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HOW TO WRITE BUSINESS LOAN REQUEST LETTER

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Posted on
Feb 14, 2019
Business Loan Request Letter

Are you looking for a business loan in India? Well, your first step in this journey should be preparing a business loan request letter.

What is a Business Loan Request Letter?

A business loan request letter is essentially a proposal or a request to a bank to fund your business. This request letter is reviewed with your application by the bank underwriter.

The business loan request letter usually covers details about you and your business, including your experience, funding requirement, the purpose for raising funds, and your ability to repay the loan. It also contains your financial statements and future projections.

Therefore, the fate of your business rests with the business loan request letter: It may be the reason your funding is rejected or sanctioned. It is a communication medium through which the bank understands you, your business, and your requirements. Therefore, it is vital to prepare a well-framed request letter before applying for a small business loan.
However, most people find it difficult to pen the perfect letter. Here’s a simple guide that will assist you in preparing an effective business loan request letter.

However, most people find it difficult to pen the perfect letter. Here’s a simple guide that will assist you in preparing an effective business loan request letter.

Requirements to Get a Business Loan

Earlier, getting a loan used to be a cumbersome process. One had to carry documents from one bank to another from pillar to post to get a loan sanctioned. Fortunately, loans can now be secured online. Though the criteria for getting an MSME business loan may vary depending on the lender, you will have to meet these basic parameters to qualify for a business loan.

  • Business loan request letter
  • Sound financial statements
  • The creditworthiness of the applicant; that is, good CIBIL score
  • Ability to repay the loan

Therefore, a good unsecured business loan request letter alone will not suffice in securing your loan. It is a means to emphasize your creditworthiness and financials, the basic parameters for a loan to be sanctioned. Further, online applications have made the process more convenient. FlexiLoans’ business loans and government schemes for small businesses have benefited innumerable people in this regard.

Elements of a Business Loan Request Letter

Elements of a business loan request letter include the following.

  • Introduction
  1. The letter starts with the basic details of the applicant.
  • Name of the applicant
  • Company/trade name
  • Designation of the applicant in the company
  • Business/company address

2. Date

3. Details of the bank to which the loan application is to be made

4. The subject of the letter, for example, “Business Loan Request,” wherein the loan amount may or may not be mentioned, although it is advisable to do so

5. Greetings to the bank officer (“Dear Sir/Ma’am,” “Respected Sir/Ma’am,” may be used)

  • Body

Drafting a business loan request letter should cover the following.

  1. Introduce your business. It may include the sector in which your company/business operates, your experience in this field, the number of employees hired, and the names of cities/states/countries where your company/firm operates.
  2. A brief overview of the revenues and financials of your company through which the lender gets operations and profitability insights. Also, future projections should be provided so that the lender can see the impact the funding may create on your business. Will it lead to an increase in the number of customers or the gamut of your products or services offered?
  3. If you are expanding to a new business area, previous financial data for that business area will not be available. In that case, future projections may be provided in brief to show the potential of your proposed business.
  4. Details of the amount that you are looking for and the end-use of the funds raised. The purpose and your strategy to use the funds should be mentioned.
  5. Showcase your ability to repay the loan. It increases your creditworthiness in the eyes of the lender. Excerpts from the financial statements and future projections may be taken, including your existing loans, business profitability, CIBIL, and cash flow projections.
  • Conclusion

Conclude your letter with the following.

  1. A paragraph that refers to the financial statements you have attached
  2. An ending paragraph that requests the officer to review your details and revert
  3. Your signature
  4. A list of your enclosures, including the following.
    • Financial statements, comprising balance sheets, profit and loss statements, and cash-flow statements for the past and future projections
    • Project report containing the details of your business and your target customers or market, if needed

Sample Template for Business Loan Request Letter

Here’s a sample format of a business loan request letter.

[Applicant’s name]
[Company/trade name]
[Designation of the applicant in the company]
[Business/company address]
[Date of the letter]
[Bank Officer’s Name]
[Bank Officer’s Designation]
[Bank Name]
[Bank Address]

[Subject: Request Letter for Business Loan of (Amount)]
[Greetings: (“Dear Sir/Ma’am” or “Respected Sir/Ma’am”)]

[Body

Para 1: Introduction of you and your business (name, sector, experience, legal structure, number of employees hired, cities/states/countries of operation).
Para 2: Past performance of your business (total turnover/gross receipts, profitability, assets, other borrowing obligations).
Para 3: Amount to be borrowed, the purpose of borrowing, benefits if funds are sanctioned to the company, prospects of the company, and your ability to repay the funds borrowed.
Para 4: Refer to attached financial statements.
Para 5: Concluding paragraph asking the officer to review your details and revert.

[Your signature]
[Enclosures: A list of enclosures that includes financial statements, future projections, and a project report, if required]
The format above is a good example of a well-drafted business loan request letter.

Other Details Required for Business Loan

Apart from business loan request letters and financial statements, basic documentation is crucial for a business loan. FlexiLoans provides greater convenience with online application forms. After satisfying the eligibility criteria, one can upload the documents online, and if the documents are correct, the application will be approved in no time. Basic documentation for a business loan includes:

Personal KYCPAN Card and Aadhaar Card
Residential Address Proof (any one)Rent Agreement | Driving License | Voter’s ID | Ration Card | Passport
BankingLast six months’ current account bank statements
Business KYC (any one)GST Registration Certificate | Shops & Establishment Certificate | Business PAN Card

By following the proper format, you can significantly improve your chances of getting a loan sanctioned. Having a well-drafted request letter backed by sound financials and strong credit scores will get you the funds that you require. To further simplify the process for securing business loans, FlexiLoans helps you apply online!

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