Whether you need financing to help start a business
or to expand
your business, you may be required to provide a business plan as part of the loan application
process. If you don’t have one readily available, the thought of preparing a business plan from scratch can seem daunting, but remember: no one knows your business better than you do. Let’s take a look at what is included in a business plan, and how creating an outline can help ease the stress of this task.
Elements of the Business Plan
A traditional detailed business plan
includes background information that is needed to properly assess the potentials risks of a startup or AN existing business. It is also your chance to prove to a lender why your business should receive financing
and what the money will be used for. The following topics are typically included:
Business owners should have a clear vision of why their business exists and what goals they have for it. The Executive Summary is where you will communicate this vision. It should give your lender a quick, high-level introduction to your business. Think of it like a movie trailer – provide the gist without giving away too much information.
Your Executive Summary should outline fundamental details such as your mission, business model, and target market. A brief financial overview and your key growth objectives should be included here as well if you’re seeking financing. You should also include basic about your business’s location, leadership, and employees.
The Company Description section of your business plan is where you will begin to provide additional details about your business, including its strengths. For example, you should explain what problem your business solves and what gives you a competitive edge. Provide proof by including a few examples or testimonials. Remember that when seeking financing for your business, the goal is to give the lender everything they need to believe your business will succeed.
Although you will likely touch on competition in your Executive Summary and/or Company Description, the Market Analysis section of your business plan is where you will discuss your industry more thoroughly. It should include competitive research, and projected demand for your business. You should also discuss your target market in more detail and provide insight into the trends and dynamics of your industry. A “SWOT” analysis could be a good way for you to outline the strengths and weaknesses of your business and the opportunities and threats it faces, and how you will handle them.
Organization and Management
The Organization and Management section of your business plan should include information about how your business is legally structured (for example, a corporation, LLC, partnership, sole proprietorship, etc.). You should also include detailed information about key members of your management and leadership teams. An organizational chart can be a good way to illustrate who manages specific areas of your business.
Products or Services
At the core of every business is the products and/or services it provides. This section of your business plan is your chance to do a deep dive into exactly what your business offers to its customers. If you are just starting your business, you should explain what you will initially offer, and how that might change over time. Any research and development you’ve done should be outlined in this section as well. If your products or services require anything in the way of insurance, contracts, patents, or intellectual property, you should share those plans as well.
Every business needs some sort of strategy for attracting and retaining customers. Your Marketing Plan should provide details about how you plan to do so. Examples may include email outreach, paid advertisements, social media, or other marketing strategies. Projected marketing costs and your expected return-on-investment should be outlined in the next Financial section, so be sure to have a good understanding of your available marketing budget, and which marketing channels you plan to use.
The Financial section of your business plan will likely be the main focus of your lender. It should first discuss the amount of funding you are requesting and it should outline exactly what that money will be used for. What are your operating costs? How much will revenue do your products and services bring in? Be sure to provide financial statements from the past 3-5 years to demonstrate the financial stability of your business. These include income statements, balance sheets, and cash flow. Basically, you need to prove to your lender how your business will make enough money to pay back the loan.
If you are just starting a business, provide realistic sales projections and forecasted expenses that can demonstrate your plan to be financially stable. If you are an existing business, you should provide financial projections for the next five years of so. There are many templates available that can help you organize and communicate the financial outlook for your business.
Keep in mind that some lenders may have specific elements they want to see in a business plan while others may not require a full document. Once you choose a bank or lender you’d like to seek financing from, ask them what they’ll need before you apply for a loan.
The Big Picture
Having a solid understanding of what to include in your business plan can help streamline the process. Think of a business plan as an opportunity to pitch your business idea or your existing business to a potential lender and be sure to highlight any information you think would be beneficial to them.
If you are a small business owner in MA or RI looking for business financing, schedule a consultation with a member of BankFive’s dedicated Business Banking Team today.