Writing A Proposal For Small Business Loans |
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The SBA is responsible for making billions of dollars of small business loans available to small businesses, especially those that better their communities or support equalization of opportunity. As a small business owner, however, you do not apply directly to the SBA for money. The SBA makes these small business loans available by working with banks and other lending institutions or community-based government agencies that are still responsible for screening applicants and deciding if they qualify for the terms of specific types of SBA small business loans. There are certain guidelines to writing a proposal for any small business loans, particularly those which will be guaranteed by the SBA. The SBA has specific criteria in mind for companies that are deemed a reasonable risk. Begin your small business loans application with an executive summary. Briefly but clearly explain the nature of your business, the amount of small business loans you are requesting and the proposed use of the small business loans, how you will repay the small business loans, and how the funds will benefit your business and community. This document can contain bullet points or be formatted in such a way as to make the relevant information easily accessible. When you go into depth, include industry-specific details in your small business loans proposal. You cannot assume that a reader will be familiar with your specific industry, so help him or her understand how your business is run and what trends may affect performance and sales. Include resumes from each owner and key members of management. SBA requires financial statements from all principal owners (anyone who owns 20% or more of the business), and they must be recent statements (fewer than 90 days old). You also have to have copies of the past year's federal income tax returns for all these individuals. You must also offer financial statements from the business from at least the last three years. A current financial statement (also fewer than 90 days old) including balance sheets, statements of profits and losses, and a reconciliation of net worth must also be included in your small business loans proposal. You will need to present quality financial information from your accounting software, preferably signed off by your accountant or tax advisor. Lending institutions would also like to see a brief explanation of how you plan to use the funds, as well as how you plan to repay them. Also include a list of property and assets that are to be used as collateral. To get approval for your small business loans application, you must be able to meet the lending criteria set down. Some organizations are more risk averse than others, and will therefore have more stringent criteria. To vastly increase your chances of a successful funding application, you will need to present the following information along with the above said information: o The reason for the small business loans. The lender will be looking for something that fits within the normal range and expertise of your business. The amount may cover a number of items, so you will need to cover each. o The amount required, and the repayment term of the small business loans you want. (e.g. $10,000, term 5 years, payable quarterly). o Details of how you will repay the small business loans amount borrowed. For example, "From the increase in profits of reduced running costs of the Whizzbang Go4It" o Details of security you will be able to offer to the small business loans lender. This will act as reassurance for the lender. If you're not prepared to put up some aspect of security, then why should they? o Latest set of management accounts, from your accounting software. o Accounts receivables (debtors) and payables (creditors) aging reports. o Principal's financial statements, particularly if some form of security is necessary. If you are a new company, the emphasis is going to be on your business plan, and the security (also called collateral) you or your business can provide against the small business loans. You must take the time to practice presenting your case to the bank or lender to iron out any glitches. Practice on your colleagues and family (you never know, they might be so impressed, they'll invest or lend!). It may help to role-play the small business loans lender and come up with as many pointy questions as possible. The more time you take the better your chances will be. (But remember don't fall into the analysis paralysis trap!) |
