What’s a business plan?
Businesses that write a business plan see a 30 percent increase in growth compared to those who don’t have a formal written plan. A business plan is a living document that provides a three- to five-year outlook into your company’s projected revenue, as well as a summary of where the business is headed. A well thought-out business plan should be part of every entrepreneur’s to-dos when they start or buy a business, but it’s especially important for those applying for a loan.
The business plan is usually the first thing lenders analyze to determine your strength as a borrower. A well-constructed plan communicates to banks that you’re ready to become an entrepreneur, have a clear vision of your business and can manage the financial responsibility of a business loan.
Elements of a Successful Business Plan
There are 10 fundamental component of every business plan that lenders expect to see:
- Cover Page and Table of Contents
- Executive Summary
- Company Description
- Market Plan and Analysis
- Organization and Management
- Service or Product
- Marketing and Sales
- Funding Request
- Financing Projections
1. Cover Page and Table of Contents
Make a good first impression with the cover page of your business plan. The cover page should contain your business name, logo and your contact information as the owner. Also include a standard table of contents with page numbers to help organize your business plan.
2. Executive Summary
The executive summary should be near the beginning of your business plan because it’s one of the most important sections. It provides an in-depth overview of the current state of your company, plans for growth and why your business will be successful. This section should spotlight your experience and background in business, as well explain why you chose to buy/build the business you did. Here, you can gain credibility by demonstrating that you’ve done thorough market research and understand the industry landscape.
Note: The executive summary is the go-to page for lenders looking to get an overview of you and your business. Make sure it includes everything you want them to know about why you and your business are a safe bet.
3. Company Description
The company description is your chance to provide more information about your business, its mission, business model and any strategic partners. If you found yourself in a long elevator ride with a lender, this company description would be your pitch. Be sure to include information about how you’ll meet customer’s needs, compete with similar companies in your space and what qualities make your business unique.
4. Market Plan and Analysis
The market analysis section should review the current state of the industry your business is in, as well as identify the existing gaps that your business will solve. You should include:
- An industry overview and outlook.
- Information about your target market.
- Your marketing strategy.
When describing your target market, it’s important to cite outside resources. If you can’t afford a third-party analysis, Internet research from reputable sources and customer testimonies can make this section more robust.
5. Organization and Management
This section provides information about the management structure of your company. An effective way to communicate this information is to create an organizational chart along with a detailed description. List each management position, the name of the person filling the role, what their qualifications are and what their responsibilities will be. Also include information about your Board of Directors and any relevant experience they have that will contribute to the success of the business.
6. Service or Product
Describe the service or product your business will sell in more detail. Be sure to emphasize how your particular service will target your customer base and fill a need for them. Include any information you have regarding:
- Intellectual property rights.
- Your product’s lifecycle.
- Any product research and development you’ve completed or have planned.
7. Marketing and Sales
How is your company going to acquire new customers through its sales and marketing efforts? In this section, explain how your business will communicate with potential customers and advertise its product or service. Is it in your budget to advertise on TV or online? Does your company already have a social media following? Answer these questions here.
Make sure the sales section of your outline addresses how you’ll build up your sales force and your sales activities. Discuss whether you’ll be hiring internal salespeople or contract external staff, how they’ll be trained and how you developed your sales goals.
8. Funding Request
Your funding request should very clearly outline why you’re seeking additional business financing and how it will be used. Here’s an effective way to structure your funding request:
- Your current funding needs.
- Any future funding requirements over the next five years.
- How you intend to use the funds you receive.
- Any strategic financial plans for the future.
9. Financial Projections
This is your chance to show what you expect your company will be able to do within the next five years. The financial projections should give a quantitative value to your marketing and organizational strategies. But before developing your financial projections, you must first analyze your market and set clear objectives.
For the first three years of projections, include forecasted income statements, balance sheets, cash flow statements and capital expenditure budgets (feel free to incorporate graphs, especially if they show positive growth). If you own an existing business,
this section should also contain historical data about the company’s performance.
The appendix is the final section of the business plan. Any extra documents that didn’t have a specified place should be attached here. This includes tax returns, your resume, real estate documents, etc.
More Tips for Securing a Business Loan
Outside of your business plan, lenders will determine your attractiveness as a borrower by the 5 C’s:
- Capital: Your equity injection into the business.
- Credit: Your personal credit score and credit history.
- Capacity: Your current and anticipated cash flow.
- Character: Your business experience.
- Collateral: The “worthwhile assets” you have to guarantee the loan.
Navigating the business loan process on your own can be overwhelming. That’s why many work with a company that can guide you through the process. Here’s what working with a consulting company can offer:
- Simplified Application Process: Rather than filling out multiple loan applications for every bank, a good consulting company or broker can shop a single application to multiple lenders.
- Better Loan Terms: The ability to apply to several lenders at once often means receiving several loan offers, so you’ll have more choices when selecting your terms and conditions.
- Faster Approvals: Most loan consulting companies have established relationships with a vast network of lenders, which means your application goes directly to banks who are most likely to approve your loan.
Ready to get started? Applying for an SBA loan with Guidant is risk-free thanks to our money-back guarantee. If you aren’t approved for a loan, we’ll give you a full refund of your packaging fee. Call us at 888.472.4455 or pre-qualify online.