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How to Prepare an Effective Loan Proposal

How to Prepare an Effective Loan Proposal

Banks and other lenders have extensive experience evaluating existing companies to determine if they're good candidates for commercial loans.

Ideal candidates for business loans:

Regardless of your company's history, when seeking a loan, the goal is to present the best possible business case in the form of a loan proposal. A well-designed, well-written proposal shows bankers and other lenders that your business is a sound investment that generates solid, stable returns. Transparency is a given.

When preparing a loan proposal, gather information to answer the following questions:

Those are the five questions all lenders ask, and if you don't have solid answers, pull together the information required to provide answers before writing the proposal.

When you're done collating the facts and figures, include the following key elements in your loan proposal:

Be prepared to provide profit and loss statements, balance sheets, and other financial history documentation.

You can also use personal possessions for collateral, as well. Collateral reduces lender risk and increases chances for loan approval.

Commercial lenders, like your current bank, want to understand your business so they can lend with confidence. These lenders will assume some risk, but a well-developed loan proposal helps them clearly understand the risks they face and improves your chances for loan approval.

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