If you want to get financing for your business from your bank or the U.S. Small Business Administration, you’ll need to know how to write a loan request letter. Your cover letter is one of the first things your lender sees when they review your loan application, which means it can have a major impact on their first impression of you and your business plan. Your bank’s underwriter will look for your business request letter when reviewing your application, and the SBA expects you to have one.
A well-written letter requesting a loan can make the difference between having your application approved and getting turned down. Here’s what you need to know about how to write a loan letter, including when you need one, what you will need before writing one, what format you should use and a template you can build on to write your own.
When You Need a Loan Request Letter
There are two main financing situations when loan request letters are called for:
- When you’re requesting a loan from a traditional bank lender and you want to demonstrate that your business is growing and financially viable
- When you’re applying for loan from the SBA, which recommends that you begin your loan proposal with a cover letter or executive summary
If either of these situations apply to you, you should know how to write a loan letter.
There are also situations when you do not necessarily need a loan letter:
- You’re requesting a term loan online from an alternative lender, who may only require recent bank statements and tax returns
- You’re seeking equipment financing, in which case the equipment itself will serve as collateral
- You’re requesting a business line of credit, which may only require recent financial statements or business bank statements
In these situations, a loan request letter may not be necessary. However, even if you’re pursuing these types of financing options, you may also want to seek bank or SBA loans that do require loan request letters.
Prerequisites for Writing Loan Request Letters
While a loan request letter is essential for bank and SBA loans, it won’t be enough unless it’s supported by a sound credit situation and solid financial planning. For your request for loan consideration to be persuasive to lenders, you should do two 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 will need for your loan package
Your personal and business credit scores and business financial statements will help lenders assess whether you are a good financial risk, and will lend objective 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
To make your loan application persuasive, you should prepare these statements with projections for your first three to five years of operation. You can find templates for these business financial statements on sites such as SCORE, or an accountant can help you prepare them. Preparing these statements before you write your loan request letter will provide you with some key information you need to write your letter and make it persuasive.
Bank Loan Request Template: Download
Loan Request Format
When you write your loan request letter, you’ll need to include several key elements that lenders will be looking for:
Header and Greeting:
The very top of your letter should include:
- 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 Loan Request
Start by briefly stating the purpose of your letter and the amount you’re asking to borrow.
Basic Information about Your Business
- Your company’s legal name
- Your company’s legal structure (sole proprietorship, partnership, LLC, S-corporation, etc.)
- A brief description of what your business does
- How many years you’ve been in business
- How many workers you employ
- Your annual revenue and profit
Explanation of the Purpose of Your Loan
Tell your lender what you plan to use their loan for. 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 will use, how much each will cost, and what outcome in terms of new customers or increased revenue you hope to gain.
Summary of Your Ability to Repay Your Loan
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
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 can find loan request letter templates online, which will make it easier for you to write your letter. Below is a sample template you can build on.
Sample Loan Request Letter Template
[YOUR BUSINESS NAME]
[YOUR BUSINESS ADDRESS]
[YOUR CITY], [YOUR STATE] [YOUR ZIP CODE]
[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 PURPOSE OF 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 $[NUMBER], with a net profit of $[NUMBER]. [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 REASON FOR 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.
Very truly yours,
[YOUR NAME PRINTED]
Enclosures: Business plan, profit and loss statement, balance statement, cash flow statement [LIST ANY OTHER DOCUMENTS INCLUDED]
Mastering the Loan Request Letter Format
A loan request letter is essential if you’re applying for a loan from a traditional lender or the Small Business Administration. To add weight to your request, lay a solid foundation by optimizing your personal and business credit score and preparing 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 easier.