The business loan proposal is the document used to apply for a bank loan. It mentions the amount you want to borrow, a purpose for the loan, your repayment status, any collateral you might put up against the loan and any other important information related to the business loan application. The business loan proposal is one of the most important documents as the approval or rejection of the loan is highly dependent on it. It is the first document that the lender is handed from a loan applicant which helps to gauge their business management skill, their experience and the market prospects of the business. One should ensure that the business loan proposal is attractive enough to impress the lender, let’us see how to do this.
The loan quantum or the amount is money you want from the lender as a credit. The loan amount mentioned should justify the creditworthiness of the business as well as the purpose of the loan.
The purpose of the loan states why you need the loan. The purpose can vary from an extension of the business, boosting the working capital, hiring new talents, enhancing inventory, to purchasing new equipment. The lender will then check if the purpose of the loan is worth lending money or not. Lenders generally grant a loan application only if it is satisfied with the proposed use of the loan amount.
Before the lender approves a loan application, the lender will like to know the repayment policy. The repayment can be done in EMIs or any flexible manner suitable to both the lender and the applicant. If the business loan is taken as a business line of credit, the repayment amount and the tenure are not fixed. But if the business loan is a general one, the loan repayment can be done in EMIs where the loan tenure can be adjusted. So remember to mention the what type of repayment process you want for your loan proposal.
Most of the business loans available at the present market are secured business loans which requires collateral to be put up. collateral is compulsory if you are applying for a business loan for the first time or your business is a new one. The loan amount is dependant on the market value of the collateral. The collateral makes the lender secured about lending, hence the chances of approval can be enhanced by attaching collateral to the loan. The loan collateral and its market should be mentioned in the loan proposal to make it more impressive.
Additional Reading: Business Loan schemes for SMEs
Any business loan proposal requires the personal information of the loan applicant. In the case of a joint business venture, the business loan proposal should include the personal information of all partners. The credit report and the credit history of all partners of the business should be mentioned.
The business records should be presented in the loan proposal and it should include the business turn over of previous years, the business credit report, the tax return files, the audit report, Profit and Loss Reports and Balance Sheets, etc. All of these documents should be attached to the loan proposal at the time of submitting.Get your free credit report now.
No business can prosper without a business plan. The loan applicant must prepare an excellent business plan, which reveals his chances of profit and share it with the lender. The business plan should include your plan to use the loan amount and how you believe that the investment will generate good revenue for the business, and taking the advice of an expert is always advised. All these steps spiral the lender’s interest in your business plan as your profit is dependent on your business plan and the loan repayment depends on a lot of on the profit of the business.
Along with a good proposal make sure that the loan proposal has reached to the right lender.