If you want to get business financing from your bank or the Small Business Administration (SBA), you’ll need to know how to write a loan request letter.
Indeed, your bank’s underwriter will look for your business loan request letter when reviewing your application. The SBA expects you to have one, too.
A well-written letter requesting a loan can make the difference between having your application approved and it getting turned down.
Here’s what you need to know about how to write a loan letter, including when you need one, what you’ll need before writing one, what format you should use, examples to review and a loan request letter template to write your own.
What Is a Business Loan Request Letter?
A business loan request letter is correspondence a borrower writes and submits to a bank as part of the loan-application process.
Business loan request letters include the following:
- Loan amount
- Planned use of funds
- Explanation of why you should be funded
- Details about how you plan to repay your loan
When You Need a Loan Request Letter
There are 2 main financing situations when loan request letters are called for:
- When you’re requesting a loan from a conventional bank lender and you want to demonstrate that your business is growing and financially viable
- When you’re applying for a loan from the SBA, which recommends you begin your loan proposal with a cover letter or executive summary
If either situation applies to you, you should know how to write a loan letter.
There are situations when you don’t necessarily need a loan letter, including:
- You’re requesting a term loan online from an alternative lender, who may only require recent bank statements
- You’re seeking equipment financing, in which case the equipment itself will serve as collateral
- You’re requesting a business line of credit, which only may require recent financial statements or business bank statements
Prerequisites for Writing Loan Request Letters
While a loan request letter may be needed for bank and SBA loans, it won’t be enough for approval unless it’s supported by a sound credit situation and solid financial planning. For your request to be persuasive to lenders, you should do 2 things before preparing your business request letter and loan application package:
- Check your personal and business credit scores and take any steps you can to improve them
- Prepare the business financial statements you’ll need for your loan package
Your personal and business credit scores and business financial statements will help lenders assess whether you’re a good financial risk and will lend weight to your loan request letter. Business financials should be submitted with your loan application along with your cover letter.
Essential financial statements you will need include:
- Profit-and-loss statement (also called an income statement)
- Balance statement
- Cash-flow statement
Business Loan Request Letter Format
When you write your loan request letter, it’s recommended to keep it to 1 page while including the following key elements:
Heading and Greeting
The very top of your letter for a loan application should include contact information, a subject line as a header and a greeting as follows:
- Your name and contact information
- The date of your letter
- The name, title and contact information of your loan agent
- A subject line stating that you’re writing about a loan and specifying the dollar amount you’re requesting
- A greeting
Summary of Your Small Business Loan Request Letter
Start by briefly stating the purpose of your letter and the amount you’re asking to borrow.
Basic Information About Your Business
This should include:
- Your company’s legal name
- Your company’s legal structure (sole proprietorship, partnership, limited liability company, S corporation, etc.)
- A brief description of what your business does
- How many years you’ve been in business
- How many people you employ
- Your annual revenue and profit
Explanation of the Purpose of Your Loan
Tell your lender how you plan to use the loan. Be as specific as possible, citing numbers to quantify your goals. For instance, instead of saying you plan to use the loan for advertising, specify what types of advertising you’ll use, how much each will cost and the percentage of new customers or increased revenue you hope to gain.
Summarize Your Ability to Repay the Loan
Touch on your credit history and highlight key data from your financial statements that reflect your ability to repay your loan, including:
- Summaries of recent profit-and-loss or balance statements demonstrating that your business is financially healthy and growing
- Schedules for repaying any other business debts you already owe
- Cash-flow projections that indicate when you’ll be able to budget repayments for your loan’s principal and interest
Concluding Elements
The end of your letter should include:
- A paragraph referring to your attached financial statements
- A concluding paragraph asking the loan officer to review your package and expressing your anticipation of speaking with them soon
- Your signature
- A list of enclosures, including your financial statements and any other documents that are required for your loan application. You may also need to provide your business partners’ financials, including for SBA-backed loans.
Don’t want to write a loan request letter? We’ve got you covered.
Loan Request Letter Templates and Samples
Here are loan request letter samples and templates you can use to create your own letter.
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Sample Request Letter for a Working Capital Loan to Support Expansion
Jack Smith
Owner
ABC Builders
123 Park Lane
Miami, FL 33145
Jan. 1, 2020
John Doe
Senior Loan Officer
XYZ Bank
987 Spring Road
Philadelphia, PA 19115
Re: Small business loan request for $100,000
To Mr. Doe,
ABC Builders is a successful business that is well established in the building and renovation industry. We began operation with 3 employees in January 2010 as a small company offering renovation services to local businesses and homeowners. We now have 20 employees. We advertise on our website, ABCBuilders.com, and market on social media channels as well as at home building expos.
Last year, our annual sales totaled $3.5 million. In the first year of business, we earned a net profit of $1 million. Additionally, we have maintained a steady balance in the past 10 years.
Because of increasing interest from prospective clients in neighboring cities, we have decided to open a second location. The loan we are requesting is for this additional location, which we anticipate will increase revenue by $300,000 in the first quarter following opening.
Startup costs can be costly, and we require funding to purchase supplies and equipment. However, we anticipate strong sales for the new branch and have immediate work opportunities, which will contribute to our loan repayments.
The loan of $100,000 we are requesting will provide us with the funding we need to help successfully open our second location. I have attached the contracts we have in the new location, pending equipment availability and ability to complete the project as well as our business plan with a breakdown of costs and detailed market analysis.
Thank you for reviewing this letter and the accompanying financial documents. I look forward to hearing from you at your convenience.
Sincerely,
Jack Smith [signature]
Jack Smith
ABC Builders
Enclosures: Business plan, profit-and-loss statement, balance statement, cash-flow statement
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Sample Loan Request Letter to Fund the Salary of a New Hire
Jane Doe
Chief Executive Officer
ABC, Inc.
123 Park Lane
Miami, FL 33145
Jan. 1, 2020
John Smith
Senior Loan Officer
XYZ Bank
987 Spring Road
Philadelphia, PA 19115
Re: Small business loan request for $100,000
Dear Mr. Smith:
I am writing this letter to request a small business loan in the amount of $100,000 for the purpose of hiring additional staff.
My business, ABC, Inc., is a growing company that serves clients in the food-service industry. You can follow our success online at www.ABCInc.com.
ABC, a corporation, began operation in January 2016 with 5 workers and 1 location. We have grown consistently in the past 4 years. We now employ 15 workers and have expanded to 2 locations.
Last year, our annual sales revenue was $2.8 million and we generated a net profit of $975,000. We have maintained our cash flow consistently over the past 2 years and have generated a net profit each year we’ve been in business.
To promote our continued growth, we plan to hire a full-time manager this year to oversee our business operations. We are requesting working capital funding to continue our expansion efforts and cover the cost of the new manager’s salary and benefits. In addition, in an effort to retain top talent, we plan to offer an enticing relocation package and signing bonus. This new hire will streamline operations and lead to efficiencies totaling $150,000.
We would like to pursue this endeavor in the second quarter of 2020, but this venture will require more funding than our current cash flow can sustain. Although we lack a lump sum large enough to cover this additional expense, our budget can allow for monthly payments over time given sufficient financing.
A loan in the amount of $100,000 will enable us to acquire the right talent to facilitate our expansion. Our projections, which are enclosed, indicate that increased efficiency and sales will generate enough increased revenue to repay this loan by 2023.
Attached, please find our business plan and our most recent financial statements for your review. Based on these strong financials and our business credit score of 90, we are confident that you will find us a safe credit risk.
Thank you for reviewing this request letter and the accompanying financial documents. I look forward to hearing from you at your convenience.
Sincerely,
Jane Doe [signature]
Jane Doe, Chief Executive
Enclosures: Business plan, profit-and-loss statement, balance statement, cash-flow statement
Additionally, you can use the following example to create your own term loan request letter format.
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Loan Request Letter Template
[Your name]
[Your title]
[Your business name]
[Your business address]
[Your city], [Your state] [Your ZIP code]
[Date]
[Loan officer’s name]
[Loan officer’s title]
[Loan officer’s company]
[Loan officer’s address]
[Loan officer’s city], [Loan officer’s state] [Loan officer’s ZIP code]
Re: Small business loan request for $[amount]
Dear [loan officer’s name]:
I am writing this letter to request a small business loan in the amount of $[amount] for the purpose of [summarize the purpose of the loan here]. My business, [your business name], is a growing company that serves clients in the [type of business] industry. You can see our success online at [list your website and any social media profiles you want to showcase].
[Your business name], a [business legal structure], began operation in [date you began operation] with [number] workers [if applicable], and has grown consistently over the past [number] years. We now employ [number] workers [if applicable].
Last year, our annual sales revenue was $[amount], with a net profit of $[amount]. [If you are not profitable, you can omit mention of net profit here.] We have maintained our cash flow consistently over the past [number] years, and have generated an annual net profit each year we’ve been in business [if applicable].
[Explain the reason for the loan request here. For example: To promote our continued growth, we plan to hire a full-time administrative assistant and a sales representative this year. We are requesting funding to cover the cost of their salaries and benefits. (Substitute appropriate language applicable to your business plan.)]
We would like to pursue this next quarter [specify time frame], but this will require more funding than our current cash flow can sustain. Although we lack a lump sum large enough to cover this additional expense, our budget can easily cover monthly payments over time given sufficient financing. A loan in the amount of $[amount] will enable us to cover labor costs for our two new employees. Our projections indicate that increased efficiency and sales will generate enough increased revenue to repay this amount by [date].
Attached, please find our business plan and our most recent financial statements for your review. Based on these strong financials and our business credit score of [score], we are confident that you will find us a safe credit risk.
Thank you for reviewing this request letter and the accompanying financial documents. I look forward to hearing from you at your convenience.
Sincerely,
[Your signature]
[Your name printed]
Enclosures: Business plan, profit-and-loss statement, balance statement, cash-flow statement [list other documents included.]
You also can find loan request letter templates and sample letters online.
Here are a few websites offering examples of business loan application letters you can refer to when writing your own loan request letter:
- If you’re wondering how to write a letter to a bank manager for a loan, check out RequestLetters.com.
- LiveCareer offers a loan application sample letter as well.
- Refer to these loan request samples, too.
Mastering the Loan Request Letter Format
A loan request letter is essential if you’re applying for a loan from a conventional lender or the SBA. Add weight to your request by optimizing your personal and business credit scores and including your business financial statements.
Follow the proper format when writing your letter, including a header and greeting, a summary of your request, basic information about your business, an explanation of the purpose of your loan, a summary of your ability to repay your loan and, finally, appropriate concluding elements. Use a template to make writing your loan request letter a little easier.
