If a lack of funds is stressing you out, then it can be difficult to write a calm and professional loan application letter. However, if you come across as desperate, you can hurt your chances of getting the money you need.If you are starting a business, have unpaid medical bills, want to pay for college, or need a loan for any other reason, loan application letter templates give you a good place to start. Study the example below and determine how much of it applies to your current situation. After you’ve started your letter, double check some of the common mistakes and key takeaways included in this guide.
Loan Application Letter Template
Below, Steven Kehtel has written a loan application letter to relocate and grow his small business. He has stated exactly how much money he needs and what the money is for. He also mentions the kind of materials he is including in this letter as part of this particular bank’s loan process. If you are preparing multiple applications, make sure you read the requirements carefully.
I am writing this application for a small business loan I would like to take out with the Seventh Street Bank and Trust. I have been a customer at this bank for the last seven years and believe the wonderful service you have provided thus far would greatly benefit the growth of my business.
In order to hire more staff and make initial payments on a new location, I require a loan of $10,000 from your bank. In addition to staff and rent, this money would also cover marketing expenses associated with relocating my business, such as fliers with our new address. Once this money has gone toward development of my business, I project the resulting growth will more than cover the repayment plan. Attached, I am sending last year’s financial records for my business, all licensing information, and the address for the proposed move.
You can reach me via email at [email protected] or via phone at (555) 555-1100 if you have any questions. I hope we can pursue this business relationship together for the growth of my business. Thank you for your time.
How to Write a Loan Application Letter
When you write a loan application letter, the goal is outlining what you need and why you need it in a professional way. This letter should also be short and specific as opposed to long and generic. Focus on the reader, a loan officer, who works hard to ensure his or her bank doesn’t hand out bad loans. A professional letter that does not ramble sets you up as a reliable loan candidate.
Open your letter addressing the recipient. It is usually easy to find out who is in charge of loans at the bank you are applying. In your first paragraph, focus on introducing who you are and how you know about this bank. If you are a current customer, include that information. You do not need to mention specific numbers until the next paragraph.
In the second paragraph, state specifically how much money you need. If you do not know, provide an estimate and a reason for why you cannot give an exact amount. For example, if you need a home loan, maybe the sale is still under negotiation. After stating how much money you need, state what the money is for. If you need a loan to cover multiple costs, list up to three of them. In the loan application letter template provided, Steven mentions the money will cover staff, rent, and marketing for his small business.
Your closing should reiterate what your letter hopes to accomplish and thank the reader for his or her time. At a large bank, a loan officer may read multiple such letters in a day, so keep this portion brief and acknowledge that his or her time is valuable.
What to Avoid in Your Loan Application Letter
Writing a letter to request aid needs to sound professional, otherwise you risk sounding desperate or untrustworthy. Avoid using word like “need” and “want,” instead using “require.” Also, do not focus on how the lack of funds is making you or your business suffer, as financial decisions by banks use facts about your credit history and a level of trust for new borrowers.
For a school loan, focus on what a higher education will allow you to contribute to your community instead of the difficulties you are facing without a college education. For a business loan, include
at least a generic projection of your future business gains as a way to show you can pay back the loan.
Whatever reason you have for needing a loan, focus on what good you will do and how you will be able to make payments. Use facts and predictions instead of wishes and needs.
How to Follow Up After Sending Your Loan Application Letter
Most banks require five to seven business days to process a loan, so if you have heard nothing in that time frame, a follow-up is permissible. Like your original letter, a follow-up should not sound needy or demanding. Keep in mind that you are offering a gentle reminder that you await the bank’s decision on the loan.
Some information to include is the date you sent your previous letter, since this can help a loan officer find your documents if they got lost, and a request to know if there is anything the bank still needs from you in order to process the loan.
You can also call to inquire, which allows you to more accurately find out what other documents you may need to send or where your loan is in the evaluation process. Whether you call or send a letter, make your willingness to provide further documents known.
Top 5 Loan Application Letter Writing Takeaways
1. Be professional
A loan application is serious business to a bank and entails some risk. By keeping your letter professional, you come across as more trustworthy and a better investment.
2. Learn the loan officer’s name
You want to address your application letter to a person, not a bank or team within the bank. This personal touch can make your letter stand out.
3. Include plans for the money
Don’t just ask for money; include what you will do with it. This could be as simple as saying it will help you pay for school or as complex as identifying three expenses the loan will cover within your business.
4. Request an exact amount
Help your potential lender by stating how much money you need. This means he or she will need to do less digging to determine your needs and can go right to evaluating your ability to pay back such a loan.
5. Refer to your means of repayment
On the subject of paying back your loan, include some clue about how you plan to do this. For business loans, this could be referencing the expected growth potential after receiving the loan. For school loans, this could be describing how a higher-paying job, made possible with a college degree, will let you pay back the loan.