Chapter Four Title Banner of SBA Long Form

A business plan is a crucial piece of any SBA loan application. It’s what lenders will look at most closely when approving a loan, so it should be organized, well planned and persuasive. Set yourself up for success by learning how business plans impact loan approval and which critical elements to include.

What is a business plan?

Many entrepreneurs talk about their business plan — whether it’s stored only in their minds or scratched on napkin — but truly savvy business owners take the time author a well-written one. So what exactly is a business plan?

A business plan is a living document (meaning it can and should be updated as your business progresses) with a three- to five-year outlook into your business. It should provide an overall summary of where the business is headed, plans for growth and projected revenue. Business plans take time, research and due diligence, but the reward is organized and actionable steps to grow your business. In fact, companies with a formal written business plan see a 30 percent increase in growth compared to those that don’t.

How does a business plan help you get an SBA loan?

Outside of your basic eligibility requirements (see Chapter 2 for the 5 C’s), your business plan is the top element lenders will review to determine your attractiveness as a borrower. Having a solid business plan with clear ideas makes it easier it is for banks to see that your business will be successful, and therefore that you’ll be able to repay the loan. However, business plans are not a one-size-fits-all endeavor. If you’re running an independent business or launching a start-up, the importance of your business plan carries additional weight and will be more carefully scrutinized. If you’re funding the purchase of a franchise, the competitive analysis and management sections will be more closely reviewed than others because the business model has already proven successful.

Writing a business plan can sound intimidating, but even a thorough plan only needs to be seven to ten pages. Check out our free eBook and business plan template to help guide you through the process, and keep reading for an overview of each section of the business plan.

The 10 Elements of a Business Plan

Whether you’re writing a business plan as a part of your SBA loan application package or not, there are 10 essential elements to include. Here’s a look at what those sections are as well what’s included in a complete plan.

Cover page and table of contents

Cover Page and Table of Contents

The cover page and table of contents of your business plan is a great way to show your lenders that you’re a professional and organized businessperson. These pages should be simple and straightforward, but you can (and should) make them your own by including your company’s logo.

What’s included in the cover page and table of contents?

  • The business’s name and logo.
  • Your contact information as the owner.
  • A standard table of contents with page numbers.

Executive Summary

Executive Summary

As the first thing that lenders will read in your business plan, the executive summary is the most important section. Here, you will introduce yourself to potential lenders or investors, so the overall tone should be professional, but it should also paint a positive picture about the business.

What’s included in the executive summary?

  • An overview of the business idea, what problem it solves for consumers and how it fits into the market.
  • How much the business will cost and how much funding you’re seeking.
  • Plans for growth and why the business will be successful.
  • Information about your business background.

Company description

Company Description

The company description is a closer look at how the business will function. This information is a good opportunity to show lenders you’ve thought through the day-to-day details and have a solid strategy in place. Consider the company description your extended elevator pitch.

What’s included in the company description?

  • Your company’s name, mission and vision.
  • An explanation of the business structure, including products sold or services provided.
  • Any information regarding strategic partnerships.
  • Business location and when it will open.
  • Business goals and competitive advantages.

Marketing analysis under a magnifying glass

Market Plan and Analysis

The market analysis section should show readers your deep understanding of the market and your plan to be competitive. Those looking to fund a franchise should give this section extra attention, as lenders will be reviewing this information closely. This is also great space to use visual to help support your story.

What’s included in the market plan and analysis?

  • An industry overview and outlook, including trends, size and expected growth.
  • Target market demographics and market research data.
  • A marketing plan tailored to the audience you’ve identified.
  • Competitive analysis.

Business structure

Organization and Management

Depending on the size of your business, the amount of detail in the management section can vary greatly. Even if there are only a few people in leadership roles, an organizational chart is an effective way to show lenders how the management team will be structured. If you are your only employee (and plan to remain so), you can write a short paragraph explaining this as well as your qualifications.

What’s included in the organization and management section?

  • A list of each management position including who will fill the role and their qualifications.
  • Any additional information about how the management team will contribute to the success of the business.
  • Information about the Board of Directors.

Services or products

Service or Product

When describing your service or product in your business plan, it’s important to emphasize how your particular offering will meet a need for your target market. Try to think beyond providing a general description of what your company is selling and focus on how your company provides value to your customers.

What’s included in the service or product section?

  • A detailed description of your product or service.
  • Pricing details.
  • Product research and development
  • Intellectual property rights.
  • An overview of the sales process and order fulfillment.

Marketing and Sales synergy

Marketing and Sales

The marketing and sales information in your business plan is all about how you’re going to connect with customers. Whether your strategy is to focus on advertising or inbound marketing, you should detail your plan here and explain why it makes sense for your target audience. You should also discuss how you plan to build and support your sales strategy.

What’s included in the sales and marketing section?

  • Detailed marketing plan geared toward your target audience.
  • Sales and marketing goals and KPIs.
  • Budgets for both sales and marketing.
  • A training plan for your sales team (if applicable).
  • Revisit your pricing strategy.

Funding Request

Funding Request

Your funding request is an opportunity to tell lenders how SBA funding will help your business, as well as how your business will successfully repay the loan. Here, you should explain why you’re asking for small business financing as well as an overview of how the funds will be used.

What’s included in the funding request?

  • An overview of your business.
  • Financial information for current operations (if applicable).
  • An outline of how much funding you need now and in the near future (up to five years).
  • Detailed explanation of how the funds will be used.
  • Strategic financial plans for the future.

Financial projections

Financial Projections

The information in the financial projections section of your business plan should cover three years of forecasted financial information. Keep in mind, you’re showing lenders how your business will perform by providing profit and loss, balance sheet and cash flow details. Remember, your business plan is a living document, so for your own benefit, you should continue to update this information even after funding.

What’s included in the financial projections section?

  • Financial statements.
  • An expenses budget, including both fixed and variable costs.
  • A break-even analysis.
  • A sales forecast for each service or product line.
  • Historical financial data (if you own or are purchasing an existing business).

Chapter Appendix

Appendix

The appendix is the final section of your business plan, and is the best place to add any supporting documents. For example, if you had multiple pages of data to support your market analysis, you can include them here. You should reference which documents are in the appendix in earlier sections so lenders know where to find additional information.

What’s included in the appendix?

  • Charts, graphs and data to support the information provided in earlier sections.
  • Licenses and contracts with vendors or partners.
  • Building permits.
  • Resumes and professional certificates.
  • Credit history.

Creating a written business plan may seem like an arduous task, but it’s a crucial step to obtain SBA financing. This living document can also help to guide you once you’re in business — keeping you on track, helping you to see what’s working and possibly what’s not. Taking the time to write a business plan now will help you find success down the road.