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SBA Startup Basics - Part 2
Information for Buyers
SBA STARTUP BASICS - PART 2
What lenders want to see in a loan proposal
After you've written your business plan, if you're seeking funding from a bank or other lender, a well-crafted loan proposal is your next step.
A loan proposal must answer:
- Who are you?
- How much money do you need?
- How are you going to repay the loan?
- What happens if you can't repay it?
The SBA advises that a loan proposal contain:
A summary. This should be clear, concise, accurate and inviting. Summarize how the loan will be used and repaid.
Top management profiles. You will need resumes, a summary of experience, and the qualifications and credentials for owners and key members of management.
Business description. Include a brief overview of the history and a summary of current activities. Demonstrate that you understand your field. It is also helpful to include letters from suppliers, customers and other business references.
Projections. Include projected income and cash-flow statements for two to three years. Your assumptions should be clearly stated and realistic.
Financial statements. Include business and personal financial statements. Make sure you understand the "story" that your financial statements tell.
Purpose of the loan. Present a detailed statement of how you will use the loan proceeds. Include proceeds of the loan in your cash-flow projections (and the interest in the projected income statement).
Amount. When determining the amount, ask, "How much money do I need, and how much will they lend?" and not, "Will they lend it?"
Repayment plans. In the first package, you will propose the terms you want, but ultimately this will be a point that will be negotiated with the bank.
This information is from www.sba.gov. Read more about loan proposals and other finance topics at www.sba.gov/starting_business.
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