How to Write a Business Letter for Loans
Loans and financial funding are very important for businesses, especially for start-up and small-scale firms to allow these to compete against other major industries and rival companies.
Meanwhile, to have a chance to get a loan, business owners should be able to write a comprehensive letter of proposal to entities that provide funding and capital.
Loans are important for any industry, especially for smalls-scale and start-up companies which are trying to boost production and expand operation. However, these funding may not be easy to obtain especially due to recession and competition among other firms.
While getting loans may be challenging, companies can improve their chances to convince banks, venture capitalists, and entities that provide funding by sending a business proposal letter which should include important entries such as:
Cover letter
Just like in a resume, business letter asking for loans should also include a cover letter which introduces a company, the amount of loan requested, and the purpose for this funding.
The introduction in the letter of proposal
The letter of proposal should be comprehensive and clear so there will be no unanswered questions left to readers.
To make this possible, a short but complete introduction should be the starting point of the letter. In this first paragraph, it should include the business name, address, names of the owners (it is advisable to include their Social Security numbers), the amount of the loans requested and its business purpose, and the plans on how it will be used.
The body of the letter
After writing a brief introduction, the succeeding paragraphs should include all the details of the company such as its business structure (e.g. partnership, corporation, and sole proprietorship), its economic viability and profitability, and important aspects of the business.
Furthermore, the body should include other rival companies, complete market information, and the target-market of the company.
The last part of the letter’s body should include the following: management profiles that will include the educational background, qualifications, and achievements of the company owners and their key employees; financial statement and income statements of the owners; details of all the assets that serve as collateral; and the last three years of the company’s operation;
Proofread the letter
Proofread the letter several times to make sure there is no error or vague statement.
Submit the letter
Submit the letter to the loan provider. Company owners should also keep a copy for themselves.
In case that the company owners did not receive any reply for their proposals, they may call the loan provider and ask them if they receive the letter.
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@soya, you are somehow true but it is not impossible though. I don't know what kind of business you are planning to start but try approaching NABARD, depending on department govt distributes some loan directly from the ministry. Some states has its own financing division. Talk to the same trade people to find what are the options.
Raghunath Natarajan
Startup Biz Hub - Advisor (Staff)