How to submit a business plan to the bank

A business plan serves as a guide or map to the course a company should take on its road to success. It provides a reference manual for difficult times. If the business is a start up trying to attract investors or obtain a Small Business Administration guaranteed loan, a business plan is required. Working with a consultant or Small Business Development Center is often the most effective way to create a quality business plan.

Refine the product pricing model. Look for multiple sources for the raw materials necessary to build the product or acquire inventory to sell. Research the labor market to determine how much it will cost to hire help.

Consider what the average customer will likely buy and how much money is made on the average sale. Determine who will buy the product and how to reach them. Review the industry and market data to develop a comprehensive picture of the ideal customer. Then extrapolate the individual market from the gross data and compose a picture of the ideal demographic and use a marketing strategy to illustrate how to entice the buyer to the store.

If the words sell on the Internet are included be sure to explain how the company will attract the necessary traffic. Analyze the historical financial data for the company and prepare a synopsis that will describe and explain the trends in income illustrated.

If the trend is negative, formulate a plan to reverse them. If the trend is positive, explain why it is likely to continue in that direction. Absent historical data for the company, use historical data for the industry to accomplish the same task.

If the trend is down, explain why it is a good idea to enter this market now. Analyze the list of competitors in a meaningful way. Compare pricing, products and services to the proposed company. Describe advantages the company has over competitors in a factual rather than subjective manner. If the company is a retail location, visit the competition and map the distances between stores.

Use a demographic reporting system to study the market in the local ZIP code to see if the right customers are easily accessible. Done properly, this will illustrate whether the company has a chance of success. Overly optimistic analysis will do nothing more than jeopardize the investment in the company and the guaranty the owners have executed.A key requirement for any business loan application is a business plan.

Not only does it demonstrate that you have a clear roadmap for growth, backed by research, financial data, and product strategy, it will also ensure that your lender matches you to the right loan program, based on your needs, goals, and financial projections. But a business plan is more than that, it plays a functional role in your path to success.

Alongside your financial statements, it helps you steer your business to success, long after your loan gets approved. Instead approach the exercise in manageable chunks. The Internet is awash with free online business plan templates. SCOREfor example, offers two templates: one for start-ups and one for established businesses. This interactive online tool guides you through the process of creating a plan step-by-step.

As these templates show, any business plan should include several key elements. Cap it all off with an executive summary best written once everything else is on paper. The summary should set the stage for your plan, tease the reader as to its contents, and succinctly touch on key targets business and financialand your plans to achieve them. What assets need to be purchased to help you achieve the goals of your plan? How much will you need? How will the funds be used equipment or real estate purchase, refinancing debt to support growth, long term capital to pay operational expenses, etc.

How will you repay that debt based on your financial projections your lender can help with this based on the type and term of the loan? So take some time to assemble cash flow projections and statementsbusiness credit reports, three years of tax returns, and additional financial statements balance sheet, profit and loss statement, bank statementsaccounts receivable and payable.

The SBA loan application can be a complex process; the good news is that your SBA-approved lender is there to guide you through the process. While a business plan is a key ingredient in your loan application, a well-prepared plan, that you revisit often, can also help guide your business for years to come.

Try to think of it, not as a document, but as a living, breathing process that grows as your business grows. A useful technique is to break your plan down further. Add a plan for each area of your business — IT, marketing, sales, product development, operations, and customer service. Engage your team for input or have them take ownership of their field to drive greater accountability across your business.

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Submit a Business Plan

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Bank loan: How to write your business plan

Font Size Abc Small. Abc Medium. Abc Large.When you apply for a loan from a bank, almost all the best banks expect you to submit a business plan along with your loan application. But don't think just because you have a plan, you'll get a loan. If you're a startup, your chances of getting a bank loan are actually pretty slim. That's because banks are required by law to support loans with assets--called collateral --that protect the bank against a loan default.

This legal requirement helps protect the banks' depositors against risk. And since most startups don't have the kind of collateral needed to support a business loan, most loans are made to existing business owners.

But note that I said "most. What your bank does with your business plan once they have it tells you a lot about your bank.

how to submit a business plan to the bank

Some loan officers barely glance at the plan, check a box on the loan form noting that they have a copy, then file it away, processing the loan application based solely on the financial information you provided in the application.

Other loan officers will read your plan and discuss it with you, adding value and building a relationship.

These bankers can provide a lot more than just a simple loan approval. If you're fortunate, that's the type of loan officer you'll be dealing with. So let's discuss the parts of your plan that they'll look at more closely than others:.

It guarantees a portion of the money that a bank lends you. If you're interested in getting an SBA-approved loan, you should know that you're almost always required to put up at least 30 percent of the value of the loan as collateral, meaning that the bank guarantees the other 70 percent through the SBA. Normally, a loan requires percent collateral, so SBA loans are attractive to small-business owners who don't have the assets needed to cover the loan.

The process is about the same as any other commercial bank loan and is managed by a commercial bank. The SBA also requires entrepreneurs to submit business plans as part of the loan process, but the exact implementation depends on the specific bank.

Starting a Business. When applying for a small-business bank loan, it's important to know what your business plan needs to contain to give you an edge. Next Article -- shares link Add to Queue.

Tim Berry. October 3, 4 min read.

Opinions expressed by Entrepreneur contributors are their own. More from Entrepreneur. Get heaping discounts to books you love delivered straight to your inbox.In this edited excerpt, the authors discuss the ABCs of getting a bank loan for your business. Many of the most successful businesses are financed by banks, which can provide small to moderate amounts of capital at market costs.

Bankers primarily provide debt financing.

You take out a loan and pay it back, perhaps in installments consisting of principal and interest, perhaps in payments of interest only, followed by a balloon payment of the principal.

Bankers can usually be counted on to want minimal, if any, input into how the business is run. Loan covenants may require you to do all sorts of things, from setting a minimum amount of working capital you must maintain to prohibiting you from making certain purchases or signing leases without bank approval.

Be sure to have your accountant, financial advisor or attorney review your loan documents and spell out everything for you very carefully before you sign. Bank loan applications can be almost as long and complete as a full-fledged business plan. A banker may not be interested in your rosy projections of future growth. In fact, when confronted with the kind of growth projection required to interest a venture capitalist, a banker may be turned off. On the other hand, a banker is likely to be quite interested in seeing a contingency plan that will let you pay back the loan, even in the event of a worst-case scenario.

Cash flow. Most bankers will want to see cash flow statements as well as balance sheets and income statements for the past three or so years. It may consist of machinery, equipment, inventory or, all too often, the equity you own in your home.

Why do bankers seek collateral? They have no desire to own second-hand equipment or your house. Experience has taught them that entrepreneurs who have their own assets at risk are more likely to stick to a business than those who have none of their own assets at risk. They provide an added layer of protection for lenders. If your own capacity for taking on additional debt is shaky, a co-signer who's essentially lending you their creditworthiness may make the difference.

Marketing plans. More than ever before, bankers are taking a closer look at the marketing plans embedded in business plans. Strong competitors, price wars, me-too products, the fickle habits of the buying public and other market-related risks must be addressed. Your banker and most other investors have to know that you recognize these risks and have well-thought-out ways to deal with them. Bankers like to stress the personal aspect of their services.

Bank financing is most appropriate for up-and-running enterprises that can show adequate cash flow and collateral to service and secure the loan. Bankers are less likely to provide startup money to turn a concept into a business, and they're even less likely to put up seed money to prove a concept unless you have a track record of launching previous businesses with successful results.

Bankers prefer to lend to companies that are almost, but not quite, financially robust enough to pursue their objective without the loan. Their natural tendency is to be conservative. This is important to understand because it affects how and when you will borrow. Business Plans. Next Article -- shares link Add to Queue. Image credit: Shutterstock. The Staff of Entrepreneur Media, Inc. November 13, 6 min read.

How to Write a Business Plan for a Bank

More from Entrepreneur. Get heaping discounts to books you love delivered straight to your inbox. Sign Up Now. Are you paying too much for business insurance?Some tips to help you during the Start-up stage of your new business.

how to submit a business plan to the bank

A Business Plan is a written document that describes a business, its objectives, strategies, the market it operates in and realistic financial forecasts. A business plan has many important uses from proving the viability of your business, to securing funding and measuring success. Your business plan should be continually updated as the business evolves. You may need to share your business plan with potential investors, grant providers and business partners.

The Business Planning Process Various research shows that entrepreneurs who use a business planning process are twice as likely to be successful in getting a business started than those without.

Write your business plan. The devil is in the detail. A Critical Document A business plan has many important uses from proving the viability of your business, to securing funding and measuring success. A roadmap for success. Focus on what you need to do to develop your business.

how to submit a business plan to the bank

Structure the financial aspects of your business effectively. Measure the success of your business against your objectives. Identify potential pitfalls before they happen. Things to think about when writing your business plan. Practical support and tools. Related Links.Most entrepreneurs see writing a business plan as a gargantuan task — especially if they've never written one before.

And if you need a business plan for a bank loan, getting this document right is absolutely essential. So here's what we recommend: simplify the planning process by breaking the work up into manageable, bite—sized steps.

That way, you can focus on one section at a time to make sure it's accurate. Here's a quick overview of the step—by—step process we guide entrepreneurs through when they sign up for LivePlan.

We recommend actually going out and chatting with your target audience first. That way, you can validate that you're solving a real problem for your potential customers. Be sure to describe your solution in vivid detail.

For example, if the problem is that parking downtown is expensive and hard to find, your solution might be a bike rental service with designated pickup and dropoff locations. This is crucial information for determining whether or not your business will succeed long—term. For example, it would be easy for a barber shop to target everyone who needs a haircut. But most likely, it will need to focus on a specific market segment to reach its full business potential.

This might include catering to children and families, seniors or business professionals. Who are your direct competitors? These are companies that provide similar solutions that aim to solve your customers' pain points. Then outline what your competitive advantages are. Why should your target market choose you over the other products or services available?

How to Write a Business Proposal for the Bank

Think you don't have any competition? Think again. Your customers are likely turning to an indirect competitor that is solving their problem with a different type of solution.

For example: A taco stand might compete directly with another taco stand, but indirectly with a nearby hot dog vendor. This is where the action happens!