Proper planning is the key to a successful business venture. A business plan is an important document that will help you not just in your business operations but also in planning to apply for quick business loans. In essence, this will show your lenders how you’re planning to spend the financing you obtained from them.
Most successful business owners know that adequate financing is important for their business to grow and expand. But before you qualify for a loan, lenders would want to know what you plan to do with their money. It’s important to create a business plan that contains all the necessary information lenders need.
With that said, here are some of the most essential elements your business plan should have:
1. Description of Your Business
The description of your business should be reflected in your business plan. It should include several key elements like your company’s structure, mission statements, goals, target audience, marketing plans, and even people involved in the management. It should also include the product your company is trying to sell and why you think that product is helpful for your target market.
Pro tip: According to the Small Business Administration (SBA), when writing a business description, owners should make use of the “5 W’s” – who, what, when, where, and why. Aside from that, the business description of your business plan should also include the mission and vision statement of your company. This will tell the lenders what will set your company apart from other businesses in the industry.
2. Management Summary
The management summary part of your business plan tells the lenders exactly how your business is structured and who is responsible in each department. This section will give the lenders an idea of how strong and capable your management team is in running the different departments of your business.
Pro tip: Be sure to include the qualifications of each of your management team members on the business plan. Write about their experience, skills, and how each of them will contribute to your business.
3. Purpose of Your Loan
Lenders will want to know what you’re planning to do with the money. Are you planning to use it to open a new location or buy equipment for your business? Although this will also be written in your loan application form, including your purpose for taking out a loan in your business plan will also be useful.
Pro tip: Be as detailed as possible when stating your reasons for securing a loan, especially if you’re planning to apply for an SBA loan which is tied up with strict policies.
4. Cash Flow
Did you know that more than 90% of the loans declined by the banks are due to the company’s cash flow situation? Lenders want to make sure that their clients can make repayments on time. With that said, owners should be able to come up with a convincing cash flow backed up by evidence such as your company’s sales report or, if possible, your competitors’. Be sure to include your cash flow statements and tax returns for the last three years.
Pro tip: A lot of people may not know this but there are three cash flow scenarios that lenders usually ask their clients to present: conservative sales, realistic sales, and aggressive sales projection. So be sure to have those in your business plan, as well.
Collateral can come in handy for start-up businesses applying for a loan from a bank they’ve never worked with before. Collateral is a hard asset that the bank can confiscate or seize in case the borrower fails to pay the agreed-upon repayments within the set period. It can be equipment, inventory, vehicle, or real estate property.
Pro tip: If you’re planning to include collateral in your business plan, be sure to present those assets that will more or less have the same value as the amount of loan you took out. Typically, the higher the value of your collateral is, the better the terms of your loan will be.
6. Balance Sheet
Your company’s balance sheet will serve a snapshot of how your company’s financials are currently going. Including this in your business plan will give your loan manager an idea of how well you can manage cash flow in your business and can, therefore, attest to how responsible you are in handling your company’s assets. In turn, this will help lenders determine whether you’ll be able to make payments promptly or not.
Pro tip: Instead of doing it themselves, business owners should consider hiring accountants to do their company’s balance sheets. While this might mean another expense, it’s an investment worth making because it ensures that the liabilities and assets will be properly accounted for.
Are You Planning to Apply for Quick Business Loans for Your Small Business?
While business plans aren’t the only thing that lenders will ask for when you apply for quick business loans, it’s an essential tool that can help increase your chances of loan approval. If you need additional financing for your small business, ask the experts on how you can apply for one. No matter what business you’re in, you’ll be sure to find the best loan option that will address your business’ current needs.