A business proposal is a written document that is sent to the banks and NBFCs, providing them the details of the functioning of the business. Business Proposal depicts the ways by which the entrepreneur likes to enhance the services of their products for the customers. Business loan proposal is a proposal made by a particular business to avail a loan from financial institutions for business expansion purposes.
Business owners are supposed to mention the function of the business with the time period of the business and the annual turnover if required. The proof of business-related documents and documents of identification of the CEO and identification documents of the person under whose name the loan will be sanctioned is required.
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Elements to include in a Business Proposal
To include all the information to represent the business properly takes a lot of effort. Thus you have to make sure to include the facts and figures accurately while finalising the proposal to present to the bank or NBFC. Also, you should form a business proposal sample and analyse the requirements and format that is provided by the banks before submitting the final document.
Some of the basic requirements for forming a business proposal are mentioned below:
- Basic information of the business: The opening sentence of the proposal shall be your name, identity in the business and the amount required. The other basic information are- Business name, Business entity structure, time in business, current annual revenue, and current number of employees. This will also include information about the business owner and their financial backgrounds and at times information of the employees
- Description of business model: Narrate what your business does, how it serves the customer base, market, growth of business and competition
- Purpose of business loan: The bank would want to understand the detailed reason for availing the loan and the purpose for which the loan amount shall be used
- Proof of your loan repayment capability: The numbers are to be clear for how you will be using it and how will you accumulate the fund to repay. The product or the service’s ability too is to be described in the document. Methods to earn profit can also be listed there
- Existing debt information: Any debts yet to be paid will also be analysed. The information of the debt will be covered too with the reason of the previous loan, the amount and the repayment time. The lender’s first understanding is to believe that the borrower is capable to repay the amount
- Other documents for the Business Proposal Loan:
- Business Plan
- Balance Sheet
- Profit and Loss Statement
- Cash Flow Statement
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Financial Forecasting / Projections
The debt of the business and the risk assessment of the business are also performed to understand the success rate of the business. The business proposal format is supposed to be as per the bank’s requirements and should follow the defined guidelines. Generally, business proposal formats are provided by the banks and NBFCs to ensure that they do not miss important points to analyse the business.
Why banks ask for Business Proposals?
For any type of loan, borrower needs to provide the bank a reason for the loan requirement and the amount that you wish to avail should be valid for the purpose of availing the loan. The banks this way analyse the business and also suggest from their end the amount and the types of loan that a business should instead opt for. Business is supposed to be either debt-free or a start-up to avail the business loan. As if the business is in debt then the bank will doubt for approving the loan application and a start-up would rather be hoped to be successful gradually and will be expected to pay the loan in the given time period.
Documents are required to verify the business’s identity in the government registration in order to not be fooled by any fake company. They also ask for the product details, the type of market being targeted or the type of market is analysed by a start-up, as per the products or services. The background of team members is also required at times and the previous financial documents of the business.
The financial documents are supposed to be of at least 3 years to understand the profits and losses incurred by the business and to examine the time periods of overcoming the loss. This helps them understand the potential in the business and the future of the business for repaying the loan amount within the given time period.
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Conclusion
For any lender it is important to get a clear image of the purpose of the purpose to be fulfilled by the borrower. If the lender is convinced with your ideas of the use of the amount will be done accordingly in with the purpose of reaching to the goal then it will be easy for them to lend the loan amount. The borrower is to but make sure to provide the correct documents to the lender and the communication of any kind should be clear and easy to understand to not let any issue occur in in the future while the repayment. Thus, business proposal is to be clear and easy to be understood by the lender.