20 Best Loan Application Letter Samples (Guide and Format)

A loan application letter is a formal letter written to a financial institution by a borrower requesting a loan, payable in a specified amount of time.

The letter helps lenders get acquainted with the borrowers better to determine if they qualify for the loan based on the information provided or not. Writing an exceptional loan application letter is important because it helps convince lending institutions to lend you a specific amount of money. It is their first impression of you, which is why it should be written with great care. In this article, we will guide you on how to write the loan application letter, the type of information you should provide, and some pointers that will help you highlight your strengths in the letter.

Brief Overview- What to Include

There are no strict rules for writing an application for a loan. It depends on the borrower to decide what information to include, but the following items are typically included in an application letter:

•  Contact information
• Explanation of why money is needed
•  Amount of money being requested
• Purpose of the money
• Details about employment history
• Personal references
• Company information
•  A list of supporting documents

When to Write?

Two main situations warrant a loan application letter. The first instance is when you are seeking a loan from a conventional bank lender. Conventional bank lenders are financial institutions that do not offer loans but make them available to the general public. Conventional banks usually require applicants to submit a loan application to prove their creditworthiness.

The second situation that warrants the use of a loan application letter is when applying for an SBA-guaranteed loan. An SBA-guaranteed loan involves the federal government; applicants must undergo additional screening before they are approved for funding. Applicants can improve their chances of getting an SBA guarantee by submitting a personalized, formal loan application with supporting documentation.

Tip: There are situations when you do not necessarily need to write a loan application letter, such as when you are borrowing from friends and family, from an alternative lender who may only require your bank statements or pay slips, when seeking equipment financing, and lastly when you are requesting a business line of credit.

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Applying for a loan involves being prepared for anything, so it is important to have the things you need before writing. Do some research on your lender, and write down notes about why they are suitable for you and what you would like them to know about your project. Write those questions that may arise during the process of applying for your loan. Check your credit score and know your rights as a borrower when you apply for a loan.

After you have done all of the above, review everything and ensure that what you’ve written is easy to understand by someone who has not read your notes or audited your finances. When applying for a loan in a major financial institution or applying for an SBA loan, you will almost always be required to write a loan application letter. It is important to note that unless your loan application letter is supported by a sound credit situation or proper financial planning, it may not be enough to help you secure the loan. 

Fortunately, there are two things that you can do to increase your loan limit and increase your chances of getting a loan. You can first check your business and personal credit scores from accredited credit reporting bureaus such as TransUnion, Equifax, and Experian and take the necessary steps to improve them.

The second thing that you can do is to prepare your business financial statements, i.e., your profit and loss statement, cash-flow statement, balance statement, etc., for the past six months and attach them to your loan application letter. These documents are essential when applying for a loan as they help the financial institution assess your creditworthiness and increase your chances of securing a loan.

Writing a loan application letter can seem daunting, but it can be a simple process if you follow the proper format and include all the required information. The following is a summary of the information you must provide in your letter:

Header

The header is an integral part of the standard business letter format. It should include:

• Your name and contact information: Make sure to include your full name, address, and contact information. This should include a mailing address with a zip code, a business email address, and your cell phone number where you can be reached.
• The date: Include the month, day, and year of the loan application letter. You must ensure that you write the date on which the letter was created.
• The name of the recipient: This will be a bank representative in many cases, but it can also be an SBA representative or another financial institution to whom the borrower is addressing the letter.

Subject line

When writing the loan application letter, make sure to include a clear subject line that will help the recipient understand the purpose of the letter. Make sure to include whether the loan is for personal or professional use in the subject line.

For example:

“Loan Request Application Letter.”

Greetings

Address your letter correctly. If you do not know who will be reading it, write “To Whom It May Concern.” If you are trying to get a business loan, address it to the company’s representative issuing the loan. If you are applying for a personal loan, address it to the bank or whoever provides it.

Introduction

Your loan application letter should begin with a brief statement of the goal and amount you are requesting. It should also state your qualifications for the loan and any other pertinent information that can be used for your evaluation as a borrower such as your financial status, your work history, the length of time you have been in business, etc.

Body

The body of the loan application letter is the main part of the letter, and it should contain all the information the recipient will need to decide whether to grant the loan or deny the request. Some of the information that must be covered in the body includes:

1. Basic business information: If you are writing a business loan application letter, the first item to include in the body of the letter is details about your business. This information will help the lender understand who you are and will serve as the foundation for your loan application. Some of the information that you should cover in this section includes your business’s registered name, business type (i.e., partnership, sole proprietorship, LLC, etc.), nature of your business (i.e., what you do), main services and products, your business model, the number of employees that you have, and your annual generated revenue.
2. The purpose of the loan: You must explain why you need the loan and the purpose for which it is being requested. This can be to purchase or expand a business, for a personal reason, or to pay some debt.
3. Present yourself as being trustworthy: To get a loan, you need to establish trust with the lender. This can be achieved by explaining what you do for a living, providing some identity documents, and demonstrating why you deserve to be trusted.
4. Explain how you intend to pay back: Explain briefly how you plan on repaying the loan. This should include a timeline for repayment and be supported by evidence such as a business plan, personal financial statement, or credit report.
5. Proof of financial solvency: In some cases, you will be asked to provide evidence that the funds requested are not your only source of income. Documents like bank statements or tax returns can help you prove that you have other sources of funding, which will increase the likelihood that your request will be granted.

Conclusion

In the conclusion, you must thank the lender for considering your request. Briefly mention all the attached financial documents. Remember that each lender has their own set of loan application requirements and may request different information or documentation from borrowers, so make sure to double-check the specific instructions provided by the lender.

Sign off

Once you have finished writing the letter, be sure to sign it at the bottom. You may include phrases such as:

“Respectfully yours” or “Sincerely yours”.

Place your name and contact information directly above the signature line.

Following are some tips for writing a loan application letter:

Be specific

Be sure to include specific details in your loan application letter to keep the reader’s attention. Ensure that you include information about the purpose of the loan, how much money you need, and the reason why you are a good candidate for a loan.

Be concise

Brevity is essential when writing a loan application letter. Stick to the essential points and avoid extraneous details. This will help to ensure that your letter is easy to read and that the reader is not distracted by irrelevant information.

Address the appropriate person

Ensure that you address your letter to the most relevant party for your particular situation. For example, consider contacting the bank to find out to whom the letter should be addressed. This is how you can be sure that your letter will get to the right person.

Use a proper format and layout

As with all letters, you should use clear, concise paragraphs and avoid unnecessary jargon. Make sure to use the appropriate format for formal letter writing and use a professional, polished layout.

Include business financial statements

The financial statements for your company must be attached to your loan application letter if you are a business owner. In this way, the reader will better understand your overall financial situation and help demonstrate that you are a good candidate for a loan.

Tip: The following are some of the purposes for which you may request a small business administration loan: to start a new business, to buy new equipment or inventory for your company, to upgrade or expand an existing business, to cover unanticipated expenditures, to pay off high-interest debt, to fund marketing campaigns, to move your office to a new location, to buy insurance for your business, to purchase stock, to buy out shareholders, and for any other lawful reason authorized by the lender.

Here are the key takeaways from this article:

• When writing an application for a loan, be sure to provide specific details about the purpose of the loan, how much money you need, and why you are a good candidate for a loan.
• Use the standard business letter format and use clear, concise paragraphs.
• Brevity is vital when writing such a letter, so mention only the essential points and avoid extraneous details.
• Address your letter to the most relevant party for your situation, and be sure to include your company’s financial statements.

About This Article

Authored by:

Simone Johnson

Small Business Financial Expert, Financial Product Analyst, Startup Specialist

Simone Johnson is a writer who has covered a range of financial topics for small businesses, including on how to obtain critical startup funding and best practices for processing payroll. Simone has researched and analyzed many products designed to help small businesses properly manage their finances, including accounting software and small business loans. In addition to her financial writing for business.com and Business News Daily, Simone has written previously on personal finance topics for HerMoney Media.