Approval of your loan request depends on how well you present yourself, your business and your financial needs to a lender. Remember, lenders want to make loans, but they must make loans they know will be repaid. The best way to improve your chances of obtaining a loan is to prepare a written proposal. A well-written loan proposal contains:
- Business name, names of principals, Social Security number for each principal, and the business address.
- Purpose of the loan—exactly what the loan will be used for and why it is needed.
- Amount required—the exact amount you need to achieve your purpose.
- History and nature of the business—details of what kind of business it is, its age, number of employees and current business assets.
- Ownership structure—details on your company’s legal structure. Management Profile
- Develop a short statement on each principal in your business; provide background, education, experience, skills and accomplishments.
- Clearly define your company’s products as well as your markets.
- Identify your competition and explain how your business competes in the marketplace.
- Profile your customers and explain how your business can satisfy their needs. Financial Information
- Financial statements—balance sheets and income statements for the past three years. If you are starting out, provide a projected balance sheet and income statement.
- Personal financial statements on yourself and other principal owners of the business.
- Collateral you would be willing to pledge as security for the loan.
Check out the U.S. Small Business Administration’s Training Workshop online on writing a good loan proposal.
Reviewing Your Loan Request
When reviewing a loan request, the lender is primarily concerned about repayment. To help determine this ability, many loan officers will order a copy of your business credit report from a credit-reporting agency.
Therefore, you should work with these agencies to help them present an accurate picture of your business. Using the credit report and the information you have provided, the lending officer will consider the following issues:
- Have you invested savings or personal equity in your business totaling at least 25% to 50% of the loan you are requesting? A lender or investor will not finance 100% of your business.
- Do you have a sound record of creditworthiness as indicated by your credit report, work history and letters of recommendation? This is very important.
- Do you have sufficient experience and training to operate a successful business?
- Have you prepared a loan proposal and business plan that demonstrate your understanding of and commitment to the success of the business.
- Does the business have sufficient cash flow to make the monthly payments?
For more information on all of the SBA’s programs for small businesses, call the SBA Answer Desk at 1-800-U-ASK-SBA or TDD (704) 344-6640, or visit www.sba.gov.
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