Your Loan Proposal

July 30th, 2009

Unfortunately, even if you’ve convinced a lender that you’re a good credit risk, your loan request may not be approved if the lender you’re working with doesn’t do an equally good job of convincing others in their organization of the same. You may never meet the people who approve or decline your loan. Those  faceless, nameless folks will rely on the notes the lender scribbled in the margin of your loan proposal. And, there’s a good chance that the lender you spent so much time with completely forgot (or worse yet misunderstood) some what you said in the meeting anyway.

You want to make their job easy

So you need a written loan request package that stands on its own legs and will allow you to communicate directly to the ultimate decision makers. And the real purpose of your loan request package is to make their job of approving your loan as easy as possible. The shopping bag and shovel approach, where you give them every piece of paper you’ve ever created in your business in no particular order, and let them figure it out is not the way to succeed. It’s a lot more likely that they reject a messy deal than a clean one because the former just takes too much energy to consider. A good loan request package doesn’t have to be a professionally bound work of art (in fact, lenders would prefer that its not bound so they can make copies more easily), it just has to be organized and complete.

So what should be in it?

• how much you’re looking to borrow;
• what type of loan you want (term loan versus line of credit);
• what the funds will be used for;
• over what term they’ll be repaid;
• what the source of repayment will be;
• what collateral and guarantees are available; and
• a summary of your historical, current, and projected financial performance and ratios.

Specifically, you want to include the following which is described in detail in the Finding Money ebook:

Historical Balance Sheet And Income Statements
Financial Statements
Interim Financial Statements:
Notes/Explanation To Financial Statements
Projected Balance Sheet, Income Statement, and Cash Flow
Summary of Financial Performance
Accounts Receivable Agings
Accounts Payable Agings
Breakdown of Inventory
Schedule of Fixed Assets
Property Appraisals
Summary of Collateral Values
Personal Financial Statements
Business and Personal Tax Returns
Summary of the Business and Industry

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