Loan Cover Letter

When applying for a loan, you as a candidate are required to develop a Business Plan and include several other documents. Amongst these essential documents, a loan cover letter plays a significant role in the process of a loan application. The cover letter for any loan is said to be the first step taken to convince the loan officer into forwarding your loan application to the loan sanctioning department. So, you need to make it impressive.

Writing a loan cover letter needs a professional approach with a personal touch, if you know what I mean. You need to be absolutely clear about how this loan would be of great help for you or your organization (in case of a business loan). Lenders are known for rejecting loans due to a poorly presented cover letter or if they find that its presentation seems as if it is being forwarded to various other institutions due to the lack of personal exhibit. To avoid this misunderstanding you may relate to certain previous discussions with the loan officer.

Check if there is anyone to introduce you to the bank; a reference can prove to be of great help here. Try to open a bank account with them first and then go about applying for a loan. The loan department will definitely consider going through the application in a favorable manner if you are their customer. Try to sound as if you are conversing with the reader though you need to keep it formal to an extent.

Many tend to be apprehensive in raising a loan request because they are not sure of the procedure and wonder if the loan would be granted. There is no need to be worried at all as the loan officer wants you to put forth a loan application. Be confident for it will definitely boost your chances of getting the loan. All you need to do is show that you can succeed with your plans and mention how you are planning to overcome your difficulties or weaknesses.

Now, below are certain questions that a loan officer has in his mind while dealing with a business loan request:

• How will you use the loan?
• When will the loan be paid and by what means?
• Can you ensure a reasonable profit and achieve your goals as stated in your loan application?
• Do you have sufficient assets to repay the loan in case you incur a loss?
• Is it a high-risk or a low-risk project and is the risk higher than what the bank can afford?
• How much will they benefit by taking this risk?
• Will your business go public?

Remember, bankers prefer low risk, low profit businesses to high risk projects. Having no accomplishments in your records may also be a limiting factor. Also it would be wise to look for a bank that specializes in offering loans to businesses similar to yours.

Below you are provided with a sample business loan cover letter:

Ms. Eliza Wild - Accounts Manager
McCoy Steel, Inc
412 S Main St
PO Box 321
Galena, Illinois 61036
Contact no: (815) 742-0406
October 7th 2011

To

Mr. Cedric Dillon
Chief Loan Officer
Elizabeth State Bank
400, South Main Street
Galena, IL, 61036-2231
Re: Loan request for $550,000

Dear Mr. Dillon,

I am writing to put forth an application on behalf of McCoy Steel, for a business loan of $550,000 in order to carry out the carefully planned project that would help us in expanding our business. We are a business established in August, 2009 and I have been working as an accounts manager since December, 2010. We have come up with a new target, details of which are provided in the memorandum of salient facts with all facts and figures you need to be aware of.

We are a growing company targeting companies in the electronics industry and providing them with alloys for manufacturing. We have just recovered our initial investment of $1.7m with a considerable amount of profit without any problems whatsoever. We are definitely oriented towards the company's growth in a couple of years for which it is essential that we proceed with the project designed by experts in our organization.

Our competitors include companies like Corey Steel, Binzel Industries, Arcelor Mittal, Chicago Heights Steel, Youngberg industries and Crawford Steels within Illinois. We are currently working with 23 clients, all of them being electronic goods manufacturers, in and around the state of Illinois and we strongly believe that we will go about making more clients within the next couple of years.

We, as a business, are investing $800,000 out of the total cost of the project which comes to $1.3m which we are hoping to recover within a span of 3 years. A loan of $550,000 is needed for us to start with the project and expand our business, which would increase the sales by $400,000 by the 12th month and thereafter increase the profit by $40,000 per month.

As discussed during our previous meet, we have attached our business plan explaining these facts and figures in detail. I have also attached our balance sheets for the past two years to give you a clear picture of our performance.

Thank you very much for your time and I appreciate your help in the process of applying for the loan.

Sincerely yours,

Eliza Wild

Also, you can refer to Effective Cover Letter and Factory Job Cove Letter for samples of letters.