Three Tips For Writing A Business Plan For A Loan

A clear vision is what differentiates an organisation from its competitor and helps it steer through the odds. Lack of vision is like wandering without a purpose and this is exactly why it is crucial to have a business plan for all activities including taking a loan.

What Is A Business Plan For Loans?

A business plan is a written road map that outlines the company's objectives and means to achieve it. Both startups and established companies need to have a detailed business plan, serving as an external guide to attract investors as well as internal guide to keep the staff motivated.

And yes, a business plan is also one of the most important documents that lenders consider while assessing a loan application. To get the lender's stamp of approval, one needs to know the art of writing a business plan. Lenders are curious to know about the business idea in order to weigh its sustainability in the market. A well-written business plan is like a communication tool speaking for itself.

The business plan for a loan should be practical and comprehensible to loan officers. When lenders ask for a business plan, they specifically look for the history of the business along with particulars about the core management team and the experience they bring to the business. Lenders are equally interested to know about the product, its target audience and the rivals sharing the same space.

How To Write A Business Plan For A Loan

All lenders are concerned about their money. So, they take exceptional interest in knowing how a borrower will operate his business. A business plan should suffice this and much more. Here are a few suggestions to learn the basics of writing a business plan for a loan.

• Compelling Executive Summary:

It is a concise version of the business plan, usually contained in less than two pages. For startups this section should discuss key pointers such as business opportunity, target market and planned strategy for building the business. For established businesses the executive summary should reflect the past achievements and must also project the business operations and financials for the future growth plans. The section also may touch on the business’s current market position. It ought to discuss the product and how it will succeed against the competitors.
However, it must not be a full-proof marketing plan or a detailed description about the company. These can come later. Since the executive summary must be engaging, easy to read and fittingly include the gist of the entire business plan, one should write the entire business plan first and then create the executive summary. Since most entrepreneurs may not be good at writing, hiring a professional writer or an editor can be useful.

• Confirming Primary Objectives and Strategies:

Including the key objectives and strategies in a business plan clears the purpose. When writing a business proposal for a loan, it is important to outline the mission and vision statement to all stakeholders.
This part of the business plan describes how and where the business would operate, the anticipated marketing and promotion strategies and also, the unique selling proposal of the company that separates the organisation from rival companies in the industry.

• Projecting Important Financial Information:

Most lenders ask businesses for at least three to five years of financial data. While writing a business plan for a loan, one must provide accurate and up-to-date financial information. It should include income statements, cash flow statements, capital expenditure budgets, balance sheets, etc.
Lenders are also interested to know how the expected funds can help. It is also important to consider seasonal changes in business and what financial impacts those changes could possibly have. The business plan must also mention the requested loan amount, interest rate, payment schedule, collateral, and other financial metrics relevant to the case.

Conclusion

A business plan for a loan defines the company's vision to the lender. Before lenders grant money, they evaluate the business plan to understand the company’s viability and financial predictions. Hence, there is no alternative to a good and effective business plan.

A promising business plan for a loan should have a concise executive summary outlining the company’s purpose while communicating the key objectives and strategies along with important financial information. In addition, it should also include an exit strategy to convince the lenders how the business is aware of the potential risks involved in the trade.

Of course, lenders consider other things beyond a business plan. No matter what the lender asks for it is important to be receptive to all lender requests to keep the process moving forward.

IIFL Finance offers quick business loans to businesses of all sizes and types. IIFL Finance loans for business can be availed by proprietorship, partnership firms, private companies or limited liability partnership (LLP)units . Most IIFL Finance business loans have a tenure of 1 to 5 years. However, to qualify for a business loan, the company should be operating in the market for at least 6 months.