How To Write a Business Plan That Lenders will Love
A business plan defines the mission and vision of the business, serving as a trustworthy road map that helps the management make important decisions down the road. It’s definitely among the most crucial documents you will have to create as an entrepreneur. It’s also extremely useful for people looking to gain access to business loans. Once you’ve learned what lenders are looking for in loan applications and implement these tips while drafting your business plan, no lender will ever say no to you!
Here are the details you need to keep in mind while writing a business plan:
Your revenue generation model Lenders are looking for companies that have a solid revenue model and so, will require details on how you intend to increase your company’s revenue. Explain how your business operates and the revenue boost to be gained if the loan comes through.
Talk About Your Management Let your lenders know more about the people heading the company and the experience, knowledge, and skills they possess. Lenders are more likely to clear business loan applications for companies that are headed by qualified and knowledgeable individuals who are experts in their field.
Your Market Provide information about your target customer base. Provide concrete reasons why your business is a viable model in a sector. Talk about your unique advantages and skillsets that separate you from the competition. Make sure you highlight your publicity and marketing campaigns as well.
Provide Detailed Historical Financial Statements This is the highest priority for all lenders – they want to see your company’s revenue, repayment structures, liabilities, and assets, which can help them evaluate your company’s financial health. Numerous business loan applications get rejected due to inaccurate or poor accounting or due to paltry debt service coverage ratios or insufficient cash flow. In simple terms, they don’t have enough cash to make their loan payments on time.
Provide future projections Provide detailed future revenue and growth projections for your company and the stimulus that this loan would provide for it. Include other projections regarding product development, market growth, job creation, and other impacted aspects as well. If your business experiences cyclical or seasonal changes, be sure to describe the financial impact of these changes on your business.
Collateral Offer detailed information about all the assets your company currently owns, including real estate property, patents, or any other collateral property that can secure your debt. Other personal properties like ranch land, rental properties, etc. can also be used for providing additional collateral, which can increase your chances of securing the loan.
What Purpose Will the Loan Serve You should explain the need for the business loan in clear terms. Talk about why you require is – is it for expansion, for purchasing new equipment, for moving to better locations, or for opening a new physical location? Provide comprehensive information about your business, especially if you’re trying to avail SBA loans or loans from other government incentive programs. Lenders will want to know how you plan on spending the money. The more comprehensive you are, the more likely they are to approve your loan.