Business loan proposal
You will find information on how to write or create business loan proposals strewn all over the internet, bookshelves, business speeches seminars, just to name the major sources. There is too much material! Some of these are too long and conflicting while some are not really relevant.
All the documents and assurances needed by a lender are referred to as business plans or business proposals. We shall try, in this very short discussion, try to highlight some of the salient points to be considered when making a proposal to potential lender.
What is a business loan proposal?
A business proposal, just like any other proposal, can be defined as a clear outline or manifestation of the proponents’ intentions to achieve certain set goals. This is very important for commercial banks and other potential business lenders including angel investors and venture capitalists.
It gives them the necessary confidence that is always required to fob off perceptions of high risk, or at least reduce them. It should always be taken into mind that an acceptable entrepreneur's risk is often greater than an acceptable lender's risk.
Indeed, presentation of a business proposal, even when it is not a requirement, gives the lender comfort that he/she is dealing with a professional. Information for these proposals should come from business documentation already prepared by the business owner or from any relevant data.
Dominant proposal writing rules
- Always present your proposal with a cover letter that introduces your business, the amount of loan and the intended use. If the proposal is for venture capitalists, you may want to show an exit plan or return on investment (ROI).
- Always commence the business proposal with basic information about the business entity being the subject of the loan. These include the name, address and amount of money applied for.
- Always give details of the performance of the business, both past and present as it will give credibility to your application.
- Always provide market research details including the advantages and disadvantages of the particular industry. The lender will be interested to see that you realize that the business faces normal risks.
- Always provide the resumes of the key management and owners of the employees. This should include their level of experience and education attained.
- Always provide information on the previous financial performance of the business. This should be as far back as is reasonable and as is required by the lender.
Business proposal writing and submission is always fraught with misinformation and non disclosure. It is in your interest as a potential borrower to disclose all the relevant information, especially that which will materially affect the decision of the lender.
Commercial banks have the capability of assessing the truthfulness of statements made and may sue for misrepresentation or fraud if any relevant information is not disclosed.
Although it is not possible to have a perfect business proposal, one that has gone through the grills of an experienced lawyer and accountant will make more sense to the lender. As an investor, you are advised to make a loan proposal to lenders who may finance your business.
This will save on costs and time spent making endless proposals. Try as much as possible to present your business loan proposals to banks that you have conducted a research on.
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