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Small Business Loan

Small Business Loan Guide Step 3: How to Apply for Small Business Loans

    If a stranger came up to you, asked you to give him or her $1,000 and promised to pay you back by the end of the month, wouldn't you want to know as much about that person as possible before lending your money. Banks and other lenders feel the exact same way. In order to answer all of their questions, you have to create a loan proposal that reassures them that you can pay back the small business loan. Below is a general list of what should be included in your small business loan proposal. However, you should contact each prospective lender ahead of time to learn if they require any additional information (United States Small Business Administration).

Cover Letter and Executive Summary: The first page of your small business loan proposal should be a brief business letter explaining who you are, your background, your business, how much money you want to borrow, how the money will be used and how you will repay the loan (United States Small Business Administration). Keep the explanations short and concise. If they need more details, they can look over the rest of your small business loan proposal.

Business Description:
The lender will want to know everything about your business before giving you a small business loan. Write out what your business does, what it sells, what services it offers and whom it sells to. Also, include information about your business's competition, history, location, suppliers and markets (The Federal Reserve Board). Don't assume the lender is familiar with your industry. You'll need to be thorough and write in a manner that is clear, easy to read and easy to understand.

Personal Profile of Stakeholders: Give the names of your company's principal stakeholders. Include their résumés, backgrounds and business experiences (The Federal Reserve Board). Also, include information about any high-level managers. It may help you demonstrate that the business is being run professionally and efficiently.

Proposed Small Business Loan Information:
Inform the lender of the type of small business loan you would like and how you intend to use the money (The Federal Reserve Board). Try to be as specific as possible. Lenders won't want to give you money unless there is a specific purpose for it.

Business Plan: Explain your corporate strategy for the next three to five years. Include information about your prospected earnings, profits, expenses, debt schedules, cash flows and any expected changes (United States Small Business Administration). Explain what they mean and how they will relate to the small business loan.

Repayment Plan: Briefly state how you will repay the small business loan. Detail where the money will come from and when you expect to have it (United States Small Business Administration). Your financial projections and business plan must support your proposed repayment plan.

Collateral: Specify what you will use to secure the payment of the small business loan if your payment plan falls through. Collateral can consist of business and personal assets such as inventory, equipment, accounts receivable, real estate, stocks, bonds and other items (The Federal Reserve Board).

Financial Documentation:
You need to bring copies of both personal and business financial documents. Business financial statements for the last three to five years are necessary as well as an up-to-date report (The Federal Reserve Board). Necessary documents include balance sheets, profit-and-loss statements, income sheets and tax returns.

Supporting Documents: In addition to all your financial documents, bring copies of supporting documents such as leases, articles of incorporation, partnership agreement, reference letters, contracts, letters of intent and licenses (United States Small Business Administration).

    Although it may seem like a lot of work, if you make a professional small business loan proposal that includes all the necessary documents, a lender will be impressed, and you will have a much better chance of receiving a small business loan. If you do get turned down, don't despair. Just because one lender didn't give you a small business loan, doesn't mean that another won't. If your loan proposal is top-notch and you are persistent, chances are you'll find a lender willing to give you a small business loan.

The Rest of Our Small Business Loan Guide:


The Federal Reserve Board. "A Guide to Business Credit for Women, Minorities, and Small Business: The Credit Application Process." (accessed July 27, 2006).

United States Small Business Administration. "Applying for a Loan." (accessed July 27, 2006).