How to Write a Business Plan for Business Loans

When you are applying for a business loan, it helps (and is often required) to have a prepared business plan. This type of plan shares hard data about your business’s current success as well as forecasts for how the proposed loan will help you achieve continued growth and meet future financial goals.

Let’s talk about what should be in your business plan. 

A strong business plan for a loan application will include the following elements:

  • Cover Page and Table of Contents
  • Executive Summary
  • Company Description
  • Market Plan and Analysis
  • Organization and Management
  • Service or Product
  • Marketing and Sales
  • Financing Analysis
  • Funding Request
  • Appendix

1. Cover Page and Table of Contents

Your business plan for a loan application is a professional document, so be sure it looks professional. The cover page should contain the name of your business and your contact information. If you have a logo, it should go on the cover.

Both lenders and you will appreciate a table of contents and page numbers in the business plan for a loan application, so they can quickly find specific sections. If you are delivering your plan digitally and not physically, be sure your table of content is clickable and links readers to the correct sections.

2. Executive Summary

It’s common for business documents to carry executive summaries at the beginning so that busy people have the key takeaways from a larger document immediately at hand. Your reader shouldn’t feel they have to wade through a large document for crucial information.

Briefly summarize the entire business plan on a page. Describe the company, your product, and why you started the company. Include your chief competitors and why your product will succeed against them. If relevant, discuss the economic climate vis-à-vis your customers and products.

3. Company Description

The company description should include a mission statement, the company principles, any strategic partners, and your corporate structure. It will be relatively short.

4. Market Analysis

After you’ve told the lender what your company does and who does it, you’ll want to provide a competitive analysis of your market. Let’s be clear: the market analysis is not a full marketing plan. That will come later. The market analysis focuses on the qualities of the market, not a detailed plan of how you’ll capture it. Identify the existing gaps that your business will fill. A business plan’s market analysis should include:

• An industry overview and outlook

• Any differentiation in sector and niche

• Information on your target market

• The company’s marketing strategy and how it will make your company stand out

The market analysis should also specify the effect of outside sources on your company. For example, if the industry is subject to regulation, include information indicating your knowledge of the regulation and your past compliance with it (if your business is already up and running). Will you require raw materials? If so, how do you guarantee you’ll have them at costs that support your financials? Are there any risks to price points changing?

What about your competitors? How do they differentiate themselves? What is their pricing strategy?

5. Organization and Management

The organization and management section should itemize your company’s management structure. Many business plans provide an organizational chart, a structure description, and salary forecasts.

The description should include each management position, the person in the position, their responsibilities, and their qualifications. If you have a Board of Directors, list them on a separate page, along with any experience relevant to your business’s success.

The principals of the firm, such as the owner and co-owners, are included in the business description section. If your company is small and currently contains only the principals, it isn’t necessary to include a separate organization and management section.

6. Service or Product

Now it’s time to describe your company’s product or service in detail. What do you sell, and who do you sell to? What exactly is your business model? What need are you fulfilling for the customer base? Business plans often itemize their entire product line with the planned or current pricing structure.

The service or product section should also include your product/service’s estimated lifecycle, and any research and development completed, in progress, or planned. Naturally, this section will vary greatly depending on your type of business. It should also include a description of any trademarks, patents, or other intellectual property rights, if applicable.

7. Marketing and Sales

The marketing and sales section includes three vital pieces of information:

  • How will customers find out about your products?
  • What will your sales channels and methods be?
  • What is your growth strategy?
  • If you plan for customers to discover your products or services through informational methods like industry meetings, specify what your plan for that method is. If you plan to advertise or develop a public relations campaign, specify what your efforts will be. Will you be on social media channels? Which ones, and why? Are these efforts designed to appeal to specific demographics or types of customers? Which ones, and why? Will sales be accomplished via a targeted sales team? Will management call upon relevant prospective clients or stores? Will you have an online presence?

If you have a growth strategy, outline it. If you plan expansions to other geographic areas or other types of potential customers, discuss it in this section.

8. Financial Analysis

The financial analysis section is key for lenders. The financial analysis must include financial projections for three to five years out. The further out into the future forecasts run, of course, the more difficult it is to predict with certainty. One solution is to prepare a business plan with three-year forecasts, but have a five-year forecast ready if the investors want them.

Tip: If you are already in business, you should also include historical results for the past three to five years (or for as long as the business has been operating, if it’s less).

The financial projections must include:

  • Income statements
  • Cash flow statements
  • Capital expenditure budgets
  • Balance sheets
  • They may also include profit and loss statements, sales forecasts, and financial metrics relevant to your industry. Lenders may ask you for more granular data, such as cost of sales or cost per product (or service).

You need to provide the projections by month, quarter, and year. Potential investors want to see the financials in both the short and long term. Why? Because businesses that aren’t meeting their monthly and quarterly projections can be risky. If they are falling behind in sales or profit, for example, they can fail rapidly.

On the other hand, if sales are much greater than projected, the company can find it challenging to keep up with production and other efforts. To counterbalance the risk, lenders always want a clear picture of what’s likely to happen.

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