Some banks might require a business loan proposal before considering your small business for a loan. Learn how to write one with our complete guide.
Kymberlin earned her Bachelor of Arts in Creative Writing from Pacific University in 2020 and resides in Portland, Oregon.
WRITTEN & RESEARCHED BY Kymberlin Bush Kymberlin earned her Bachelor of Arts in Creative Writing from Pacific University in 2020 and resides in Portland, Oregon. Expert Contributor
Erica began writing on small business topics in 2008. She joined Merchant Maverick in 2018 and focuses on loans, accounting, and POS. She is a Certified ProAdvisor for QuickBooks Online and QuickBooks Payroll. She has been cited in MSN, Reader's Digest, Vox, U.S. News & World Report, and Real Simple. She is a graduate of Limestone University and resides in Greenville, South Carolina.
REVIEWED BY Erica Seppala Erica began writing on small business topics in 2008. She joined Merchant Maverick in 2018 and focuses on loans, accounting, and POS. She is a Certified ProAdvisor for QuickBooks Online and QuickBooks Payroll. She has been cited in MSN, Reader's Digest, Vox, U.S. News & World Report, and Real Simple. She is a graduate of Limestone University and resides in Greenville, South Carolina. Editor & Senior Staff Writer
Our content reflects the editorial opinions of our experts. While our site makes money through referral partnerships, we only partner with companies that meet our standards for quality, as outlined in our independent rating and scoring system.
As a small business owner, you know the need for external funding.
It’s important to familiarize yourself with all the most promising ways to gain extra capital for your business — from crowdsourcing, to grants, to the best business loans. And when it comes to loans, we have a guide to walk you through the process of writing a business loan proposal.
In this article, we’ll go over the specifics of a business loan proposal, what you need to include, and when you would need to write one.
Table of Contents
A business loan proposal is your opportunity to explain to a potential lender why they should take on the risk of lending to you. Think of it as a persuasive essay to convince the bank you are a viable business that will not default — you will paint that picture both with a narrative about your business and your profit/loss metrics.
Any face-to-face or phone meetings you have with your lender are most likely going to be brief. You may not have an opportunity to present your business in a more personal or nuanced manner, and that is where the proposal comes in.
Business loan proposals are a way to share the human side of your business, and they act as a brief overview of your business’s financial and performance history.
But how do you actually write a business loan proposal? Let’s go over the steps below.
Before we get into the actual writing, let’s first go over what kind of information/materials you will need in order to write your business loan proposal.
Any lender is going to need to know:
Some extra information that you’ll want to be sure to provide is your basic business model.
All of these questions are things you have probably included or considered in your process of writing a business plan or starting your business. Include your business plan in your application materials.
These projections will be based on last year’s cash flow reports, profit and loss (P&L) statements, and your most current balance (statement of your business’s assets, liabilities, and owner’s equity).
You’ll need to have all of this information ready to properly write your business loan proposal.
Make sure you also have your tax returns, bank statements, and credit reports from the past two years or more.
If you have any other loans, traditional long-term or otherwise, you’ll need to collect their information to include in your proposal.
For any lenders you currently have a loan with, you’ll need to give your new potential lender its:
You will need to share financial information for yourself, any other owners/business partners, and/or your management team. While this one may seem a little personal, it’s just another way lenders will assess your risk as a customer.
This one is a very 21st-century addition. A common theme in this list is that lenders want to make sure they’re going to get paid. Just about everything in a business proposal is designed to show a lender that you can and will pay back your loan in a timely manner.
One way you can prove that your business is a good investment is to show that you are actively marketing yourself.
Lenders may want to know that you’re proactively trying to find new customers. You can prove this by listing your social media handles and website URL. If you use other methods of advertising (posters, emails, industry-specific groups, etc.) make a list of these as well.
With all of your information in hand, you’re ready to write your proposal.
Keep in mind that you’ll want to write this proposal like an essay, not a list. Tell the story of your business while still meeting all of the requirements.
For SBA loans specifically, your lender will need to know exactly what the funds you are receiving are going toward. Include a description of what you’ll be using the funds for, your expected costs, any variable expenses you expect, and how the work done as a result of the loan funding will change your business for the better.
While a lot of this is written in a more narrative form, this section of the business loan proposal is very focused on the numbers. Begin this section by repeating the loan amount you’re applying for.
Now that your potential lender knows more about your business, it’s time to introduce them to the people behind the operation.
Expect to have to produce names, addresses, contact information, tax returns, bank statements, and credit reports for yourself and any business partners or management team you have.
It’s also important to include in this section any management or industry experience that applies to your business. Lenders will also need to know how much of your own money you’ve invested in your business.
SBA-backed lenders will be especially interested in ensuring that your business doesn’t loan money, involve passive investments, pyramid sales, or gambling.
Another way to prove that you’ll continue to have the revenue required to make your monthly payments is to show your marketing strategy. You can do that by sharing your social media accounts, your website, email campaigns, and other promotional activities.
Sometimes, after all that work, your loan might still be denied. Don’t lose hope!
Some common reasons why a loan might be denied include:
You can also ask a loan officer for the reasons why your loan was denied to help you further understand if there is any other information you can include next time.
However, a stellar business loan proposal can decrease your chances of being denied, so take your time and present as much positive information about your business as you are able — paint a picture of how your small business is thriving and how you intend to pay back the loan.
Kymberlin earned her Bachelor of Arts in Creative Writing from Pacific University in 2020 and resides in Portland, Oregon.
View Kymberlin Bush's professional experience on LinkedIn.
Get in touch with a real human being on the Merchant Maverick team! Send us your questions, comments, reviews, or other feedback. We read every message and will respond if you'd like us to.
Our Experts Are ListeningGet in touch with a real human being on the Merchant Maverick team! Send us your questions, comments, reviews, or other feedback. We read every message and will respond if you'd like us to.
Let us know how well the content on this page solved your problem today. All feedback, positive or negative, helps us to improve the way we help small businesses.
