Featured image: How To Write A Business Plan For A Bank Loan

07Jul

By candbindia Business plan, Financing Stratrgy, Funding your business 2

How To Write A Business Plan For A Bank Loan

One of the key requirements of any business loan proposal is a well-developed ‘BUSINESS PLAN’. “BP” not only demonstrates that the business has clear roadmap but it also ensures that the lender gets convinced and provides business the required funds. By which the projected plan of the business can be executed and achieved.

A good business plan is the best way to convey ‘Why bank should lend you money and support your business'

A well classified “Business Plan” will help the company in identifying the potential need of fund in well-advance time period, so that the company will have enough time in working towards raising the required funds with well wider options to reach out and decide whether to raise Debt-Funding or Equity-Funding.

Here Are Some Ways Of How To Write A Business Plan For A Bank Loan.

A QUICK INTRODUCTION

Give an overview of the company, that gives the reader a basic background information and an understanding of What a business does, who constitutes the management team, what category of customers are being served. It should provide a short, concise, optimistic overview of your business that captures reader’s attention. It shall include,

Company Overview

Product they offer

Management team

Vision and Mission statement

Legal structure and ownership

1Geographical presence.

DESCRIBE YOUR PRODUCTS OR SERVICES

In this section describe the value proposition that business offers to their potential customers. Success or failure of the business mainly depends on the product or service offered by the company. So, describe it by stating following attributes,

·Description of the Product/Service

·Pricing

··Product specialty and how better the product is compared to the competitors

Process

R&D of your product under development

Target Customers

Trademark if any for the products or services etc.

MARKET ANALYSIS:

After giving a brief intro, provide competitive analysis of the market where business is carried out. The market analysis concentrates on characteristics of the market in which the business is in and the existing gaps that the business intends to resolve and fill. A business plan’s market analysis shall include,

1. Industry Overview

2. Any differentiation in sector and niche

3. Information on your target market

4. The company’s marketing strategy and how it will make the company stand out.

5. Include in information on the competitors and customers. Mention how the competitors differentiate themselves in the market, what is their pricing strategies etc., along with your future plans to overcome it. Add outcomes of our market analysis on your target customers. It shall contain.

a. Who are the customers?

b. Age group

c. Gender

d. Geographic location

e. Education (if your business is of service industry) etc.

which indicates that you have proper analysis of the market and also that you have made projections and future business plans with proper supporting evidence. The market analysis should be based on the credible sources. While disclosing information about your competitors and their products, disclose the source of the information.

ORGANIZATION AND MANAGEMENT SECTION

This section of the business plan states how the organization is structured, details about the ownership of the company, profiles of the management team including BOD and KMP. A convenient way to organize this section is to break it into the following points

Ownership Structure : Outline the legal structure of your business. And make sure to mention about the ownership holding pattern.

Internal Management Structure : Describe the major departments like Finance, Production, Sales, Marketing, etc. and include brief profile of the responsible persons highlighting their skills.

External Management Resources : Having external resources gives the business an edge over their competitors and the business can take advantage over their years of experiences. Give a brief profile about all the External Resources whose guidance are sought after by the management in taking better decisions such as Lawyers, Business advisors & consultants.

Human Resources : Give a clear picture of HR department by including following information

·Organization’s Employee Requirement at each stage of the business

Skillset required for Employee Selection

Type of employment (Full time or Part time)

·HR Policies and Planning towards Employee recruitment and retention, which supports improving efficiency of the staffs, ensuring the future success of business.

FINANCIAL ANALYSIS

‘Profits make your business attractive to the lenders’.

Financial analysis section is the key for lenders. It must include financial projections for next three to five years. Financial projections shall include the following:

1. Documents such as Income statement, cash flow statement, Balance sheet

2. Break even sales at which business can recover total cost

3. Projected profit or loss that business expects to make in the projected years

4. Cash flow forecast, estimating the quantum of money that will be in business cycle circulation.

5. Pro forma Balance sheet stating the projected assets and liability

6. Business ratios especially debt coverage ratio, Interest coverage ratio etc.

FUNDING REQUEST:

When it comes to funding section, provide information on future financial plans, how much cash is required, at present and in near future (next five years), and how the estimate is being arrived. In case of collateral loan, include information about the asset being pledged as well. Outline how funds will be used, whether for business cycles, expansion or repayment of existing loan etc. Mention the source and the amount of revenue that organization can generate in the future that ensures repayment of loan.

APPENDIX

Appropriate appendix material includes

Tax returns

·Relevant Documents

Sales & Other forecasts

Profit and loss statement

·Balance Sheet, etc.

CONCLUSION

A well written business loan proposal is the first step towards receiving a loan approval. In most cases Business Plan will be the first contact a lender will have with your business. Therefore, put time and effort to draft a persuasive, positive proposal that convinces the lender to lend you the funds.

EFFECTIVE WAYS OF PREPARING A BUSINESS PLAN FOR LOAN PROPOSAL