Applying for a Bank Loan — Part VII

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Applying for a Bank Loan — Part VII

Once you’ve decided which loan meets your needs and you’re ready to apply, you will have to gather the required documentation. Documentation is an important word in banking — the ability to produce it can maximize your borrowing ability. When applying for a small-business loan from a bank, you’ll need to provide both a business plan and a loan proposal. We’ll cover each of these next.

Business plan outline
Collect your research and data and prepare a solid business plan. Your business plan is the blueprint of your company. It lays out a strategic vision and is the basis for sound decision-making. It dictates how you allocate resources and how you measure the result. The plan is often broken down into two areas:

  • The business – usually includes:
    • Revenue model
    • Market opportunity
    • Target market
    • Product
    • Differentiating factors
    • Product development
    • Sales, marketing, and positioning
    • Competition
    • Key management
    • Board of advisors
    • Future growth opportunities
  • Financial data — usually includes:
    • Income statement; current and three-year projected
    • balance sheet
    • statement of cash flaws

Loan proposal
Your loan proposal should include:

  • Executive summary for loan proposal: what you are using the loan for and why
  • Personal background
  • Audit history
  • Corporate history
  • Summary of loan request
  • Cash flow discussion
  • Collateral discussion
  • Capital
  • Credit history
  • Character references
  • Sources of repayment
  • Financial statements
  • Projected statements
  • Projected banking needs
  • Long-term scenario
  • Concluding remarks about loan, company, and bank

Other documents
In addition to your business plan and your proposal, you should be prepared to submit the following as well:

  • Corporate history
  • Itemized summary of loan request – purpose of loan and use of funds
  • Collateral information

Continue to: Part VIII. Special assistance programs