Most start-up businesses need finance to grow and establish themselves in the market. Even the established businesses might want to invest more money in the business as part of a growth plan. One easy option for finance is banks. Generally, commercial lenders require specific details from a borrower, which includes a brief summary about the business, profit and loss statements, balance sheets, a personal and/or business resume, collateral and personal guarantee by the borrower. A successful business plan can change the game and ensure the finance required is obtained easily from the banks.
Different banks have different requirements but there are five things a banker will look for in the business plan:
Cash flow: This is probably the backbone of any business plan as this is a summary of cash flow in and out of the business over a certain period. A well-documented cash flow will consider the repayments and other payments including all the cash inflow to ensure the business is solvent over a period and meet the guidelines for the bank loan. Many banks want to see the projected cash-flow for the next three years including past years cash-flow (if applicable). A good cash flow will ensure you satisfy the most important requirements of the bank.
Income statement and Balance sheet: The income statement (profit and loss statement) shows the revenue, expenses, and net income (or net loss) for a period of time. The projected income statements demonstrate that your business has the ability to earn profits over time which ensures the business is viable without constant bank support.The balance sheet is a statement of financial position that shows total assets = total liabilities + owners’ equity. The purpose of the balance sheet is to report the financial position of a business at a particular point in time. Banks will look-at both of the statements to ensure it meets the banks requirements.
Management: Successful management mean successful business. Banks value this motto and you should be serious about this too. Any past business experience, past business courses or any related skills is likely to foster a positive attitude of the banks towards your business. We suggest you include all the management personnel’s skills and experience in the business plan so the bank immediately have a positive attitude about your business.
Marketing plans: Bank usually take a closer look at your marketing plan as without a good marketing plan, your business will not grow. A good marketing plan will consider your competitors, SWOT Analysis, it will also incorporate a plan to expand your products/ services, etc. Banks will recognise that you have done hard work to come-up with a good marketing plan and this means success for your business.
Security: Security for the bank loan (preferably any real estate assets) will ensure the loan is easily approved by the banks. Banks always want to ensure your repayments will be collected, if not; they have a security asset to recover the loan amount. Any security asset can be described in the business plan including its ownership details. Usually, the loan interest rate will be lower when a real estate security asset is on the table.
Bankers are there to lend you money but they want the security of its return plus interest. A well-presented business plan answers any question the bank has about your business including detailed financial projections to validate the concepts in numbers. A clear business plan sets-out your mission, vision, goals and projections which is‘must have’ information required by most of the banks before they tick the yes box for your loan. Here are some of the sample Business Plan templates of the major banks: