In the course of starting or running your small business, you will need to borrow a small business loan. However, it could be hard for you to convince the lenders that you are indeed worthy of being advanced a loan.
There are two scenarios here. One, you could be looking for a business loan to expand an already ongoing business. Two, you could be looking for a business loan to start a new business from scratch.
The business plan for a loan to expand an already ongoing business
When you are looking for a business loan to expand an already ongoing business, the lender will seek to know the history of your business, how you started it and how the progress has been all along.
The lender will also want to know how your business generates revenue. Every lender wants to be assured that they will get their money back. How do you serve customers? Do you have any special applications like CRM (customer relationship management) to streamline sales, marketing, and customer service? Be sure to let the lender know everything.
Who is at the helm, that is, in the management team? Are they qualified? The lender wants to know whether these people have the relevant skills. You will need to demonstrate that the people managing your business are qualified.
You also have to show what you intend to do with the loan. How much will your business grow after you inject the loan into the business? This is where you mention expansion plans, job creation, impact on life and so on.
Do you have any collateral? If you are looking for a secured business loan, you will get better interest rates than when you are looking for a business loan without collateral. If there are any assets apart from the stock, patents, vehicles and any others should be listed here. You can also include your personal property if you are a sole proprietor for more collateral. The personal property that you can list here includes rental property, undeveloped land and so on.
These are just a few things that you need to show in your business plan when you are borrowing a loan to expand an already ongoing business. There are more.
The business plan for a loan to start a new business
Always start with the simple things. For example, you will need to show the lender your business plan. A business plan is an outline of how your business idea will actually materialize and eventually become a viable business. The lender will have their small business experts analyze your business plan and if it is worth its value in the market, you will get a loan on the same.
What should a good business plan incorporate?
A good business plan is best divided into three parts – the beginning, the middle part, and the end part. You will have to write your vision down, what goals you intend the business to achieve and so on. Basically, you are telling people what led you to believe that the business can be viable.
What market segment does the business idea that you have fallen into? What is your target market? Is it commensurate with the kind of products and services that you will be offering?
You will also have to write down your marketing technique. What special things do you think are going to attract targeted clients? What channels of advertising will you use? Does the business require a website to boost its accessibility? Maybe you will need a radio, television and newspaper advertising, but this mainly depends on the clientele that you are targeting. Basically, the lender needs to be convinced that your marketing techniques can bring the business money eventually making it possible for you to pay back what you owe.
You will need to include a budget in the business plan. This also needs to have financial predictions for the near future. The importance of the budget is that it shows the lender how you intend to spend the loan should they lend you one. Therefore, the money plan is perhaps the most important part of the entire business plan.
Other things that you will need to include in the business plan include your strategy for management, and how you intend to operate the business. If you do not know how to write a good business plan, maybe it would be a good idea to hire a freelance business plan developer to write one for you.
Approaching lenders for small business loans
Armed with your business plan, you are ready to start talking to lenders for a small business loan. Now, you are ready for interviews with the lenders, because there will be some. You could get lucky and get a loan from the first lender that you approach if you prepared thoroughly, or you may have to approach a few. You must prove that your business is going to be profitable. That is what lenders look for in a business plan.
What are the risks that you anticipate in the business? Of course, every business has risks, but what matters is the strategy that you have in place to overcome them.
