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how to write a business plan for a loan application

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Writing an effective business plan can improve your loan application’s chances of getting approved. Lenders have criteria by which they evaluate business loan apps, and a business plan can show them that your risk appetite fits their appetite.

A business plan is an opportunity for you to show the lender your professional experience and that you are a serious business operator. By highlighting your skills and planning to repay your loan within the framework of a business plan, you are justifying to the lender that they should consider your request to borrow money.

A business plan is comprehensive and has many components. Alternatively, a more streamlined business plan approach may work for some loan applications. We’ll cover both these types of business plans and the nuances of creating your business plan.

Why business plans are important

Think of a business plan as the foundation of your business; A path for structuring, operating and growing your business. It’s a way for you to think about the key elements of running your business. A good business plan highlights you, the leadership team, the business itself, market opportunities, revenue projections and funding requests.

Business plans are important because most lenders will require a business plan as part of the approval process. Once your business plan is complete, you can use it for a variety of business loan applications (though you may need to change and adjust it based on lender specifications). It can also guide you through the various stages of operating your business. For example, a business plan can help you outline how to start, manage, and grow your business.

A well-crafted business plan will improve your business loan application’s chances of getting approved.

components of a business plan

Generally speaking, a traditional, comprehensive business plan is what you should be planning to prepare for your business. However, the US Small Business Administration (SBA) suggests that an alternative, leaner startup version of a business plan may be applicable in some situations. Let’s review the components of both of these business plans:

traditional business plan

A traditional business plan is more thorough and more than most lenders are looking for because it provides a comprehensive view of your business needs. The components are as follows:

  • executive Summary: This high-level summary of each of the bullet points listed below will allow your reader to quickly understand your business and opportunity. The executive summary is essentially the “elevator pitch” of your business plan. Be sure to include a mission statement that summarizes why your business exists.
  • Company Description: Provide detailed information about your company. Why your company exists (you can build on the mission statement from the executive summary), what problem is it solving, what problem are you solving (ie, who are your customers), where will you be located ( If you plan on being a completely remote company, discuss it here), what competitive advantages do you have, and any other strengths that make you different.
  • market analysisShow the lender that you have done your market research by clearly describing market opportunities and providing competitive analysis. How much money do consumers currently spend on your product or service? Who are the current players in the space and why are they currently successful or what have they failed to adapt? How do you plan to take market share from them? What trends and themes are emerging in the space that put you in a unique position to capitalize on? In other words, who is the target market, and what is the opportunity to make money?
  • Organization and ManagementQ: Who is on your executive management team and how does the team uniquely set the company up for success? Discuss past successes, experiences, etc. If you plan to take your company public, has someone on the management team guided the previous company to the public? How will your company be structured? Will you organize as an LLC or an S corp, or maybe you will start as an LP but later transition to an S corp. Show an organizational chart and include resumes for everyone in it.
  • Service or Product Line: In this part of your business plan, discuss the specific products or services you will bring to market. What will you sell and how will it benefit your customers? If there is something unique or special about your offerings or intellectual property, do you plan to file for a patent or copyright? If you are in the research and development stage, give details of all plans and reports.
  • marketing and salesWhat will be your initial marketing plan and sales strategy? How do you plan to let your potential customers know you exist (ie, what marketing strategy and channels will you use?), what will you charge them, what is your pricing strategy, will you offer discounts And what are you planning? Retaining customers, up-selling customers, cross-selling customers, etc. This section should be included in your financial projections, discussed below.
  • funding request: Here you have to specify how much money you are asking. If your business loan application gets approved, how will you use the loan amount over the next few years? For example, what percentage will go towards employee salary, rent, utilities, equipment, operations, travel etc.? Think about all your expenses and how you will use the money.
  • financial projections: Supplement the Marketing, Sales and Funding Request sections with your financial forecasts. This is your opportunity to show the lender that you have a solid, well-thought-out Financial Planning And show how you’ll be able to pay off your loan. How will your marketing and sales strategy generate revenue, how will that revenue grow over time, etc.? For an existing business, you must include additional financial statements and financial information. This additional information may include capital expenditure budgets, credit history, credit scores, income statements, balance sheets and cash flow statements for the past three to five years. If you have other collateral you can put against the loan, such as real estateYou should include that information as well.

Lean Startup Business Plan

as described by sbaThe Lean Startup business plan offers a high-level overview of your business. It’s very quick to write, and only contains important information about your business. For some businesses, the Lean Startup plan can serve as a replacement for the traditional business plan. For example, if your business is relatively simple or you want to quickly craft a business plan (they’ll ask for more information as the process progresses), get the ball rolling with investors or lenders. Here are the important details to include in your lean startup business plan:

  • major partnershipWho are the people, businesses, strategic partners, contractors, subcontractors, suppliers, etc. that you will use to help run your business?
  • key activitiesQ: How will you operate the business that will make you different and effective? For example, are you going to do something in a certain way that isn’t currently competing with you or that you haven’t thought about? How will you disrupt your market?
  • key resources: Touch on the assets and resources you will need to help you build market share. Do you have intellectual property, cash reserves, employees, a management team, real estate, etc. that will create a competitive advantage?
  • value propositionWhat value are you bringing to your customers and how does it differ from what your competitors are currently doing?
  • customer relationsQ: How will you nurture relationships with your customers? Touch How you interact with your customers. For example, will customer contact be online, face-to-face, or both?
  • customer segmentsWhat is your ideal customer profile? Describe the personality of who will buy your product or service. How big is this pool of buyers?
  • ChannelWhat channels will you use to communicate with your customers and what strategy will you implement? What is your marketing strategy? For example, will you use social media and communicate via live chat? Or will you use a combination of channels and strategy?
  • cost structure: Describe what costs you will incur to operate your business (i.e. how will you use the capital obtained?) and describe ways in which you can maximize the impact of those dollars.
  • revenue branches: The most important component of this version of the business plan. How will your company make money? How long will it take for your company to make money? Are you planning to open additional revenue sources as you go?

If Writing a Business Plan Specific to Yousba loanIn this article, the SBA has examples and templates for both types of business plans that you can review. Visit the SBA’s Web Page How to write your business plan To download and review examples of a traditional business plan and a lean startup business plan.

nuances of a business plan

Your business plan can be used as the foundation for your loan applications. However, there are many different lenders and many different Small Business Loan Types, This means that you will be filling out many different types of applications with different requirements. Although a business plan template is a good place to start, your business plan is not one-size-fits-all.

The specifics of a business plan accompany the loan application and should be massaged into the lender’s search to fit it. For example, your business plan for someone SBA 7(a) loan funded by a online lender will be different from Term loan Funded by a traditional financial institution such as a bank.

business loan consultant

Business Loan Advisor is a fee-based service that can help a small business owner prepare business plan for a loan application. The loan advisor can also identify the right loan product based on your situation. They can streamline the entire loan process by gathering the right documents, preparing applications, submitting paperwork, and working directly with the lender on any follow-up questions.

For entrepreneurs whose most precious resource is time, or first-time borrowers who are overwhelmed with the application process, a business loan advisor may be well worth the investment. For more information, read our article on How To Find Business Loan Consultants Near Me.

to start

Once you have a business plan, and you are ready to proceed to receive capital for your business, you can begin the application process. There are many ways to get a business loan for your small business and Biz2Credit is a great place to start. Our helpful staff provide small business owners with exceptional customer service and will work hard to understand the needs of your small business, the intended uses for your loan, and the best terms that can be offered. Get in touch today to locate small business loan financing that can help you.

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