Top Things You Should Know While Writing a Business Loan Request Letter

A business loan request letter is a document a borrower submits to their lender as part of the loan-application process. This letter includes:

     A brief explanation of why the borrower seeks funding

     The planned use of funds

     Loan amount required (you can figure this out with the help of an online business loan EMI calculator)

business loan or a micro loan? Both these loan types have their own setof strengths and weaknesses. Here we have a detailed comparison of the two based on the keydifferences. Read through the comparison to arrive at a well-informed decision for your business.

● Amount of the loan

 This is where the most basic difference between these two loan types arises. You can acquire a microloan if you need funds up to Rs. 1 lakh. Whereas, the upper cap for business finance depends on yourlending institution. Most of them lend you credit up to Rs. 30 lakhs, while others up to Rs. 50 lakhs. Theamount sanctioned under both loan categories depends on factors such as your past credit score and repayment history.

Do I always need to write a loan request letter?

Typically, for smaller loans, you may or may not require one (depends on the moneylender you have approached). However, with business finance of a larger amount with a high business loan interest rate, you mostly need to write one.

 Things to include in a business loan request letter

With the basics aside, let us dive into certain things you must emphasize while writing a business loan request letter.

     Start with a header and greeting

The header carries necessary information like your name, business name, business contact details, contact details of your lender, and a subject line. Besides, like any other formal writing piece, you need to begin your letter with a greeting for a cordial start.

      A summary

Before jumping to the request letter’s main body, state the purpose of writing the letter. Also, provide a quick description of the loan terms you are looking for and for what reason. It should contain the loan amount you are requesting to give the reader a clear idea of what may follow.

     Pertinent information about your business 

Once you get past the summary, offer a concise yet relevant overview of your business through a few short sentences. This should necessarily include your business’s legal name, its legal structure, how long you have been in business, number of employees, annual revenue, and current profit.

     Purpose of the loan 

Here comes the real deal – the purpose of the loan. You have to tell your lender how precisely you intend to use the funds. For instance, instead of simply writing that you will employ the funds for working capital, elucidate how you will increase the inventory by 150% or increase the revenue.

     Some concluding elements 

Demonstrate how you plan to repay the debt. You can make use of your prior credit history or figures from your current income statement/balance sheet. The idea is to emphasize your business’ financial health.

To sum up

You may want to stick to a single page for your letter because the financial institution’s reviewer does not have a lot of time to read your letter. So, package the information briefly and make it easy-to-read. Whatever you write, make it straightforward and specific to promptly convey the ideas.

With all being said and done, our last piece of advice is to keep your request letter to-the-point. Put your point across and leave the rest up to the lender.