How to Create a Business Plan for You and Your Lender

Creating a Business Plan

Here are a few words that describe starting a business: exciting, daunting, thrilling, confusing, scary, and maybe “it’s about time!”

If you’re getting ready to launch your own enterprise, we encourage you to build a business plan that captures your visionary thinking on paper. Business plans aren’t just for those start-ups looking to borrow money or find investors. Business plans help soon-to-be business owners evaluate their ideas, prepare for different scenarios, stay focused, and get taken seriously.

In this article, we’ll outline what your business plan should cover, and what lenders look for when they’re reviewing your plan. At the end we have a great resource that will help you easily pull all the important details together.

Section 1 – Executive Summary

You’re actually going to write this section last because it should be a compelling overview of the rest of your plan. This preview needs to interest your reader enough to continue through to the end. Describe your idea; explain clearly what you’re selling. Highlight the strengths of your idea, the credibility of your team, and summarize why your business vision is relevant, timely and viable. Provide a simple chart of financial projections, then state clearly how much funding you’re requesting, and what these funds are needed for.

Your lender will want to see: Why you’re starting this business, why it will succeed, what makes it different and exciting, and how much money you need to borrow.

Section 2 – Company Profile

Even if you’re a company of one, this section is important. What does your company do? What problem does your company exist to solve? This may be answered with your company’s vision, mission, and value statements. Explain your business philosophy and your personal reasons for starting this business. If you’re seeking funding to grow, move or expand and have been in business for a few years, include your key accomplishments. Describe who makes up your team, and what their qualifications are.

Your lender will want to see: A clear reason-for-being, your passion, and solid management expertise.

Section 3 – Products and/or Services

Now you can describe, in detail, your products and services. Why is your offering different and why will people buy it at the prices you’ve set? What is it about the raw materials you’re using, the way you create your offering or the people you employ that make your products/services unique? Explain how your business can capitalize on current trends, and survive beyond them.

Your lender will want to see: What makes your business different, and your thorough understanding of your industry.

Section 4 – Marketing

This isn’t the place for clever taglines or advertising slogans – yet. This is a strategic look at your market (who’s buying) and your marketplace (who else is selling). Describe who will buy your product, how often, where they’ll find it, and how much they’ll pay. The more detail about your potential customers that you can give, the better. You’ll need to promote your offering: you may need package design, branding expertise, tech support and advertising. Who is responsible for marketing? Consider asking them to help write this section.

Your lender will want to see: That you won’t be your industry’s best-kept secret. You have a solid base of customers out there and a concrete plan to win them over.

Section 5 – Operations

This section will show how well you run your business. Identify all your suppliers, and outline your process – from design to creation to distribution. What steps are you planning for quality control? What innovations will you apply? How will you recruit and retain employees? Who and what technology will help you track inventory, logistics, scheduling, and costs? This is where lenders want to see you consider all the angles, including what can go wrong. What risk mitigation and risk management steps will you take?

Your lender will want to see: A thorough understanding of what it takes to run your business day in and day out, foresight when it comes to problems and business interruptions, and an approach to employee satisfaction, customer satisfaction, and sustainability.

Section 6 – Financials

Throughout the plan, you’ve provided lots of detail about what you’re selling, how it’s created, who makes it, who delivers it and who buys it. Financials are a natural next step. (It’s probably safe to say this will be your lender’s favourite section.)

Your three main financial statements are the Income Statement, Cash Flow Projection, and Balance Sheet. These statements will be formatted as tables or spreadsheets and will show clearly the assets, liabilities, expenses, projected revenues and profits for at least a year’s worth of business.  Download our workbook, More than Numbers Can Say, for a full explanation of these financial statements and what they need to include. Accuracy and attention to detail are crucial to present credible financials – this is where your Chief Financial Officer, accountant, bookkeeper or banking partner needs to weigh in.

Your lender will want to see: That beyond being a visionary, you understand the money management side of running a business. You can offer a detailed financial picture, realistic projections, and a buffer for unexpected events.

Section 7 – Appendices

An ‘appendix’ is any additional documentation you attach at the end that you think adds value to your plan. These may include full resumes of your leadership team, client or vendor agreements, design plans, permits, market studies, contracts, etc. The only reason to include additional information is if it makes your plan more convincing, but doesn’t fit neatly or concisely into the sections above.

Your lender will want to see: That you’ve done your homework and have thought through the details.

You can see how this level of planning and projecting would help any new business, even one not applying for a business loan yet. On our website, we have some great tips and resources for business planning, and a fill-in workbook, More than Numbers Can Say, A Business Planner. This will help you start pulling together the information you need for your business plan, which you can then flesh out before you present to lenders.

Get help from qualified professionals – your lawyer, accountant, a mentor or business advisor. And if we can provide any insight beyond the business advice on our website, please reach out. We’d be happy to help!