Letter to a Bank About a Refused Loan

The question

How to approach this formal letter question

A formal letter goes to someone you do not know, such as a manager or a council. Use a polite, impersonal tone and cover every bullet point.

1. Open with "Dear Sir or Madam," and state your purpose in the first sentence.
2. Give one paragraph per bullet point with specific details.
3. Avoid contractions and slang; use polite requests (I would be grateful if...).
4. Close with "Yours faithfully," and your name.

How to plan this answer

Structure

1. Opening: 'Dear' and the loans manager's name, or 'Dear Sir or Madam', with a reference to your loan application.
2. Paragraph 2: describe your business history, including its five years of successful trading and its main customers.
3. Paragraph 3: explain the loan you applied for, its purpose and the date of the application, and note that no reason was given for refusal.
4. Paragraph 4: make three requests: specific reasons in writing, a meeting to review the decision, and a list of documents you should provide.
5. Closing: thank the manager for their time, and sign off 'Yours faithfully'.

Points to cover

• Business history: five years of trading, with recent accounts and a list of repeat clients that shows stability.
• Loan: the amount requested, the purpose such as new equipment or expansion, and the date you applied three weeks ago.
• Reasons: ask whether the refusal was based on documents, credit information or the sector, and request this in writing.
• Meeting: propose a meeting with the loans manager within the next two weeks to review the decision.
• Documents: ask which accounts, tax returns or cash flow forecasts the bank would like to see before reconsidering.

Useful vocabulary

• I am writing to ask for: I am writing to ask for the reasons behind the refusal of my loan application.
• I applied for a business loan on: I applied for a business loan on 4 May to fund new equipment.
• without providing any reason: The application was refused without providing any reason.
• I would be grateful if you could set out: I would be grateful if you could set out the specific reasons for the decision.
• a review of the decision: I would welcome a review of the decision in light of my business history.
• the supporting documents: Could you let me know which supporting documents you require?
• our trading history: Our business has a five-year trading history and a steady client base.
• I would welcome the opportunity to meet: I would welcome the opportunity to meet you within the next two weeks.
• the decision was reached: I would like to understand how the decision was reached.

Common mistakes

• Describing the business in general terms, such as 'we are successful', without factual detail.
• Asking why the loan was refused as a rhetorical complaint, rather than making a specific request for written reasons.
• Forgetting to request a meeting, which is one of the three required points.
• Offering to send documents without asking which ones the bank needs.
• Being emotional about the refusal rather than focusing on facts and next steps.

Examiner tip: Give the business facts first, then make three precise requests: written reasons, a meeting and a list of documents, so the manager can respond to each one.