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Loan Request

Do’s and Don’ts of Writing a Letter For A Loan Request

Are you looking to get financing for your small business? Then you should know how to write a letter for a loan request. 

Unlike direct funders that need you to submit a no-obligation application, almost all lenders, including SBA and banks, need you to draft and submit a convincing loan request letter. 

A well-crafted business loan request letter can make or break a deal for you. Since it’s the first thing your bank’s underwriter will look for when you submit an application, you must know the do’s and don’ts of writing a winning loan request letter that can help you meet the challenge. 

How to Write a Letter for a Loan Request?

There is no denying the fact that condensing your business down to a single page may seem like an impossible idea. However, it is also the fact that your loan request letter might be one of your only chances to convince your lender why they should acknowledge your request. 

Here’s what you need to know about the ins and outs of writing an effective business loan request letter. 

Business Loan Request Letter Explained

A loan request letter is a formal correspondence a borrower writes that includes evidence proving why your business is profitable investment risk.

Essentials of a Winning Business Loan Request Letter

As a general rule, a business loan request letter includes the following essentials: 

  • The amount of money you wish to borrow
  • Explanation of why your business should be funded
  • What will you do with those funds?
  • Explanation of how you would be able to repay the loan

Financing Situations When Business Loan Letters are Required

You don’t need a business loan request letter when you secure funding from same-day financing options. 

But you need to create one when you’re requesting a loan from a financial institution or SBA, and you want to prove that your business is expanding and financially stable. 

Similar to same-day funding, you don’t need to write or submit a loan request letter when:

  • you’re applying for a business loan from an alternative lender online
  • you’re applying for equipment financing, as in that case, the equipment will act as collateral against the loan money
  • you’re applying for business lines of credit

Do’s & Don’ts of Writing a Letter for a Loan Request

There are certain things you should pay attention to before you start writing a business loan request letter. 

Make sure you check your credit scores (both personal and business) and take appropriate steps to improve them. Also, you must have all your financial statements, including balance sheets, P&L statements, and cash flow statements handy. 

Your credit scores and P&L statements will help lenders monitor whether or not they should invest in your business project.

You must submit all your relevant credentials along with your loan application and cover letter. 

Business Loan Request Letter – Key Elements

Header

The header of your business loan request letter acts as a hook for the lender. The header is further divided into five segments: 

  • Name/contact information
  • Date
  • Your loan agent details, including name, title, and contact info
  • Subject line
  • A greeting

Summary

The summary section should briefly cover the purpose of your loan request letter. 

Here, you can talk about all the basic info about your company. This includes the legal name of your company, the legal structure of your business (sole proprietorship/partnership/LLC), a short introduction about your products or services, total years in business, how many employees you have, your annual revenue/income, etc.

Purpose of Your Business Loan

In this section, you can give an explanation of the purpose of your loan. Make sure you do not over exaggerate things in this section. Also, your tone and writing should be concise and relevant. Be specific about where you plan to use your funding. 

Explanation of How You Would be Able to Repay Your Loan

This section is the most critical part of the entire business loan request letter. Here, you can talk about your credit history. Don’t forget to shed light on key data from your P&L statements. In addition, also include repayment schedules of loans you already owe to build trust.

Footer

Last but not least, include a concluding para referring to your enclosed documentation and statements. 

Include a line or two asking the loan officer to review your business loan application. Also, express your anticipation that you look forward to talking with them soon. 

If you’re planning to apply for a loan via bank or SBA medium, you have to write a compelling business loan request letter. Make sure the information you include in your loan request letter should be accurate and updated. 

Take a hint from this guide and draft an impressive loan request letter to increase your chances of loan approval.

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