Whether your business is still in its startup phase or in the middle of a growth period, one of the most important documents you’ll ever need to create is a business plan. In case you’re unaware, your chances of obtaining small business loans rest heavily upon it. In other words, your request and approval for a loan highly depends on how well you present your business to potential lenders.
Needless to say, the key to getting the funds you need to drive your business forward is to figure out what the lenders want to see in a business plan, and then provide it for them.
To help reputable lenders gain a better understanding of your business, be sure to include the following key points:
1. The History of Your Business
Indicate where your business started and how it has grown. Be sure to cite the unique challenges you were confronted with and how they were addressed. This will give lenders a clear perspective on your business acumen, and how you adjust to the changing highs and lows of today’s market.
2. How Your Business Generates Revenues
Lenders would want to make sure they’ll be repaid the money they lend. You’ll need to explain how you serve your customers, how you deliver your product/service, and how you collect payment.
3. The Management Team
Your prospective lenders will want to know if your management team possesses the relevant skills such as knowledge and experience at leading and growing your business. Be sure to clearly present the people at the helm in a positive light and expand upon what they bring to the table.
4. The Market
Lenders pay close attention to how your business generates continual revenue creation and growth. Your business plan provides them with pertinent information about the customers you serve, the size of the market, the viability such as affluence and potential for growth. They will also look at your competitors and want to know how you set yourself apart. They’ll also want to see how you market your business and look for things such as strategic partnerships, a social media presence, broadcast advertising, and presentations.
5. Historical Financials that Include Debt Coverage Ratios
Lenders want to see a detailed financial report that clearly shows all of your business’ revenue, assets, and liabilities. However, you’ll need to present repayment structures so that they can have a clear idea about your business’ financial health. You’ll also need to make sure you don’t have insufficient cash flow as well as debt service coverage ratios. Not having enough cash on hand to make loan payments is a surefire way of being denied small business loans.
It’s critical you give lenders a snapshot of what you expect to happen to your business financially, on a moving forward basis. It’s best to highlight the contrast between what will occur without funding and what projected growth is expected should you receive financing. Don’t forget to mention your projections involving job creation, product development, and market growth. They’ll also want to see any seasonal or cyclical changes to your business and how these changes will impact (if at all) your business financially.
Never fail to cite the assets that your company currently owns including any real property or patents that can be leveraged against your debt. In case you’re not aware, it’s also possible to include personal property as additional collateral for underwriting consideration.
8. The Purpose of Your Project
Lastly, remember that reputable lenders will always want to know where their money is going. Furthermore, they need to understand the reason why you’re asking for small business loans and the need it serves. Whether you plan on installing new equipment, expanding, opening a new location or moving to a better location, you’ll need to be as detailed as possible. A comprehensive presentation of these details is highly critical if you’re looking to get small business loans or some other economic incentive that’s tied to specific policy directives.
It’s also quite possible lenders will ask for items that go beyond your business plan. These may include criminal records, residence or secondary repayment sources. To keep the process moving, you’ll need to be responsive to their requests even if some of them may seem to be unnecessary.
If you’re prepared to give them the information they’re ask for, you’ll give them a positive impression that you and your business are stable, professional and credit worthy. Do all that you can to improve your chances of being approved, and be sure your business plan be the center-point that works on your behalf.
Small Business Loans: The Financial Source You Need
If you want additional information regarding the ins and outs of small business loans, talk to the lending experts at SMP Compass today. Simply ring us up at (888) 853-8922 or email us at firstname.lastname@example.org.