Write the Perfect SBA Loan Proposal
There are many things you have to take into account when owning a business, and we know it is quite the hard work. To make things (apparently) more difficult, here comes the loan proposal: basically, the day comes when you have to convince your lender that you deserve to be approved for a loan, if asked to.
But you should not worry. We did, after all, assure you that the difficulty is only apparent. In reality, writing a loan proposal is definitely easier than writing an English term paper like in high school. Thanks to the knowledge of Nick Wilson, founder, and CEO of Advance SOS, we gathered for you the most important information and tips on the topic. In this complete guide, Nick as an experienced loan officer shares the basics of business loan proposals and how to write the perfect one.
What Is a Business Loan Proposal?
In short, a business loan proposal is the abbreviated version of the business’ financial and operational history, your chance to make a good impression on the lender. That is to say, you write all the data contained in cash flow reports, balance sheets, revenue projections, profit and loss statements, business card histories, tax filings, bank statements and more in a document. This is all the information you are going to put in your loan proposal in order to show to the lender the financial standing in which your business is (hopefully, good), and to reassure them that there is no sign you will turn out to be a bad credit risk in the future.
Why Do Lenders Request a Loan Proposal?
When lending money, those who lend must have some certainty and security before running the operation. A well-done, complete SBA loan proposal, which condenses all the info proving that a certain business is financially stable and strong. The lender must be able to look at your proposal and understand that right now, and most importantly, in the future, your cash flow and revenues will be steady and secure, at least. In sum, it should be clear from your loan proposal that you (and your business) are to be trusted and that there are no negatives in lending you the money requested. If you manage to comprehensively put together all the data regarding your business, and show that everything is going as it should, then you will make a perfect impression on the lender.
What to Include in Your Business Loan Proposal
Now that we have understood why a small business loan proposal is so important, and why lenders may require it, let’s see in detail how to write a good one. As you probably already realize, there is a lot of information to be added to the document, but you want to make a good first impression, so here are some first tips.
- You have to keep it short, so try to stay as close to one page as possible.
- Since we are looking at portraying a first impression, include primarily your business’ most impressive facts and figures.
- Don’t use specific lexicon related to your industry, it may confuse the reader and make it all more difficult to go through. Write your proposal in a simple, concise, easy-to-read language.
Step-By-Step on How to Write a Small Business Proposal
- Present your request. You should start by presenting yourself and the amount you are requesting.
- Basic information about your business. Proceed by presenting your business. Add all the info regarding it: business name, entity structure (S-corp, C-corp, LLC, etc.), how much time you are in business, current annual revenue, employees if you have any and how many.
- Describe briefly your business model. Write down what is your business about, what types of customers it serves, how it generates income, what competition it has, how is the industry growth.
- Explain what is the purpose of the SBA loan you are requesting. Be detailed in specifying what are you aiming to do with the funds, how are you planning on making the investment, etc.
- Provide proof that you will be able to repay the loan. To do so, you have to refer to the numbers we were talking about earlier: cash flow projections, current balance, P&L statements. If possible, prove that the funds you are requesting will help in growing your revenues, thus being able to repay them faster.
- Add information on any existing debts. If you have any, include them in your proposal and provide all the data about them.
- Collect your personal and financial background, and your business’ partners. The lender is interested in knowing the financial details of you, your partners and your management team.
- Add links to any social media channel. Online marketing is getting more and more important nowadays in business, so at the end of your loan proposal, list any social media in which you are active, as well as your website and any other online advertising channel you have.
- Finally, gather supporting documents. The most is done, now you only need to collect all the documentation which proves you are not telling lies. This will help the lender in verifying the information you have provided so far. Remember to include: your business plan, balance sheet, P&L statement, cash flow document, financial projections. The lender will probably ask you for other financial documents in order to evaluate your profile, this is completely normal.
You are done! Once you have followed these steps, your business loan proposal will be ready. If you want to compare your document with others, or see how a professional loan proposal is done, the internet provides a lot of samples for you to check out.
About the Writer | Amanda Girard
Amanda Girard leads the copywriting team at AdvanceSOS. Her invaluable input and expertise translates into articles posted throughout our website and other notorious channels. Since our founding in 2019 she has written the most comprehensive yet exciting pieces for our company and is not going to stop any time soon.