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Sample Loan Proposal
A loan proposal is very similar to a business plan -- or at least it should be. Among other similarities, both the business plan and the loan proposal tell you (and your banker) that you've figured out the answers to the five key borrowing questions: 1. How much do you need? 2. What will you do with it? 3. When will you pay it back? 4. How will you pay it back? (that is, where will the cash flow come from?) 5. What if something goes wrong? We've written a sample of the introductory portions of the proposal. The remainder of the proposal is presented in an outline format -- each section, if applicable to your company, should be included in a complete business plan or loan proposal.
Loan Proposal for Olympic Flooring Purpose of Loan
Olympic Flooring is seeking to: (a) Convert existing short-term notes of $165,000 to a long-term note to be repaid at $3,000 per month (plus interest). (b) Establish a credit line of $250,000 to finance expected seasonal fluctuations in inventory and accounts receivable.
Repayment on long-term financing will come from continuing net profits. Repayment of the seasonal credit line will come from liquidation of inventory and receivables.
Name: Address: Phone: Date Established: Form of Organization: Olympic Flooring 2610 - 32nd Avenue N.W. Seattle, Washington 98139 (206) 589-3700 February 14, 1995 Washington Corporation Incorporated by Bob and Andrea Nelson on June 25, 1995.
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Olympic Flooring is a Seattle-based corporation that wholesales flooring products to retailers and contractors out of a North Seattle warehouse location. The average customer is a small- or medium-sized retailer of carpets, linoleum, and window coverings; no one customer is key. Estimated sales for fiscal 2005: $1,430,000. Advertising expense has been low since most advertising is at the retail-level, co-op by manufacturer. The primary focus of the business is service and delivery -- and the ability to keep fast moving items in stock. Most accounts are carried on a 2% 10/Net 30 basis; few customers take discounts. Contractors are generally carried on a Net 10 basis. Distribution is from a central warehouse in North Seattle, which is connected to a small showroom and also contains the corporate offices. Lead-time on ordering for inventory is quite short and style changes generally occur once per year. The major supplier is Footloose Coatings. Footloose's terms are 2% 10/Net 30. Almost all the suppliers offer discounts, some even larger than 2% 10/Net 30. During 2004 there was one major price increase of about 5%. Olympic operates out of leased premises and holds a very favorable lease through 2006. Location is not critical, although current location does provide excellent access for delivery trucks. This is a distribution business and, therefore, depends upon efficient routing and/or shipping. Bad debts have recently taken an alarming upturn.
Operational Information Product
This section includes narrative discussion of the following points: (a) Description of the business performed as indicated by the Standard Industrial Classification code, including the principal products sold or services rendered. (b) General development of the products and/or services during the past five years or since inception. (c) Relative importance of each principal product or service to the volume of the business and the profits. (d) Significant changes in types of product or services. (e) A tentative five-year plan of the objectives and goals of the company, including anticipated revenues and earnings....
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