The striker penned a deal to 2013 yesterday.
Coyle told the Bolton website: "I have tremendous belief in Danny but it's fair to say that he needs to go and get some Championship experience.
"He was involved in our squad throughout pre-season and did ever so well but with the players that we have in front of him at the moment then it makes sense for him to go out on loan.
"He can now go out on an emergency loan, which covers the next three months, and I know that when he comes back then I will get a far better player.
"Danny did ever so well with Swindon in League One and he was a big part of their promotion push which saw them reach the play-off final.
"If he goes out and gets some games then he will come back and be ready to push into our first-team.
"There have been numerous clubs throughout the Championship that have been after him, so it is likely that he will go out on loan in the next week or so."