Business loans offer a convenient form of financing for startups. You can apply for a business loan at a local bank or online. As long as you meet the lender’s requirements, you may receive an injection of new capital, which you can use to finance your business’s operations. Before applying, however, you may want to craft a business loan proposal.
Breaking Down a Typical Business Loan Proposal: What You Should Know
A business loan proposal is a document in which a business owner submits a formal request for debt financing. Lenders use it to determine the creditworthiness of the business. Businesses with a strong proposal will have an easier time securing financing than those with a weak or nonexistent proposal.
Common Parts of a Business Loan Proposal
A typical business loan proposal features several parts. When creating a proposal, you’ll need to include some basic information about your business, such as your business’s name, tax structure (S-corp, LLC, etc.), revenue and size. You should also provide a description of your business’s operations so that the lender knows how it generates revenue.
Another essential part of a business loan proposal is the purpose of the loan. In other words, what do you intend to use the borrowed money for? Maybe you want to cover short-term operational expenses, or perhaps you want to upgrade your business’s equipment. Regardless, you should let the lender know when crafting a business loan proposal.
If you’re applying for a secured business loan, you should include information about the collateral in the business loan proposal. Secured loans require collateral. You’ll have to “pledge” assets to the lender. In the event of a default, the lender can claim ownership of the assets. When applying for a secured loan such as this, you can provide the lender with information about the collateral assets in the proposal.
Something else to include in a business loan proposal is the repayment plan. It should feature the proposed term of the loan, the interest rate and a repayment schedule.
Business Loan Proposal vs Business Plan
While similar, business loan proposals and business plans aren’t the same. A business plan is a document outlining the goals and objectives of your business and how you intend to achieve them. A business loan proposal, on the other hand, is a document that contains a formal request for debt financing from a lender.
This article was brought to you by Intrepid Private Capital Group, a Global Financial Services Company. For more information on startup and business funding, or to complete a funding application, please visit our website.