Preparing and Presenting a Loan Proposal
How Should I Develop My Loan Proposal?
Your loan proposal should answer the following questions: Who are you? How much do you need? How are you going to pay it back? What happens if you can’t pay it back?
What Should My Loan Proposal Contain?
Summary. This section should be a summary of how the loan will be used, how it will be repaid, and how it will benefit your business. You also need to explain why your business stands out from the competition.
Top management profiles. You should include resumes, a summary of experience, qualifications, and credentials for all owners and key management team members
Business description. This should consist of a detailed description of your business, including a brief history and summary of current activities. You should also have literature about your products and services and references from business associates such as suppliers and customers.
Projections. You should have projected income and cash flow statements. You should be ready to answer questions about what you intend to do if there are kinks in your plan.
Financial statements. Include both business and personal financial statement and list any significant trends.
Purpose of the loan. Detail how you intend to use the funds and make sure to include the loan and the repayments in your cash flow statements and projections.
Amount requested. Remember that you have to pay this back and the bank is going to want to see that they will get paid the full amount. This is not an allowance, so you should ask yourself, “How much do I need?” and “Will they be willing to give me that amount?”
Repayment plans. This will require you to make certain assumptions about what the loan is going to give you because at this juncture, you will not know the bank’s final decision. However, make sure that in all financial paperwork for your company’s future, you are including information about the repayment plans and the fact that you have budgeted this into the future.
How Do I Select a Bank?
Usually, the initial choice is to go to a bank where you have an established relationship. Regardless if there is your first loan or your tenth, you have to take several factors into account before choosing the bank. First, you should be allowed to choose the bankers or partners with whom you want to deal. Secondly, you should find a bank who is sincerely interested in your business and who is ready to give you the services you need and desire. Finally, your banker should be someone you can see working with for awhile and that has had experience with other small businesses.
When selecting a bank, there are several questions you should ask bankers. You should find out if they have an industry specialty that is related to yours, what the average size of their borrowers are, their professional backgrounds and length of the position, and the level of lending authority they have.
You should decide whether to go to a large commercial bank or a small community bank depends upon your needs. If you need several financial products and services, a large bank is probably for you because they have more locations and more services. However, if you want a smaller, more intimate feeling, you should go to a community bank since you can develop a relationship with your banker.
How Do I Present My Loan Proposal?
The first step will take place even before you go visit with the banker by role playing with someone you trust so that you know all of the material in your loan package inside and out and are prepared for any questions that the banker may ask. If you have additional questions, you can visit the Info Exchange for advice from an expert or another business owner with this type of experience.
Secondly, you should have several things ready before your visit with the loan officer: (1) comprehensive written documentation; (2) deep knowledge of all of your numbers; (3) what collateral you have to offer; and (4) preparation to sell yourself.
Third, during the meeting, remember to handle yourself professionally by making an appointment ahead of time, dressing professionally, being there on time, and maintaining a business demeanor. You should also remember to emphasize how the bank will benefit from your business. You should also ask questions about their services. When the meeting ends, you can ask when you will hear back about the bank’s response.
My loan was approved…now what?
(1) CELEBRATE!
(2) Make sure you understand all of the loan documents before you sign them and that if you have questions, consult with a lawyer or accountant.
(3) Make sure you remain on deadline and return all of the necessary paperwork on time.
(4) Continue to check in with your loan officer and explain where the business is and if problems arise, make sure to tell the bank so that they are not surprised down the road.
My Loan Was Not Approved…Now What?
Just because a banker has given you a no today does not make that permanent. You have other options. Graciously ask the banker why your loan was not approved because knowing why you were turned down can help you to make those changes and make sure you get approved.
Help Me Please!
There are a number of resources available to help you prepare your loan proposal, including Women's Business Development Centers, Small Business Development Corporations, and Service Corps of Retired Executives (SCORE).
No One Will Lend Me Money...What Now?
Because the markets and the business world are constantly changing, sometimes, all the preparation in the world will mean that you still cannot get approved. If you have a viable business idea, you have done your homework, and developed a solid business plan, you should be able to get funding. Rather than getting bitter, it is better to become resourceful.
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