A business loan proposal is a proposal prepared by the person or business seeking a business loan and is presented to the potential lender of the loan. A business loan may be sought if a new business is to be started or if funds are required for the continuation or expansion of the ongoing business. The lender could be a bank, institution, company, or individual; the lender can be small or big.
Usually, it is not easy to meet the financial requirements of a new or even an existing business which is why business loans are often sought by companies or individuals. For this purpose of seeking a business loan, a proposal is prepared that includes all the relevant details for the lender. This proposal can be utilized by the borrower to market itself and make the deal mutually beneficial with higher chances of acceptance.
The details that are required to be included in the proposal depend on the needs and demands of the lender as well as whether the loan is being sought for a new or existing business. However, they generally included details are:
- Details of the borrower.
- Details of the lender.
- Executive summary/introduction.
- Company profile, if an existing company.
- Experience in and expertise of the field.
- The reason for the business loan.
- Business loan request including the loan amount.
- Repayment process and details.
- Collateral details.
- Required financial statements, if an existing company.
- Projections or predicted figures.
The business loan proposal is a critical document as it lays the basis for the approval or rejection of the loan. Therefore, it has to be prepared carefully and thoroughly. Some of the considerations, while putting it together, are:
- The proposal should be professional, formal and comprehensive.
- All the relevant and required details should be mentioned.
- It should be attractive and lucrative for the lender, especially in terms of the repayment process.
- Persuasion should be carried out with strong and influential statements.
- If it is a new business, convince about its probability of success and promising growth. And if the loan is required for an existing business, present a good financial standing as it would ascertain the lender about repayment of the loan.
- The collateral should be worth consideration for the lender.
- Evidence of good credit history or creditworthiness should be provided.
- No misleading or incorrect information should be included.
If a lender accepts the proposal, the lender and borrower would get into a legally binding agreement. The business loan would be granted and the borrower must make the repayments as agreed on in the deal. On the other hand, if the potential lender does not approve the proposal, the borrower would have to seek his business loan from some other lender. In addition, the total amount of the business loan, if large, can be divided into proportions and sought separately from different lenders.
Sample Business Proposal Template
Applicant (Sender):
[Full Name]
[Name of Company]
[Address of Company]
[Contact Number]
[Email Address]
Lender: [Name of Company]
Attention: [Full Name of Representative]
Introduction
Dear [Name of Representative of Lender],
I have been working in the [Name of industry-specific to business, e.g food industry] for over [Number] of years. My experience has been gained by working on various projects [Summary of work experience].
[Summary of how the applicant got started]. Since I was in college, I used to work part-time at the local fast food joint. After receiving my degree in [Field of study], I got hired at a well-known food manufacturing company. From then onwards, I have been extremely lucky to advance my career in the [Name of the field] field. Currently, I work at [Name of Company] as the [Job title].
Ever since I started working, I started making goals of opening my own food manufacturing factory. Moreover, I have gathered enough experience and contacts to create a detailed business plan.
This proposal will explain to the [Name of Lending Company] why I need a loan and how the loan will be used in the business plan.
Sincerely,
[Name of Applicant]
Company profile
The concept of our business plan has been derived from the need for a proper food manufacturer that caters to the needs of all cultures, with affordable prices. Growing up in a community with people of various cultures, it was hard to find a manufacturer that would provide the required items at affordable price ranges. In order to overcome this problem, we came up with this business idea.
Our business is expected to be up and running in 8 months, with our location situated in an area surrounded by communities of diverse cultures. With steady foot and vehicle traffic, and other stores selling necessities, our location is an ideal spot for a business of our kind.
We plan on providing our products and services to all age groups with a friendly and open-spaced store plan that allows customers to relax and shop at their own pace. Our price ranges will be competitive in regards to other food manufacturers and attracting customers. However, we would also like to provide our employees with living wages and other benefits. Any tips generated will be calculated and distributed equally among the employees.
Other Investors
My business has two more investors, excluding myself, from the [Similar Field of Work] and together we have all brought different experiences and qualifications to create this business plan.
One of the investors has been working as a [Job Title] for over [Number] of years in [Name of Company]. They have acquired experience and qualifications by working with different manufacturers both locally and abroad. Their culturally diverse experience will help us take care of a larger customer base.
The second investor works for [Name of Company] as [Job Title]. They are sourcing or business plan by providing us with knowledge about [Field]. This will benefit our business by [The benefits of 2nd investor].
I, another hand, will be taking responsibility for [Department]. As I have experience in [Field of work], I will be the sole director of [Department].
Loan request
The total budget calculated according to all the aspects of our business is $[amount]. The three of us investors have raised $[amount] out of the total budget. We have found a space to set up our business, therefore our currently existing investments will be used to lease the space and renovate it according to our business requirements as well as the standards of business operations set by the officials. Moreover, some of the investment has been set aside in order to obtain the required license and registrations. We expect to officially start operations in 8 months.
The loan being requested from [Name of Lending Company] is planned on being used for the following needs:
- Equipment, $xxx: In order to manufacture and pack the items, we will need to purchase good quality manufacturing and processing machinery, and also [Other equipment used for manufacturing purposes].
- Raw materials/ingredients, $xxx: Special care will be taken when ordering raw materials so the delivery is made just in time and the inventory rotation is maintained.
- Promotion, $xxx: In order to attract customers, we will need to advertise and promote the business. Both, internet portals and manual promotion, will help increase the speed of customer base building.
Repayment
We are requesting [Name of Lending Company] for a loan of $[X], which will be repaid over 13 months with 5% interest.
According to our expected revenue, that will be $xxx per day from [Number] of operational days per month. This means the total revenue for a month will amount to $xxx. After taking out the costs of employees, $xxx per month, and $xxx for operational costs, we will be left with enough finances to pay off the loan under those terms.
Collateral
The table below displays the different collaterals being kept by all investors as security for the loan request. Among them are two savings accounts, three separate residential properties, etc.
Financial statements
You will find the personal and business financial statements of each investor attached to this proposal.
Projections
The following document explains the plans, in case our expected calculations are not met properly when the business starts operations. This document includes the income and cash flow projections of the business.
