How to Prepare a Business Plan for a Small Business Loan Application

Most business owners will tell you that starting a business is one of the most exciting things imaginable. When it comes to obtaining funding, it can also be one of the most frustrating. Banks are not in business to make risky loans to untried individuals with a big dream but little expertise. Most legitimate lenders are interested in making loans that are a sure thing or at with extremely low risk involved. So, how does a budding entrepreneur like yourself ever hope to get a business loan from a bank? The answer could reside in a document known as a business plan.

Lending institutions want to know a little bit about you and your business idea before they will even consider cutting you a check. Most loan officers have gone out on a limb a time or two and had it sawn off when the borrower went bankrupt. A good business plan at least lets the bank know that you are serious about your dream. A well-written plan explains concisely what your business will do and how it will make money. Most lenders want to see numbers; ideas alone are meaningless unless you have taken the time to project your costs and returns in detail, and the numbers work out positively. Another critical factor bankers want to know is whether you have planned your marketing and advertising. They know that if people do not know about or remember you, they cannot buy from you.

Your business plan should also include detailed information about you and every partner and management-level individual in the company. The personal and business credit history of you and any partners will play an important role in getting approved for a loan. Also, you need to include a detailed account of how the borrowed money will be used in the business. The banker wants to know how you plan to spend the money the bank loans you in such a way as to increase the odds of you making enough to pay it back on time.

A final thing to include in your business plan is your longterm goals. Where will your business be in three years? How much will you have grown in five years? Any predictions you make will not be perfect, but give the lender realistic projections based on the best calculations you can perform. It is alright to be optimistic, but you want the bank to know that you are grounded in reality and not chasing an unobtainable fantasy.

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