business Records
If your business is already up and running, you can be sure that lenders will look into your existing business records. These will let them know about the status of your business and will help them ascertain if you are good for a loan or not.
In putting together all your business records, be sure to create a checklist so you won’t miss a thing. These should include the following:
– business credit reports
– business assets (should include current market value)
– existing debts (should include payment history)
– tax returns (should cover the past three years or whatever you already have if your business has not reached three years yet)
– balance sheets, profit and loss reports (should go back at least three years or since your business started if it has not been three years yet)
If you are preparing to write a business loan proposal for a start-up, then most of the reports and records you need to prepare will have to contain projections.
Step 2 – Prepare Your Business Plan
A business plan is one of the keys for a successful business. It is not just a guide towards making your endeavour work. It is also one of the things any lender will look into before approving your business loan. It doesn’t even have to be long either, it just needs to answer the following questions:
How much money do you need?
A business plan takes time to make. You should also be thorough and make sure it contains the sections below:
Executive Summary – This is where you should place a brief overview of your business. Describe your company and the industry it belongs to. Point out its advantage over its competitors. Mention the project that requires additional funding or the needs of the business and the amount of money that should cover the expenses.
Company Description – Contained in the main part of your business plan, this should provide a more comprehensive view of your company’s history, its business strategies, and current operations.
Major Financial Data – This is where you will show the strength of your business financially. Here, you should include financial statements as well as projections for the next two to three years. Your banker or potential lender will look into this closely to learn about your track record as well as your capacity to pay back the loan. It is imperative that you maintain complete honesty and transparency in this section as well as every other part of your business loan proposal.
Production Plan – Any banker or lender will want to check if your operations have the capacity to deal with the sales mentioned in your projections.
Marketing Plan – Present a marketing plan that includes your client profile, your competition, their strengths and weaknesses, and your main competitive advantage. This is also where you should state the proven market for your products or services.
Experience of the Management Team – Highlight the qualifications, skills, and experience of your management team. This is vital if you wish to show the banker that your team has the capacity to make your business or project succeed.
Human Resource Management – Establish the ability of your human resource management team not just to recruit the right people for your business. They should also be able to train them, make them grow, and retain them not just to move your project along, but also to scale it further.
Step 3 – Add Other Supporting Documents
Strengthen your commercial loan proposal further by adding business records as well as other documents that will confirm and advance the credibility of your business plan. Aside from the documents mentioned in the earlier part of this article, you should also include the following:
– documents to support financial data like subcontractor estimates, letters of credit, copies of lease/contracts
– market studies or other research that could confirm forecasts and conclusions
– testimonials from clients
– media reports about your business
These supporting documents play a very important role in showing the veracity of your proposal. It shows lenders or bankers that what you have provided them are based on facts.
Step 4 – Write Your Business Loan Proposal
Once you’ve gathered all your business records, made your business plan, and attached all the other supporting documents, it is time to write your business loan proposal. Below are several tips you can follow to ensure that it is as effective as you wish for it to be:
Stay away from using complex words, acronyms, and technical terms. Make it is as simple as possible, so it is easy to read. If your proposal is clear and well-structured, it can bring your message across much better.
Show the bankers the reasons your venture will flourish and progress into the coming years. Stay on this track all throughout your proposal. Establish how you have thought of several possible scenarios and that you have laid out contingency plans for each.
Sell your business. Remember that your proposal is meant to show the best of your company to the bankers. So, highlight its every positive point and all its advantages over the competition every chance you get.
Your image and that of your business is vital to the whole process. As such, it might be a good idea to work with professionals in creating your business loan proposal. It might even be better to ask a copywriter to do the writing for you, if it is not your forte.
Everything mentioned above are essential in creating a successful commercial business loan proposal. Although there are probably other points out there that can help you further, the ones underscored here will already bring you a long way into making a proposal that will work for you and your business.