Make The Bank Love Your Business Plan


If you have big dreams of starting your own business one day, then you’re certainly not alone. Countless professionals currently stuck in an unfulfilling nine to five want to start a business at some time in the future, but it’s only the brave who follow through with it, for better or worse. If you’ve decided that it’s time to take the plunge, but you’re not sure where to begin, again, you’re not alone. Every business, from the smallest to the largest, starts with a good business plan. This will help you monitor your progress, make rational adjustments, and above all, secure financing. Obviously, you want a business plan that investors will lap up, so here are some tips for making sure it’s as bank-friendly as possible.

Financial Projections

Every bank will be looking at your financial data before anything else, and will want to establish that you actually know and understand how much capital you need, and whether your business idea is financially viable. If the financial projections you come up with don’t pan out the way the bank needs them to, then you can kiss your funding goodbye. One of the two main things that investors look at are your individual cash flow, made up of personal cash flow, personal debt, business cash flow projections and business debt. The second is your debt service coverage ratio, which will indicate whether or not the business can ultimately cover the debt that it takes. If you want the bank to look at your business plan favorably, you need to get your financial projections in order, and understand your cash levers so that you can speak intelligently about what you need from your line of credit.

Your Professional Experience

Your personal, professional experience is also going to have a big impact on how credible you appear in the eyes of lenders. Have you shown previous responsibility for your profits and losses? Do you have a length of experience in the industry you’re targeting? Do you have a solid way of demonstrating that you have the ability to manage your chosen niche effectively? One useful and straightforward exercise during your business planning is creating a list with two columns. The first one should contain all the major factors you need to operate your chosen business model effectively. The second should have your accomplishments and experience that are tied to those factors. The completed list should make it as easy as possible for the decision makers at the bank to see that you and your team have all the qualities needed to run a successful business. If you draw up this list, and discover that you have some glaring hole in your professional experience, you need to work on this issue before actually asking for money.

Location, Location, Location

Although fewer and fewer businesses need any kind of customer-facing premises, you might be planning to launch one that needs to be seen by customers. If this is the case, your location and the available commercial properties in that area are all going to be important factors to lenders. They’ll want to know whether you’ll be able to establish your commercial premises on a corner with a lot of foot traffic, or far away from the high street and hard to spot for passers-by. Addressing how easy it will be for customers to find you in your business plan is essential to make sure prospective lenders will look at it favorably. Understandably, addressing these things can feel pretty overwhelming to a lot of entrepreneurs, particularly if they’re inexperienced. It’s important that you remember your overarching goal should be keeping the plan concise and thorough. The banks already know what it is they’re looking for. It’s your job to make it as easy as possible for them to find this information. You don’t need to pull all-nighters composing a 50-page document covering every little detail. However, you do need to provide clear, accessible information, and let it speak for itself. Wherever possible, make sure you’re getting input from trusted third-party advisers, such as real estate agents, lawyers, and experts in your field.

Your Marketing Strategy

Every responsible lender will want to know that you can attract new customers to your business. Whether you’re starting out as a small, independent business, or a franchise of an international brand, the bank will need some kind of evidence that you know your customer, that there’s a target market in the first place, and you have some innovative ideas about how to dangle yourself in front of those people. This is where it’s essential to drop the “build it and they will come” attitude. This saying may have come about at a time where it was true, but it certainly isn’t today! Even if you have the most innovative product or service to hit the market in decades, you’ll need to have some kind of plan in place for getting the word out and differentiating what you do from what your competitors do. Without getting on your customers’ radars, you won’t make any sales, won’t turn a profit, and won’t be able to pay back the considerable amount that you’re planning to borrow. Take the time to study the market, find out what your most successful competitors have been doing, and how you can improve on these tactics. Again, seek out an adviser. You don’t have to be a marketing expert to come up with a decent strategy, but talking it over with one will certainly help!

There you have my best advice for drafting a business plan that will have lenders reaching for their wallets. Your plan shouldn’t be an academic exercise or a single hurdle to overcome. It should be a living document which will show your investors, partners and advisers that you’re serious about turning your dream into a tangible, profitable reality. Remember that there’ll almost always be some flaw in your assumptions and projections. Once you get approved and open the doors to your customers, look for holes in your plan and work on patching them up!


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