You’ll need to know how to write a loan request letter if you want to acquire company finance from your bank or the Small Business Administration (SBA).
When assessing your application, your bank’s underwriter will check for your business loan request letter. The Small Business Administration (SBA) expects you to have one as well.
A well-written loan request letter might mean the difference between your application being granted and being denied. Use our sample bank loan request letters as templates for your small business loan request letters.
Sample 1 - Bank Loan Request Letter For Small Business
City, State, Zip Code
Name of Loan Office
Name of Bank
Address of Bank
City, State, Zip Code
Re: Business loan request for [$40,000]
Dear [Name of Loan Office],
The aim of this letter is to request a small business loan of [$40,000] to improve and upgrade my restaurant. My business is registered and approved by the health department. I have been in business for the past five years and have shown a profit each year.
One of the reasons my restaurant is so successful is because it is the only restaurant in the area of a five mile radius that serves authentic Indian food. We purchase fresh produce daily and prepare several dishes that represent the cuisine of both North and South India.
To meet the growing demand for our specialty, I need to expand the kitchen, add some new stove tops and refrigerators as well as expand the dining area. The shop next door has agreed to sell me their premises for expansion at a fair market price.
There are several other different ethnic restaurants in the area that are also prospering, and I believe that the market for India cuisine is growing. My restaurant is crowded every night especially on the weekends. I have already invested most of my profits in the restaurant and require the loan to expand in order to meet demand.
Please see the attached business plan that outlines my financial projection for the next five years and clearly states my assets to date. If you have any questions, I can be reached at [555-123-4567] or at [email@example.com]. Thank you for your attention to my loan application.
List of Enclosures (Business Plan)
Sample 2 - Bank Loan Request Letter For Small Business
August 6, 2021
Huntington National Bank
90 Syndicated Lane
New Albany, Ohio 43058
Attn: Commercial Loan Department
Johnson Construction is a very successful company that is well established in the construction industry. We began operation in June of 2010, as a small construction company that helped local business and homeowners with their renovation needs.
We have a website that sells our services and also have many channels through which we gain new business. Last year, our annual sales amount was $2,894,892. The first year of business, we brought home a profitable $978,000.
We have maintained a steady balance over the past 14 years, due to the fact that we have provided our customers with a service they need. Our business, and ones of its nature, are in high demand. Due to the large customer demand from our central division, we have decided to open a second branch.
The loan we are requesting is for the opening of this second division. Startup costs can be excessive, and while the other business is profitable, we still find ourselves in need. We anticipate strong sales for our new division in Waverly, Ohio. In fact, after doing much outreach to this area, we have seen that the need in this region is great.
We have immediate opportunities available that will allow us to capitalize this untapped market. However, we cannot transport our equipment from our New Albany location on a daily basis. The loan of $100,000 will give us the ability to buy the equipment we need.
I have attached the contracts we have in the Waverly area, all pending we have the equipment ready and can do the job. It makes sense to have both location running, and we can ensure that the new business will be a success.
Please take a moment and review this request letter. If you feel that you can help our company in our latest endeavor, we would love to hear from you.
Some things to consider before applying for a small business loan are:
- The small business needs to have made a profit for the last three years to qualify for an U.S. Small Business Administration (SBA) or small business bank loan. The credit history of the business also needs to be good. Most banks require the owner of the business to personally guarantee the loan, but if the business has enough collateral to cover the principal of the loan, the lender will most likely not require a lien on the owner’s home.
- The small business owner should clearly express why they need the loan. It’s important for the borrower to tell the loan officer about future prospects, if their industry is experiencing growth or if they are planning to join with a successful partner in the near future. They need to make their case to the loan officer. This will give him or her a better picture of the risk of giving the loan as well as an idea of the determination and enthusiasm of the borrower.
- Even though it may take longer to get the loan because of bureaucratic paperwork, it’s worth looking into getting help from the SBA. They offer a program where 80 percent of the loan is guaranteed by the government, which will make a bank much more likely to give a loan. It is also recommended to ask for a loan from a small community bank rather than one of the huge national bank.
- If the business owner doesn’t have the required three years of profit or enough collateral to cover the amount of the loan, they may not be considered for a business loan by any bank or the SBA.In this case it may be advisable to find alternative financing. Factoring and asset-based lending are two ways to get money, but the interest rates on these types of financing is much higher than on a regular business loan.
The SBA offers five steps for getting a small business loan:
- When selecting a lending institution, the borrower should look at the criteria of the institution for making a loan. There are different standards, but most banks require that the loan be for sound business purposes and not for gambling or speculating. The business owner and the partners must be of good character with good credit history and be personally invested in the business, and the business must show the ability to repay the loan.
- The information that most lenders require is business and personal credit history and financial statements as well as a good business plan, at least one year of cash flow projections and the personal guarantee from the owner and partners.
- Borrowers should be well prepared before submitting a loan application. They should select the best lending institution, choose a bank that already knows them, consider community banks and credit unions, talk to a lending officer before starting the process, and make sure they bring everything the lenders require.
- Borrowers should have a good idea of how large the loan needs to be to be beneficial for them and also within the lending limits of the lending institution. Loans can range from $5,000 to $250,000.The SBA loans range from micro loans of $5,000 to the largest guaranteed loan of $5 million. The average loan is about $371,000.
- Start-ups have the most difficulty getting funding because most lenders want to see a history of profits, which is why many start-ups look for funding from family members and friends. However, if the owner’s credit is good, and he or she has a good business plan as well as personal resources and collateral, there are community banks and credit unions may consider giving a loan.