To make an assessment of the loan application, lenders need to understand how your business operates, what you see for the future and expected financial results.
The most effective way to present this information is to provide a current business plan and details of how you intend to implement that plan.
Providing a business plan shows that you have:
- Considered how you’re going to manage the business moving forward
- Assessed any possible risks
- Understood the financial impact a loan will have on the business
Remember, your lender doesn’t know your business like you do. A business plan is a great way of helping them understand your business and goals.
- Map out what you need to include in your business plan. Refer to the Business Plan template we’ve provided in the Forms & Checklists section
- Undertake research, assess the competition, include market analysis and robust forecasts
- Verify any external information you use in your plan – this builds credibility into your assumptions
- Seek assistance from an accountant or qualified adviser to prepare the financial forecasts, including some scenarios. For example, if turnover increases or decreases by 10%, what impact does this have?
- Present the business plan in a professional way in your loan application to give a good impression to potential lenders
- Set aside enough time to prepare a professional plan that covers every aspect of your business and the potential funding requirement.
- Remember that the business plan is for you – not just for potential lenders. If you are going to spend time preparing a plan make sure it will be useful for providing direction in your business.
- Executive summary
A succinct overview of key aspects of the business plan.
- Business description and vision
Include location, history, legal structure, assets and ownership details of the business.
Also include your vision for the business – where you see your business in the future, what plans you have for growth and how you will get there.
- Description of products and services offered
Information on what the business provides to customers – what problems does it solve for your customers?
- Market definition and analysis
Describe who is your target market, demographics of your market, trends in the industry, growth of market and competition, SWOT analysis (strengths, weaknesses, opportunities and threats), marketing strategies.
- Overview of the organisation and management
Provide an organisational chart, information on management structure, management experience and track record, staffing, including qualifications and skills gaps and how these will be addressed.
- Business operations
Information on all business operations including management information systems and controls, risk management assessment, insurance details and any other relevant business activities.
- Financial forecasts
Include your business case for the loan.
The financial forecasts should include profit and loss budget, budgeted balance sheet and a cash flow forecast for the term of the loan or three years minimum. Include separate detail of all of the assumptions that have been made for preparation of the budgets and forecasts. Include sensitivity analysis on the prepared financials. Your accountant can help you with this.