Whether you’re starting a new business or expanding an existing one, you'll need money to accomplish your goals in the form of a loan. You can fund the business yourself, but there may come a point when you need cash from a lender. Here are tips on how to apply for a small business loan.
If you don't have a business plan, write one. If you already have a business plan, update it. Key elements in your business plan should include an executive summary, market analysis, company description, your organization and management, how you'll handle marketing and sales, full details about your product or service, your funding request and financials, and an appendix with supporting documentation if needed.
The more thorough your business plan, the better chance you have of getting a loan. Lenders want to know how they'll get their money back, with interest. Your business plan is your roadmap. Each lender will have its own requirements
In your summary you'll introduce yourself. Even if you already have a relationship with your lender, it's a good idea to take a highly professional tone. You never know who might read the document. Tell the reader who you are, why you're qualified to run the business, what your company does, the amount you need to borrow, and a brief synopsis of how you'll repay the loan. The executive summary is a good place to include your unique value proposition, a brief, and a one or two sentence summary of what truly makes your company special.
As you get further into your business plan, you'll want to expand on what your business does. Again, assume the reader knows nothing about what your business does, even if you already know the lender. It presents an air of professionalism. Expand on your unique value proposition. Go into detail about your product and service. Give proof about why it's the strongest on the market and how sales of it will repay the loan. Back this up with details about annual sales and you’re past profits. Talk about the strength of your workforce, including the number of employees. Share the biographies of each key member of your management team.
You'll need to include a competitive analysis. Any lender's going to want to know what risks you face as well. A strengths, weaknesses, opportunities and threats (SWOT) analysis will help your case for a loan. Discuss your customers and suppliers, attaching any relevant contracts.
Finally, give a detailed account about why you need the loan and what you will accomplish with the money.
A thorough accounting of your business financials must accompany your business plan and loan application You'll need to show balance sheets, income statements and reconciliations for the past three years. Discuss your short-term debt and accounts receivable. Include copies of your lease, any franchise agreements, purchase agreements, etc. Show projected earnings and expenses, and how the projected earnings will repay the loan.