Worried about how to apply for a business loan? Although it may seem like a daunting task at first, it can be made less so by careful preparation. When applying for a business loan, you must prepare a written loan proposal. Make your best presentation in the initial business loan proposal and application; you may not get a second opportunity.

Always begin your proposal with a covering letter. Clearly and briefly explain who you are, your business background, nature of your business, the amount and purpose of your loan request, your requested terms of repayment, how the funds will benefit your business, and how you will repay the business loan. Keep this cover page simple and direct.

When writing your proposal, don't assume the reader is familiar with your industry or your individual business. Always include industry-specific details so your reader can understand how your particular business is run and what industry trends affect it.

Provide a written description of your business, including the following information:

Type of organization, Date of information, Location, Product or service, Brief history, Proposed Future Operation, Competition, customers, Suppliers

Management Experience: Resumes of each owner and key management members.

Loan Repayment: Provide a brief written statement indicating how the loan will be repaid, including repayment sources and time requirements. Cash-flow schedules, budgets, and other appropriate information should support this statement.

Existing Business: Provide financial statements for at least the last three years, plus a current dated statement (no older than 90 days) including balance sheets, profit & loss statements, and a reconciliation of net worth. Aging of accounts payable and accounts receivables should be included.

Proposed Business: Provide a pro-forma balance sheet reflecting sources and uses of both equity and borrowed funds.

Projections: Provide a projection of future operations for at least one year or until positive cash flow can be shown. Include earnings, expenses, and reasoning for these estimates. The projections should be in profit & loss format. Explain assumptions used if different from trend or industry standards and support your projected figures with clear, documented explanations.

Collateral: Provide a list assets to be held as collateral. Few financial institutions will provide non-collateral based business loans. All business loans should have at least two identifiable sources of repayment. The first source is ordinarily cash flow generated from profitable operations of the business. The second source is usually collateral pledged to secure the business loan.

Depending on your particular circumstance you may need to provide one or more of the following documents:

Lease, Franchise Agreement, Purchase Agreement, Letters of Intent, Articles of Incorporation, Plans, Copies of Licenses, Letters of Reference, Contracts or Partnership Agreement.

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