How to Write a Business Plan for a Business Loan

Know who is reading it

Lenders read plans to judge repayment risk. They care about cash flow, management and what could go wrong more than slogans and vision statements.

A lender wants to see that you understand your business and your numbers. Lead with facts. Keep the language plain. Avoid claims you cannot support, such as "no competition" or "guaranteed growth".

Not every funding type requires a full plan. Faster products often rely mainly on bank statements and an application, while SBA and bank term loans commonly ask for a plan. Check what your funder needs before you spend weeks on it. For plan types, see six types of business plans.

Executive summary and business description

Open with a one-page summary covering the business, the request, the use of funds and the repayment source. Then describe operations, customers and location.

The summary should stand alone. Include:

• What you sell and to whom
• How long you have operated and where
• Recent revenue and profit, stated plainly
• The amount requested and exactly what it will buy
• How and when you expect to repay

Follow with a description of your products or services, ownership structure, staff and location. Keep it factual. The guide to writing a business plan offers a fuller outline.

Market and competition

Show who your customers are, how you reach them and how you compare with alternatives. Be honest about competitors.

Describe your customer base and why they buy from you. Mention your local market, repeat customers, contracts and seasonality. Name your main competitors and say how you differ on price, quality, speed or service.

Do not invent market-size numbers. If you cite statistics, link to an official source. Useful tools are covered in market research and competitive analysis in a business plan. A candid SWOT section also reads well. See the SWOT analysis guide.

Management and operations

Introduce the people who run the business and their experience. Lenders back people as much as ideas.

Give each owner and key manager a short paragraph covering relevant experience, years in the industry and responsibilities. If you rely on one person, explain the backup plan. Describe how the business actually runs: suppliers, equipment, systems, key licenses and insurance.

If you are buying equipment or space, say what you have already done, such as getting quotes or reserving a spot. Evidence of progress carries weight with a reader who has seen many optimistic plans.

Financials and repayment story

Include historical statements, a projection with stated assumptions and a clear calculation showing how the new payment is covered.

This section matters most. Provide:

1. Two to three years of income statements and balance sheets, if available
2. Current year to date results
3. A 12 to 36 month projection with stated assumptions
4. A debt schedule
5. A repayment table showing the new payment against projected cash flow

Be conservative. In this illustrative example, if you request $80,000 with a payment near $2,700 a month and the project adds $7,000 in monthly profit, show the arithmetic. Learn about financial forecasting and the difference between an income statement and a balance sheet. Add a short downside case too.

The funding request, and when a plan is not needed

State the amount, the use and the terms you are seeking. For faster products, a plan may not be required at all.

Break the request into line items, such as $45,000 equipment, $15,000 inventory and $10,000 working cushion. Match the product to the purpose, and show you understand the cost.

If you need money soon and have an established record, you may not need a full plan. ROI Funder looks at the application and 3 months of business bank statements, for businesses with 6+ months in operation, $20,000+ monthly revenue and 500+ FICO. Options include working capital and term loans, and complete files can be funded the same business day when approved. If you want the lowest cost and can wait, prepare a plan for an SBA loan.