How to Write a Business Plan for a Loan

A business plan is like the DNA of a company that determines the company’s structure, behavior and growth. It is prepared before the launch when the entrepreneur is still preparing to start the business. The document must have all the relevant information needed to set up and operate the entity without hassles. It must cover everything from the size and type of the venture to the products and services it will offer. The document is used as a roadmap by entrepreneurs and the workforce to move the business towards the accomplishment of its pre-defined goals.

Besides the internal audience, investors who fund the entity also require a business plan. Whether entrepreneurs secure finance through a bank loan, angel investor, venture capitalist, or private moneylender, they need to pitch the idea with the help of a business plan. The document gives moneylenders insight into the viability of the investment. Here is how aspiring entrepreneurs can write a business plan step-by-step for a loan. Creating a well-researched and organized plan increases the chances of getting the required loan amount.

1. Executive Summary

Entrepreneurs must prepare a detailed business plan for their start-ups. They will also need it if they plan to purchase an established business for sale in the United States or want to expand their entity. The executive summary is the first section of the plan that provides a synopsis of the entire document. It prepares the reader for the detailed information by outlining all the crucial points.

It should include all the information, including the goals, mission, products and services, leadership, financial data, business location, team members, and growth plans. It should make the investor interested in reading the entire document. Most moneylenders have to sift through several pitches. Thus, use the executive summary to decide whether to read the full plan or not.

2. Company Overview

The company overview provides details of the business’s legal structure, purpose, mission, competitors, target market, value proposition, and gaps that its products will fill. It should help the reader understand the entity’s strengths that make it better than other existing businesses in the same domain. It must also provide information related to the size of the business and how it will be positioned in the market.

3. Market Analysis

One of the most vital aspects of the business plan is market research to understand the industry size, demand and supply, and existing competitors and their market share. This part must include information about competitors’ strengths and weaknesses and the pain points of the target audience.

It will also shed light on trends and customer behavior to understand patterns. Budding entrepreneurs who plan to buy a business for sale in United States must showcase how they can carve a niche in the market and become industry leaders.

4. Products and Services

This section of the plan must provide all the information about the business’s products and services. It should inform potential investors about the features, pricing, functionality, and applicable patents or intellectual property rights. It should also explain why this product has been made and how it can fulfill customers’ needs.

It must discuss the materials used and the suppliers shortlisted for them. It should also provide details of the product’s lifecycle and future development options. The financier must understand the cost of goods sold and the profit expected after accomplishing the break-even point.

5. Organization and Management

The business plan must include the organizational structure and how it will be managed. It will explain the hierarchy, team members, their roles and responsibilities and how the business will be operated. It must also include the operational plan and the costs associated with the daily activities and tasks.

It should have the list of the tools and machines needed to complete the tasks. The prospective moneylenders should have details of the qualification, skills and competence of the team members. It gives them assurance that the business is in safe hands.

6. Marketing Strategy

Promotions should be mentioned in the plan in detail through the marketing strategy. Entrepreneurs must provide details of how they plan to market the products, create a brand strategy, educate the target audience and generate sales. They must mention the marketing approach, channels, and types of campaigns to be used for marketing.

Entrepreneurs who purchase businesses for sale in the United States do not have to build a brand. However, they still need to market the products to generate conversions and maintain visibility in the competitive market.

7. Financing Request

The funding request is the most important part of the plan, and it will be scrutinized by moneylenders and banks. This section should tell them about the total amount of loan required and how the business will use it to meet its goals. For example, funds will be used to buy equipment and stock and pay bills and salaries until the profits start pouring into the business.

It should also clarify the kind of loan the entrepreneur needs—debt or equity. The terms of equity must be mentioned in the plan to allow investors to understand their return on investment. The plan should also explain how the debt will be paid off and the repayment plan. Although the lender decides these terms, the borrower can negotiate.

8. Financial Projections

Finally, the business plan should include a financial projections section with information about the estimated income for the next three to four years. Entrepreneurs seeking funds to buy a United States business for sale should include the past financial statements to give an overview of the health of the entity.

The forecasts must include profit and loss statements, cash flow forecasts and balance sheets for every month and quarter. It will help them understand the short-term and long-term financial goals of the entity. It should include break-even analysis and financial ratios to gauge business performance.

9. Appendix

The appendix should include all the extra documents needed to support the information provided in the business plan. It can include the entrepreneur’s financial and tax return data to showcase creditworthiness, commercial lease agreement, resumes of important team members, letters of reference, permits needed to run the business, etc.

Wrapping Up

Securing funding for the business requires a lot of hard work and persuasion. Banks, financial institutions and investors must understand the potential of the business for loan approval. A comprehensive and well-articulated business plan can help the funds without hassles.