Obtaining a line of credit for a business is more complex than opening a personal line of credit. Lenders need to see that your business will perform well financially before they will offer you a line of credit. To show this, you must prepare a proposal to offer to the bank outlining your business’s assets, potential income and place in the market. As you prepare this document, remember that your lender has less optimism about your business than you do. So be professional, thorough and honest to make the best possible showing in terms of your financial stability and your business's potential.
Gather the general information about your business and include it in a “General Information” page. This will include the business's name, the names and Social Security numbers of the owners and the business's address. It also includes the purpose for your line of credit and the amount of money you wish to have available.
Prepare a “Business Details” section describing your business’s history, type, ownership structure, assets and number of employees. Include a “Management Profile” page with a short biographical sketch of each leader in the business, including education, experience and other skills or accomplishments that make them ideal for their roles.
Compile the “Market Information,” which will define your product or service, profile your target customers with details about their need for your product or service, and identify your competitors, including details about how you will compete with them in your target market.
Collect financial information, including financial statements and balance sheets for the past three years, personal financial statements on the business’s owners and any information about collateral you will put up if you chose a secured line of credit. If you are opening a business, create projected balance sheets and income statements for the next three years.
Compile this information in a typewritten document to give to your lender.
Read the proposal thoroughly, checking for typographical, grammatical or spelling errors.
If you are writing a proposal for a start-up business, keep your projections reasonable. Banks see multiple proposals from start-ups each year, and they want to see that you have realistic expectations for your business’s early years.
Plan early when looking for a line of credit from your bank. Business financing can take a while to secure, and you do not want to be left without access to money. Be totally honest in your proposal. Your lender can access your personal credit history and your business credit history, so trying to hide financial problems can lead to a denial of your line of credit.