How to Write a Business Loan Request Letter That’ll Impress a Lender

Meredith Turits

Managing Editor at Fundera
Meredith is Fundera’s Managing Editor, overseeing editorial. Drawing on her own background in small business and startups, she writes on business, finance, and entrepreneurship. Meredith has contributed to publications including the New Republic, Rolling Stone, Vanity Fair, The Paris Review Daily, and more.

If you’ve ever considered applying for a small business loan at a bank, you might have thought about how to write a business loan request letter. If you haven’t had the pleasure of getting acquainted with the concept yet, a business loan request letter is essentially a letter that goes along with your application packet to a lender.

Okay, then—what’s in this document, exactly? The business loan request letter needs to contain as much information about your business’s history and financial status as you can fit onto one page. So, think part résumé, part cover letter in that sense.

It seems impossible to take something so personal and sprawling, and then condense it for a total stranger who’s never met you. Especially if the purpose of that document is to make a decision about your trustworthiness based on words you write on one page.

We understand the feeling—but that’s why knowing how to write a business loan request letter in an effective way is important. Because this letter might be your only opportunity to personally convey to your lender why they should approve your application.

We’ll make the steps for how to write a business loan request letter as simple as possible. Here’s what lenders want to see, what this letter is for, what to include, and the format to follow for best results.

business-loan-request-letter

When You Need a Business Loan Request Letter

You most likely to need to know how to write a business loan request letter for two specific types of loans. They’re usually required for when you apply for a traditional bank term loan or an SBA loan funded through a traditional bank.

Each of these lenders need similar information, and we’ll get to that in a bit. But first, let’s look at a few small differences between these two business loan request letter types.

How to Write a Business Loan Request Letter for a Traditional Bank Term Loan: An Overview

Traditional financial institutions—and by that we mean banks—are more likely to lend money to businesses that appear to be growing and could possibly turn into long-term customers.

Unfortunately, the good majority of small business owners find that traditional bank loan requirements are so strict that qualifying is difficult. But if your personal credit score is excellent, this might be an option you want to explore.

Before committing to such a long-term borrowing relationship, however, your bank lender will want to learn everything they can about you and your business in order to make sure you are a safe credit risk.

That’s why during the small business loan underwriting process, the bank’s underwriter will look to your business loan request letter as a direct appeal in your own words for the funding your business needs. This is your opportunity to tell the lender why you need the loan and show evidence that you’ll be able to repay the loan.

So, take the time to paint a great picture of what you envision for your business’s future, and how you plan to help it get there with the loan you’re requesting.

How to Write a Business Loan Request Letter for an SBA Loan: An Overview

The SBA loan application process is complicated as is. Then, when you look at how to write a business loan request letter for an SBA loan, there are even more requirements here when compared to traditional bank loans.

When you write a loan request letter for an SBA loan, be prepared to share financial details about yourself and any business partners, in addition to specific information about your business’s finances and credit history.

You’ll need to give details about any suppliers of upcoming purchases if you’ll be using any portion of the loan funds for asset purchasing. Likewise, if you have other business debts, your business loan request letter should include information on the debt holders.

SBA-backed lenders will need to know how much of your own money you have invested in the business. Your business loan request letter should also clearly indicate that your business does not lend money or speculate, nor does it involve passive investments, pyramid sales, or gambling of any sort.

With respect to describing your partners and management team, be sure to elaborate on the “good character” of these individuals within your business loan request letter. Also indicate whether or not you and your leadership team have previous management or industry experience that directly applies to your current business.

→Too Long; Didn’t Read (TL;DR): You’ll need a business loan request letter for two types of applications: a traditional term loan from a bank and an SBA loan. Their requirements are mostly similar but have a few small differences.

business-loan-request-letter

What to Include in Your Business Loan Request Letter

Again, the business loan request letter is a tool banks use to pre-judge you and your creditworthiness, often before they ever have a conversation with you directly. That’s exactly the reason why, when you figure out how to write your business loan request letter, you get it right. It’s so important to pay attention to what you say and how you say it.

Your letter should be short—ideally just one page—but full of pertinent information about your business. Let’s walk through the basic types of information every business loan request letter should include:

How to Write About Your Basic Business Information

The first sentence should express your request for the loan and the amount you want to borrow.

Next, use a few short and concise sentences to provide a basic overview of your business. In this section, be sure to include:

  • Business name
  • Business structure (S-corporation, partnership, LLC, etc.)
  • Brief description of what your business does
  • How long you’ve been in operation
  • Current number of employees
  • Current annual revenue

Once these business basics are covered, you’ll be ready to move on to the meat of your business loan request letter—describing the purpose of the business loan you’re requesting and how you plan to recuperate the investment.

How to Write About the Purpose of the Business Loan

With the business basics covered, you’re ready to explain clearly and succinctly exactly how you plan to use your business loan funds. And, of course, why this use of funds will be a wise business investment.

Be as specific as possible, showing the lender that you‘ve carefully considered what taking on this new debt will accomplish.

Remember, your lender’s number one priority when considering any loan application is to determine the likelihood that you will repay the loan on time and in full. A lender’s goal is always to minimize their risk! As such, be sure to mention exactly how you’ll generate the necessary additional income to cover the repayment of your requested business loan.

How to Write About Evidence That You’ll Be Able to Repay the Loan

Once you describe how you plan to use the loan funds requested, you’ll get to the part in your business loan request letter where you need to lay out your repayment proof. You want to highlight specific business financials to support your claim that funding your loan will be a low-risk decision for your lender.

Use figures from your most recent balance sheet or profit and loss statement as evidence to indicate the current financial health of your business.

From there, consider highlighting specific cash flow projections to show the lender how you plan to fit repayment of the requested principal and interest into your budget.

→TL;DR: You’ll need to include basic info about your business, what you’re planning on doing with the loan, and specific evidence on how you’re planning to repay the loan. Be specific and concise.

Use This Template to Write Your Business Loan Request Letter

Now that you know exactly how to write a business loan request letter, you’re ready to input information about your own business format that will match your lender’s expectations.

To simplify this process, think about following this business loan request letter template as a guide. Of course, you’ll need to edit and adapt this template to match the specifics of your business and the loan you intend to pursue.

Applicant’s Name
Applicant’s Address
City, State, Zip Code

[DATE]

Lender’s Name
Title
Lender’s Institution
Lender’s Institution Address
City, State, Zip Code

Re: Small business loan request for [AMOUNT]

Dear [LENDER’S NAME],

The aim of this letter is to request a small business loan in the amount of [NUMBER] for the purpose of [ADD PURPOSE OF LOAN HERE]. My business, [BUSINESS NAME], is a successful and well-established company, which is part of the [TYPE] industry.

[BUSINESS NAME] began operation in [DATE] with [NUMBER] employees, and has shown consistent growth over the past [NUMBER] years. The business now employs [NUMBER] individuals.

We have an established online presence, as you can see on our website [LIST WEBSITE], Facebook, Yelp, [LIST ANY OTHER SOCIAL MEDIA]. Through these methods, as well as [LIST ANY OTHER MARKETING AVENUES], we continue to make industry contacts and cultivate new business.

Last year, our annual sales revenue was [NUMBER] with a net profit of [NUMBER]. We have maintained a consistent cash flow over the past [NUMBER] years, and have operated with an annual net profit each year since opening.

[EXPLAIN REASON FOR LOAN REQUEST HERE]

We have completed preliminary market research in [LOCATION OR TYPE OF EXPANSION], and we have seen increased demand for [PRODUCT OR SERVICE YOUR BUSINESS PROVIDES]. Therefore, we are seeking funding to grow the business by [SUMMARIZE BUSINESS GROWTH PLAN].

This business growth opportunity is immediate but will require more funding up front than our cash flow can currently accommodate. Although making the monthly repayments with interest over time will fit easily into our budget, we do not currently have access to a lump sum large enough to make the initial purchase. This loan in the amount of [NUMBER] will enable us to purchase [WHAT YOU NEED] immediately so that we can begin to generate business for loan repayment immediately as well.

Attached, please find our business plan, our most recent cash flow statement, and our annual profit and loss statement for your review. Based on these strong financial documents and our equally strong credit score of [NUMBER], we feel that [YOUR BUSINESS NAME] will be a safe credit risk for your bank.

Please take a moment to review this request letter and the accompanying financial documents. If you feel that you can help our company, we would love to hear from you.

Sincerely,

Applicant’s Signature
Applicant’s Name Printed
List of Enclosures:

business plan, cash flow statement, and P&L statement

→TL;DR: This is a sample business loan request letter. It should help!

Business Loans That Don’t Require a Request Letter

Now that you know about how to write an impressive business loan request letter, you might find yourself wishing for a less-complex avenue for obtaining small business funding.

Fortunately, there are a number of business loan products that might work for you. And guess what? They don’t require a request letter—just a quick online business loan application.

Term Loans from Alternative Lenders

Term loans are the more traditional loan product most people are familiar with. And they’re available at places other than your local bank. Many alternative lenders in the online funding marketplace offer term loans with excellent repayment terms for small businesses. (And they’re often way easier to qualify for than bank loans.)

After approval from a lender, you’ll receive a lump sum of cash up front. Your lender will give you terms for a predetermined repayment scheduled for your loan amount, or principal, along with interest and fees at regular intervals.

With alternative lenders, most term loans have a repayment period of one to five years and are excellent choices for large expenditures. Term loans can come with either fixed or variable interest rates that are determined by several factors—size of the loan, credit history, repayment term, or purpose of the loan, just to name a few.

Small businesses and younger companies find term loans advantageous because they come with predictable payment amounts so they can be easily worked into the business’s ongoing cash flow.

When working with an online alternative lender, the application and approval process for most term loans can be completed in two to five business days.

Equipment Financing

Equipment financing is the perfect option if your funding need is for just such a purchase. Lenders can be comfortable with more risk in this type of loan. And that’s because the collateral is built right into the loan. (In short, if you default on the loan, the lender can repossess the equipment.)

The lender or vendor fronts you the cash to make the purchase, and you make the regular payments for the specified period of time. It’s usually determined based on the expected life of the equipment. With this type of financing, it is important to be sure your equipment will not be obsolete before the end of the loan.

These loans can also happen pretty quickly—in as few as a couple of days if you have everything in order!

→TL;DR: Not all small business loans to finance big purchases need loan request letters. Term loans through alternative lenders and equipment financing shouldn’t need them!

What to Know About How to Write a Business Loan Request Letter

The most important takeaway here—be precise and be concise. This is a major first impression that you might not be able to take back!

Otherwise, make sure you include:

  • Business name
  • Business structure (S-corporation, partnership, LLC, etc.)
  • Brief description of what your business does
  • How long you’ve been in operation
  • Current number of employees
  • Info on any partners, if applicable
  • Current annual revenue
  • The purpose of your loan
  • Any vendors you’ll be purchasing from if applicable
  • Evidence you’ll be able to repay the loan and principal, supported by historical financial figures and projections

And also remember that business request letters for bank loans and SBA loans are just a little different.

There are plenty of traditional term loans and other small business loan options that don’t require a business loan request letter, too—so don’t be discouraged if this sounds like a bit more than you have the energy for right now.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Meredith Turits

Managing Editor at Fundera
Meredith is Fundera’s Managing Editor, overseeing editorial. Drawing on her own background in small business and startups, she writes on business, finance, and entrepreneurship. Meredith has contributed to publications including the New Republic, Rolling Stone, Vanity Fair, The Paris Review Daily, and more.

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