When submitting a business plan to a investor, it is important to include a business plan cover letter that is addressed to the person who will review the business plan. This is the applicant’s chance to have a personal word with the lender and prepare him or her for reading the business plan.
The feasibility of the business will be judged by the business plan. People starting a small business may spend hours preparing their business plan, but not give much thought to the cover letter. This is a mistake. The cover letter is an integral part of the plan.
Understand The Lender
If the applicant doesn’t know the name of the person who will read the business plan, they should call the investor to get the name. Even if the applicant knows the investor, they should still submit a formal business plan with cover letter. If they do not know the lender, they should remember that the lender will judge them by the content and tone of the letter.
The cover letter should be short, not more than one or, at the most, two pages. It should state right at the beginning that a business plan is attached, and that the applicant is applying for a business loan to start or develop a business.
It is important to state clearly the benefits for the investor. They need to believe there will be a good return on their investment, or that the loan will be repaid on time.
Some tips for the style of the letter are:
• Use a formal, conversational tone
• Do not use slang and contractions
• Do not make it too wordy
• Give a list of the main points with an explanation for each
• Use the active voice and short sentences
• Make the business sound interesting, so they want to read the plan
The cover letter should also state why the business is better than the competition. It can relate some marketing facts, focus group responses, demographic data or other key statistics from the business plan, but it should not be overloaded with these facts.
It can have just enough to present the business as viable and show that the applicant has done his or her market research. The rest of the statistics are in the plan.
There should also be a brief mention of the financial position without going into too much detail. The letter can mention how much has already been invested in the business, and what profits are projected for the next year or two. This will show the lender or investor that the business is worthwhile.
Here is an example of a business plan cover letter. It should be personalized for each investor to whom it is sent.
Sample Business Plan Cover Letter
297 Gold Street
Berkeley, CA, 94702
April 10, 2020
XYZ Lending Group
1200 Shelter Ave
Oakland, CA, 94609
Dear Ms. Brown,
I am submitting my business plan to you in the hope of receiving a start-up loan for $50,000. I learned about your history of funding recycling centers, and my proposal takes the business to the next level.
We will be a source for other businesses who want to use recycled products or use waste material to recycle into their own products. According to our research, consumers are looking for businesses that use environmentally friendly products.
I have $10,000 inheritance from my grandfather that I plan to invest in the business. As stated in the plan, we aim to make $5,000 profit the first year and reinvest in the business to widen our clientele. We will be the first company in the city to offer this service, so we hope to be well established before competing companies enter the industry.
My brother, Richard Jennings, and I are working together to make this business a success. We have worked for the last five years in ABC Recycle Group, where they manufacture plastic sheeting for construction companies from recycled plastic.
As stated in the plan, I will collect the waste material and my brother will manage the accounts. We plan to employ office help and waste collection help. We have contacted several recycling centers in the city who agree to sell us their recyclable waste. We have found a warehouse available to rent when we go forward with the business.
Thank you for your time and consideration in this matter. I hope you will review my business plan. If you have any questions or would like to discuss the plan, I can be reached at 555-123-4767 or at email@example.com. I would be happy to meet you at any time that is convenient for you.
Business Plan Enclosed