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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 the chances of your loan application being approved. Lenders have criteria by which they evaluate business loan applications, and a business plan can show them that your risk 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 a plan 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 several components to it. Alternatively, a more streamlined business plan approach might work for certain loan applications. We will cover both of these types of business plans and cover the nuances of preparing your business plan.

Why business plans are important

Think of a business plan as the foundation of your business; a pathway for how to structure, run, and grow your business. It is a way for you to think through key elements of running your business. A good business plan highlights you, the leadership team, the business itself, the market opportunity, 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 different business loan applications (although you might have to tweak and adjust it based on lender specifications). It can also guide you through different stages of operating your business. For example, a business plan can help you lay the framework for starting, managing, and growing your business.

A well-constructed business plan will improve the chances of having your business loan application approved.

Components of a business plan

Generally speaking, a traditional, comprehensive business plan is what you should plan on preparing for your business. However, the U.S. Small Business Administration (SBA) suggests that in certain situations an alternative, lean startup version of a business plan can be applicable. Let’s review the components of both of these business plans:

Traditional Business Plan

A traditional business plan is more in-depth and is what most lenders will be looking for as 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 the opportunity. The executive summary is essentially the “elevator pitch” of your business plan. Make sure to include a mission statement that summarizes why your business exists.
  • Company description: Provide detailed information on your company. Why does your company exist (you can build on the mission statement from the executive summary), what problem is it solving, who has the problem you are solving (i.e., who are your customers), where will you be located (if you plan on being a fully remote company, discuss that here), what competitive advantages do you have, and any other strengths that make you stand out.
  • Market analysis: Demonstrate to the lender that you have done your market research by clearly describing the market opportunity and providing a competitive analysis. How much money do consumers currently spend on your product or service? Who are the existing players in the space and why are they currently successful or what have they failed to optimize? How do you plan on taking market share from them? What trends and themes are emerging in the space that makes you uniquely positioned to capitalize? In other words, who is the target market, and what is the opportunity to make money?
  • Organization and management: Who is on your executive management team and how does the team uniquely position the company for success? Discuss previous successes, experience, etc. If you plan on taking your company public, has anyone on the management team guided a previous company 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 on it.
  • Service or product line: In this section 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 on filing for a patent or copyright? If you are in the research and development stage, detail all plans and reports.
  • Marketing and sales: What will your initial marketing plan and sales strategy be? How do you plan on letting your potential customers know that you exist (i.e., what marketing tactics and channels will you use?), what will you charge them, what is your pricing strategy, will you offer discounts, and how do you plan on retaining customers, up-selling customers, cross-selling customers, etc. This section should tie into your financial projections discussed below.
  • Funding request: Here you will need to state how much money you are asking for. If your business loan application is approved, how will you deploy the loan amount you are asking for over the next couple of years? For example, what percentage of the funds will go to employee salary, rent, utilities, equipment, operations, travel, etc.? Think through all of 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 you have a solid, well-thought-through financial plan and show how you will be able to make your loan payments. How will your marketing and sales tactics drive revenue, how will that revenue grow over time, etc.? For an existing business, you will need to include additional financial statements and financial information. This additional information can include capital expenditure budgets, credit history, credit scores, income statements, balance sheets, and cash flow statements for the last three to five years. If you have other collateral you could put against a loan, such as real estate, you should include that information as well.

Lean Startup Business Plan

As described by the SBA, the lean startup business plan offers a high-level overview of your business. It is much faster to write, and only contains critical pieces of information about your business. For certain businesses, the lean startup plan might work as a replacement for the traditional business plan. For example, if your business is relatively simple or you want to quickly spin up a business plan to get the ball rolling with investors or lenders (they will likely ask for more information as the process progresses). Here are the key details to include in your lean startup business plan:

  • Key partnerships: who are the people, businesses, strategic partners, contractors, sub-contractors, suppliers, etc that you will use to help you operate your business?
  • Key activities: how will you operate the business that will make you different and effective? For example, are you going to do something a certain way that your competition currently does not do or has not thought of? How will you disrupt your market?
  • Key resources: Touch on the assets and resources you will have to help you create market share. Do you have intellectual property, cash reserves, employees, a management team, real estate, etc that will create a competitive advantage?
  • Value proposition: what is the value you are bringing to your customers and how is it different from what your competitors are currently doing?
  • Customer relationships: how will you nurture relationships with your customers? Touch on how you interact with your customers. For example, will customer interaction happen online, face to face, or both?
  • Customer segments: what is your ideal customer profile? Describe the persona of who will be purchasing your product or service. How large is this pool of buyers?
  • Channels: what channels will you use to communicate with your customers and what tactics 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 tactics?
  • Cost structure: describe what costs you will incur to operate your business (i.e. how will you deploy the capital you receive?) and ways you can maximize the impact of those dollars.
  • Revenue streams: 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? Do you plan on opening up additional revenue streams as you go?

If you are writing a business plan specific forSBA loans, the SBA has examples and templates of both types of business plans that you can review. Head over to the SBA’s web page on 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 of 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 each with different requirements. Although having one business plan template is a great place to start, your business plan is not a one-size-fits-all.

The nuances of a business plan lie with the loan application and it must be massaged to fit what the lender is looking for. For example, your business plan for an SBA 7(a) loan funded by an online lender will be different from a term loan funded by a traditional financial institution like a bank.

Business loan consultants

Business loan consultants are a fee-based service that can help a small business owner prepare a business plan for a loan application. The loan consultant 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 consultant can be worth the investment. For more information, read our article How to Find Business Loan Consultants Near Me.

Getting Started

Once you have a business plan in place, and you are ready to move forward with obtaining 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 provides 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 find out the small business loan financing that can help you.

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