How to develop a winning proposal to a lender

Advice from our co-founder and senior underwriter, Eric Inspektor.

There comes a time in the life of many small businesses when growth is inevitable. Maybe you’re looking to add new equipment, build a new facility or even acquire a competitor. As a business owner, you’re ready to proceed, but first you need to be able to fund that growth.

To borrow money, you need to find the lender who’s right for your needs. The next step is to develop a plan or proposal to present to that lender. The proposal has to explain why you need the loan, how you’re going to use it, and more.

At CORFinancial, we specialize in structuring loans appropriate to a wide and diverse variety of small and mid-sized businesses, so we’re on the receiving end of pleas and pitches on a daily basis. We love to play a vital role in helping them grow.

To help you present your business in the best possible light to us (or a traditional lending firm, like a bank), I’m pleased to provide the below guidance points.

At the core of your proposal is a solid business plan that provides your potential lender with a detailed overview of your business. This is especially important if this is the first time you’ve asked to borrow money or if it’s the first time you’ve approached a particular lender.

Your proposal should look and read like a professional document. Remember, you want to make a strong first impression. Keep the language relatively straightforward and free from too much industry jargon. The most important thing is that your proposal sufficiently shows how well your business is doing and makes a strong case for the needed money.

Tailor it to your needs. Some things to consider including are:

Executive summary

As the title implies, this is where you summarize the proposal and get the potential lender interested. It will include a brief overview of your situation, your position in the marketplace, your value proposition (what makes your company unique or distinct), the amount of financing you’re requesting, what you’re planning to use the financing for and ability to service the debt and repay the loan (security, hi-lites of the business projections). This will provide your potential lender with your proposal in a nutshell.

Concise business description

Talk about the history of your business, what you do, how you do it, how your business has grown to date, whom your customers or clients are, and what your relevant future plans are. Incorporate success stories that substantiate your experience and track record.

Introduction of your management team

Provide brief professional biographies of the key executives at your company. Describe their backgrounds, professional experience and specific skills and abilities of each member. Include your background and experience as well.

Financial data

This is your opportunity to show the financial success your business has experienced to date. You’ll want to include all relevant financial statements along with what you’re projecting over the next few years. While it’s important to show that your company is doing well financially and poised for continued growth, you’ll also want to be realistic and practical regarding your projections and expectations.

Marketing strategy

Let your lender know what you’re planning to do to continue your company’s growth. Include a statement about its position in the marketplace, your audiences or customers, specific goals and objectives (“Increase sales of Product A by 10 percent by this date”) and the tactics you’re planning to use to achieve them. Be thorough, and specifically quantify as many of your goals as possible.

Capabilities

Make it clear that your business is capable of meeting stated objectives and reaching its goals. Show that your operations are agile. You have the facility, equipment and people resources. If needed, you can supplement your current capabilities.

Supporting documents

This is a bit of a catch-all section, but it’s important nonetheless and can go a long way in helping you make a case for financing. Has your business been featured in the media? Include printed clips or links to online content. Have your customers provided you with glowing testimonials? Add those here as well. Third-party comments like positive customer comments are often referred to as “social proof,” and they can be highly effective as a persuasive tool, which is why many savvy companies leverage them. Also, include any business projections, customer contracts and other documents that can help you “sell” your company’s viability to your lender.

Once you’ve compiled all this information, format it into a clean, neat, easy-to-read document. Incorporate photos, graphs and other graphics and refer to them to support your points. Add a cover or title page with your company’s logo. Good luck!