Business Loan Letter

By: EconomyWatch Content   Date: 23 December 2009

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A comprehensive and well-written business loan letter indicates a borrower’s seriousness about the business, thereby instilling confidence in the lender to grant the loan. Consequently, a business loan letter significantly increases the chances of obtaining a loan approval.

Writing a Business Loan Letter

 

A business loan letter provides an overview of the business, including its goals, objectives and future plans. Important points that must be covered in a business loan letter are:

 

Description of the Business

This includes basic information, such as:

  • Name and location of the organization

  • Date of incorporation and brief history

  • Product or service provided

  • Competition

  • Customers and suppliers

  • Nature or type of the organization

 

A business owner (borrower) must not assume that the lender is familiar with its industry and nature of business. Hence, a business must be described in a simple, yet comprehensive manner.

 

Management Profiles

A well defined and structured management profile establishes a good impression to the lenders, illustrating the professional capability and effectiveness of the business. A management profile can cover the following information about the principals:

  • Experience.

  • Education background.

  • Qualifications and skills.

  • Track record of achievements in a related field.

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Future Business Projections

 

A business owner must be able to provide a projection of business operations for at least a year after making the loan request. The estimates must cover earnings and expenditures. The projections must be presented in a profit and loss format. To deliver a strong impact, the assumptions used on the projection report must be supported with relevant facts, figures and documents.

 

Loan Purpose and Payment Plan

Most business loan lenders are interested in knowing the intended purpose of the loan to judge the borrower’s scope of business expansion, which is necessary to ascertain their repayment capacity. Hence, a borrower must present a detailed, favorable plan of loan amount utilization. The borrowers must specify their repayment plans on the business loan letter to convince them of a low risk factor. Repayment plans must also be stated in the segment pertaining to future projections in the business loan letter.

 

Finally, a borrower must draft a cover letter to provide the prospective lender with a brief overview. This cover letter must be simple and concise, yet appealing enough to persuade the lender to review the business loan letter.

 


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