How to Write A Professional Loan Application Letter For Your Business
If you are starting your business and you need financial support for it to grow, you need to know how to write a loan application letter. Such a letter is required if you want to obtain business funding from a bank or SBA or Small Business Administration.
A well-written, professional, convincing loan request letter can determine whether your application will be approved or turned down. You can look for and use a loan application letter sample available on the internet. However, make sure it has all aspects needed to have your loan application approved.
Key Points to Mention in Your Loan Application Letter
Address to the Right Authority
Addressing to the right authority is essential. Because it is the initial point of a conversation, especially in a formal way. So, you surely want to start it right. This is why you should know to whom you will send your loan request letter and address it to them.
Reason or Mention What You Need the Money For
Money is a precious thing. This is why you have to mention the reason why you are asking for some amount of money. Asking for money without mentioning the reason will lead to a sense of uncertainty. The lender needs to know about what you need the money for so that they can decide whether your needs are reasonable or not. They need to make sure that their money is used for good.
The legality of the matter is essential as well because the lender does not want their money to be used for illegal matters, such as drugs. So, you have to convince the lender that you will use their money in a lawful manner.
Specify the Amount of the Loan
Once you have mentioned the reason why you need the loan, you also need to quote a specific amount of the loan in your loan request letter. This will help the lender to decide whether you have the borrowing capacity or not. It means that whether your income will be enough to recover the repayment or not.
Show Positive Things About Yourself
Convince the lender that you are a trustworthy person by stating positive attributes about yourself. This is like a guarantee you use to ask for the loan. Your positive work history and good behaviors are what you can offer to the lender to guarantee and make sure that the money you borrowed will be repaid on time.
State How You Will Repay the Loan
Stating how you will repay the loan in your loan request letter will depict your intention to return the money. This is so important because it will give the lender the full picture of the loan cycle.
Be Honest and Always Provide the Right Information
Lending money is risky. This is why it is important for you to be honest and factual about the situation itself in order to make sure that you have a positive credit history and also honor the entire process with respect. If you are not honest and provide wrong information, it will be considered as fraud and it may lead to bad consequences.
Besides starting your request properly, you should also end your letter properly as well. The end of your request letter should include a paragraph that includes your financial statements attached in the letter and a concluding paragraph that asks the lender to review your application. Show your anticipation to speak with them soon. Do not forget to add your signature. Give a list of attachments, including your financial statements and all supporting documents required to complete your loan request letter.
When You Need A Loan Application Letter
There are 2 primary financing situations where a loan request letter is required, which are:
- When you are asking for a loan from a bank lender and you want to show that your business is developing and financially worth it.
- When you are requesting a loan from SBA or Small Business Administration that suggests you to start your loan proposal with an executive summary or cover letter.
If one of those 2 financing situations happens to you, you need to know how to properly write a loan request letter. On the other hand, there are also situations where it is not necessary for you to write a loan request letter. Those situations are:
- You are applying for a term loan online from an alternative lender. Some of them only require the latest bank statements.
- You are looking for equipment financing. In this case, the equipment itself will be used as the collateral.
- You are asking for a business line of credit. This probably only needs the latest business bank statements or financial statements.
Loan Application letter
How to Master the Loan Application Letter Format
A loan application request letter is specifically crucial if you are applying for a loan from the Small Business Administration or banks. You can add value to your request by maximizing your personal credit scores, business credit scores, and also business financial statements. Follow the right and proper format when you are writing your loan request letter. From the header and greeting, a summary of your loan application, basic information about your growing business, the purpose of your loan or an explanation of what you need the money for, a summary of how you will repay the loan, a specific amount of the loan, and so on.
Do not forget to include appropriate and proper concluding elements. You can opt for using a template to help you to write your loan request letter. Such a template is available a lot on the internet. Once again, you have to make sure that you include the key points though you are using a template.
That is the information related to writing a loan request letter. Make sure you write the letter properly so that you have a big chance to get it approved. So, are you ready to write your loan application letter?