What’s a loan proposal?

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A loan proposal is an official business document used to request money from another person or group. These proposals look a lot like a standard business plan, but often have more descriptive information and less general detail. While there are often multiple parts to a loan proposal, they generally fall into three areas. The narrative tells about the business and its history, the description describes the financial aspects of the application, and the documentation section contains information that supports the first two sections.

Using a loan proposal is a common way to secure capital for a new or existing business. A complete document will contain a lot of information and will take significant effort to put together. These documents should be tailored to the potential lender, but large amounts of information can simply be copied.

These documents consist of three basic parts; The first is the narrative section. The narrative in a loan proposal is used to describe the company’s history, owners, environment, and methodology. These sections are generally less formal than regular business documents, as they often contain information about personal options, goals, and dreams for the business. The second part of the narrative will discuss what the loan will bring to the business and the direction the borrower hopes to take in the future.

The second basic part of a loan proposal is the description. This section will break down the financial aspect of the loan. This will include information on the company’s current financial status, other confirmed investors, and the requested loan amount and rates. This section is often the most formal part of the document, as it deals directly with money.

The last section is for documentation. This section will contain business and tax records, proof of sales, and proof of income. Basically, this will support the hard facts raised in the first two areas.

Although the loan proposal is made up of only three parts, it will rarely remain as three sections. In general, these documents are broken down to provide a more complete and rich reading experience for the lender. The proposal will begin with several short sections that act as an introduction. These consist of a narrative cover letter, a descriptive financial summary, and photos or demographic information for the business location.

Most of the loan proposal will follow a similar pattern. Start with the first section of the narrative and then move on to the financial information. Following the printed numbers are documents, usually tax information, that support the above numbers. The narrative then continues with the goals and future of the business, followed by payback and ROI details and more supporting documentation.

Smart Asset.

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