The business plan should include
Executive Summary
This portion concisely summarizes the key elements of the business plan which follow,
and should convince the lender that it is worthwhile to review the plan in detail.
Include information about the loan being sought in terms of amount, purpose, duration,
and how you intend to pay it back.
Company History / Organization / Management
Describe the historical development of the business, including legal form of
organization, significant changes, subsidiaries, degree of ownership, and the
principals roles they played in the firm's foundation. Detail their experience and
the management and decision-making structure. Also include an organizational chart
and discuss other key personnel and their responsibilities.
Product/Service
Detail the present or planned product or service lines, including their relative
importance (with sales projections, if possible), evaluation (use, quality,
performance), competitive advantage, and demand.
Market Analysis/Marketing Strategy
You should be able to estimate how many customers you will have and how near they
are to your location, as well as their age, family structure, lifestyle, disposable
income, and purchasing habits. Explain why your product/service is desirable to
them, the scope of your firm's marketing and selling activities (including pricing
policy), and what share of the market you will realistically be able to capture
based on the industry analysis that follows.
Industry Analysis (Competition)
It is equally important to know about your field and have a keen sense of the
competition. List your major competitors by name and describe how closely located
they are, what products/services they provide, what they do better/worse, and how
profitable/successful they are. Also elaborate on the industry itself, including an
industry outlook, principal markets, industry size, and major characteristics. Describe
the effects of any major social, economic, technological, or regulatory trends.
Production/Operating Plan
Explain how the firm will perform production or delivery of service in terms of physical
facilities, suppliers, labor supply (current and planned), technologies/skills required,
manufacturing process (if applicable), and cost breakdown for materials, labor, and overhead.
The following items are also often required in support of the loan request:
Sources and Uses of Funds Statement
The potential lender will require a statement of how you intend to disperse the loan
funds; back up your statement with supporting data. For example, buying a commercial
building will require a preliminary title report, an appraisal, an escrow, and title
insurance, among other documents.
Cash Flow Statement
These documents (used for internal planning) project what your business means in terms
of dollars and show cash inflow and outflow over a period of time. If you've been in
business for some time, worksheets can be compiled from the actual figures of income
and expenses in previous years combined with projected changes for the next period. If
starting a new business, you will have to project your financial needs and disbursements.
Three-Year Income Projection
This pro-forma projection only includes income and deductible expenses, while the cash
flow statement (above) includes all sources of cash and monies to be paid out. Find
out the lender's specific requirements as to whether income and expenses should be
projected on an annual or monthly basis.
Breakeven Analysis
The breakeven point is the point at which a company's expenses exactly match its sales
or service volume, and the firm neither makes a profit nor incurs a loss. It can be
calculated in either mathematical or graph form and expressed in total dollars or
revenue exactly offset by total expenses.
Balance Sheet
This financial statement, usually prepared at the close of an accounting period, shows
the financial condition of the business as of a fixed date. By regularly preparing it,
you will be able to identify and analyze trends in the financial strength of your
firm and thus implement timely modifications.
Income Statement
In contrast to the balance sheet, this statement shows what has happened to your
venture over a period of time; it is an excellent tool for assessing your business.
It enables you to identify weaknesses in your operation (such as the timing of an
advertising campaign that did not bolster sales as anticipated) and devise more
effective ways to run your firm and thereby increase profits. Similarly, you might
examine your income statement to see which months have the heaviest sales volume
and plan inventory accordingly. Comparison of income statements from several years
will provide an excellent picture of the trends in your business.
