By Richard L. Russakoff
Taking the time to prepare a well thought out and complete loan application package is central to establishing credibility with a bank and enhancing your chances of obtaining a loan.
What Is A Loan Package?
A loan package is a selling document. It is a "knock-your-socks-off" plan that expands on information found in a business plan to address the needs of a loan officer. To secure capital, your loan package must be designed to sell and inspire the stakeholders in the business. Stakeholders include the business owner, employees, and potential bankers and investors. The package should illustrate your need for capital by incorporating the following items:
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Outline exactly what you are going to do and how you will do it.
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Define your mission or niche in the marketplace. Identify the resources you will need and how you will access the capital to acquire them.
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Forecast where you will be in three to five years and the challenges you may face during that time.
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Demonstrate that you can track your money.
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Thoroughly define plans and strategies.
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Present a vision of what the business can accomplish if it is successful.
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Show how you are prepared to deal with adversity.
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Demonstrate that you can organize your ideas in writing.
Your loan package can serve many other important purposes. Vendors may offer better terms; investors may contribute capital and expertise; the plan may attract better employees; or it may spur other parties to form strategic partnerships with your company. Without a solid business plan and loan package, you could be limiting your company’s growth.
Providing A Complete Package
Most business owners don’t prepare a complete package for consideration. Often business owners will go to the bank and verbally present their cases. They also tend to bring in their most recent profit-and-loss data in a form that often does them more harm than good.
An incomplete package usually requires more legwork for the business owner after the initial meeting. Typically, after a business owner verbally presents the company’s case to the bank, the loan officer still needs additional information. This follow-up information is gathered, presented to the bank, and processed piece by piece. This impedes the owner’s momentum, and the impact of the first verbal appeal will fade over time. Loan officers agree that a complete, well-crafted package goes to the top of the pile.
The Key Components Of A Loan Package
First and foremost, make your package polished and professional. While substance is critical, an attractive presentation will get you the loan. Include graphs, charts and articles. Place your loan package in a three-ring binder with a plastic slip on the cover for your title page and use commercially-printed tabs.
Your loan package should contain the following components:
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Table of Contents
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Executive Summary Section
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Industry Section
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The Company Section
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Marketing Plan Section
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Management and Ownership Section
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The Financial Information/Projections Section
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The Purpose-of-the-Loan Section
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The Exhibits Section
Bankers are analytical by nature. The right loan package gives your loan officer something tangible to digest and pass on to the credit manager and other key decision makers. In most cases, the loan officer processes the applications and makes recommendations to the credit manager and/or loan committee. The loan package gives your loan officer the material to back up his or her recommendations. The more information you present to banks about your industry, the company, key management, and your marketing plan, the more likely they will work with you to make the numbers work for them.
© 1997 Inc. magazine
Small business writer Richard L. Russakoff is the author of Choosing The Best Bank For Your Business printed by the publishers of Inc. magazine. For additional information about assembling your loan package and details on the key components of a loan package, see the Visa U.S.A. and SCORE banking workbook series by Richard L. Russakoff available from SCORE.
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