One of the most significant details you share with the lending institution like banks while applying for a business loan is a Business Plan. This document is basically your business pitch that assures the lender that you have in place, a firm road map to grow your business.
How does a business plan support your application? When a lender investigates your loan application in order to decide upon loaning you the required amount, it’s not possible for you to be physically present on the spot to present your case. A business plan does it for you. This plan displays a company’s image in a simple, authentic and descriptive manner. The details must be relevant to the need of the hour and should ensure that the business is being showcased as a valuable entity.
The following aspects of a business plan must be included if you are considering a business loan.
An Executive Summary of your business
The most significant portion of the business plan summarizes the details included in the document. The Executive Summary consists of highlights of the plan and act as a brief glance of the proposal. These key points can help give the lender a concrete overview of your plan.
The detailed business plan
The next segment must talk in detail about every relevant aspect of the business. These include, but are not limited to:
- Duration of the business, and an overall history of the business in terms of finances and current status.
- Trade details and information about the service and manufacturing processes
- The various stakeholders, clients previously and currently associated with your business
- Your current goals and objectives and your future plans for expansion and growth.
- Apart from these factors, your business plan must also shed light upon the details about the employees – especially the management/leadership team, and their education and experience backgrounds. This is crucial information for the lending institutions because they want to know the credit-worthiness of those applying for the business loan. If your business is led by experienced management, it can support your application process.
- How the business loan can help grow your business.
The reason for your business loan application
When presenting a proposal to the lending institution through the business plan, you must strictly include the reason for the requirement of the business loan. When you inform the lender about why you need the loan, it must be followed by mention of how the loan amount will be put to use. Do not summarize it in a statement; rather, provide your intent in detail so as to increase the chances of securing the loan. This provides the lender with a wide picture of how the loan amount will be utilized and what the business can expect to accomplish with the loan.
The industry context of your business
Ensuring that the lender is aware of the existing opportunity in the line of business is of utmost significance to strengthen your business plan. Let the lender know that for the business to meet the industry expectation, it is important to put money in certain segments like manufacturing, marketing, retail and this can be fulfilled through the loan. Back your claims with relevant sources such as published journals, reports, and a detailed analysis of your industry trends. This will make sure the banks understand the necessity of the loan for your business to expand.
What is the business strategy for successful execution?
One key question that will cross every lender’s mind is: how will your business ensure the successful execution of the proposed plan? The plan must include the business strategy that your business will use to execute the ideas that require financial support in terms of the business loan. From paper to ground reality, take the lender through the journey of how you will accomplish the business plan. This detailed information will help the lender see your business potential from your perspective.
Most importantly, the financials of the business
Further to the aforementioned aspects, your business plan must emphasize on the financials of the business. This is the go-hard-or-go-home portion of your business plan. Showcase your financial health and the capability to secure and repay your business loan. Include the relevant financial documents that transparently display your revenue, running costs, balance sheets and audits to back your claims. Also, a cash flow statement is vital to be present in this plan.
A concrete business plan can not only provide a fresh perspective to your lender, it can also help you, yourself, revaluate and reaffirm the goals of your business.
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