The liquid fund is like the lifeline of a business. No business can survive many days without adequate fund. Most of the SMEs approach traditional lenders like banks for a loan for their business which is technically called a business loan.Blog: https://amritaagarwalblog.wordpress.com/2018/04/05/12-things-you-should-include-in-your-business-loan-application/
A business loan application is nothing but a marketing tool just like your brochures, pamphlets or ads. The application must be impressing enough to convince the lender to invest a huge amount in your business. One must understand what a lender is looking for in your application. A combination of facts and figure will provide security and stability which is needed to convince any lender to make a profit making deal with you. There are twelve items which are must for a complete business loan application. Each component of a business loan may differ in size or appearance according to the size of business, industry or the amount needed. Here are the items which you are to add to your business loan application. 1. Cover sheet– An ideal business loan application looks like a booklet with a cover. The first thing should be done first. A proper cover page should include the name of the applicant at the top. Then the name of your company and its address. Along with this, one must include the date and the business phone number too. 2. Cover letter– A cover letter is a personal business letter which an applicant has to send to the lender requesting consideration of the application for a line of credit or an installment loan. This letter must describe the kind of business, kind of ownership etc. The last part of this letter must have the content which makes a good impression on the banker by seeing your future plans for your business and the potentiality lies in it. 3. Table of Contents– A table of content is the third page of a business loan application. It is similar to a content page of a book. This is done just to make your lender see that all the documents are attached neatly. 4. The Amount and Use of The Loan– Here you have come to the main purpose of the application. In this section you are to mention how much of money you want to borrow and how are you going to utilize the money. Let’s say you are buying a new land for setting up a branch office. You must show the evidence of the property price, the registration charges or whatever your plan is. You have to show your own contribution (if any), and show the balance to be borrowed.
5. History and Description Of Your Business–In this section, you are to explain your business in a narrative way. Most of the business loan applicants get stuck in this section as this part of loan application must show the present scenario of your business and must enable the banker to believe that your you business will bring multiplied returns in days to come. Here one must describe the legal form of your business and the location too. One must conclude this with future plans of the business. 6. Management Team– Your management team is your strength. Lenders understand that without quality manpower no business can flourish. One must include the team, their capabilities and why they are chosen to work with you. If you have appointed any outside consultants such as a lawyer, accountant etc you must mention them and their roles and responsibilities in your business. 7. Market Information– This page of the application must begin with a description of the market for your product or service. Here you are to describe how you have targeted the market niche. This part should be ended with the future plan of your business according to the market demands. 8. Financial History– The history of your business is always demanded by the lender. A balance sheet of profit and loss statements is the strongest evidence to make a lender put faith in your business. In the case of startups, banks will compare the norms and decide the eligibility. 9. Financial Projections– This is all about the calculated data which will show how the new investment will generate sufficient profits to pay off the loan. This segment includes a projected income statement, balance sheet, and cash-flow statement. 10. Collateral– Business loans are secured loans. Hence one has to put collateral in order to get the loan. The collateral for a business loan can be cash reserves, stocks and bonds, equipment, home equity, inventory etc. Each collateral which one has listed must be described with the current market value and the total cost of it which will support your credit.