Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Courses
  • Home
  • Law, Transactions, & Risk Management
  • Business Transactions, Antitrust, & Securities Law

Business Plans for Loans

Written by Jason Gordon

Updated at December 16th, 2020

Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Accounting, Taxation, and Reporting
    Managerial & Financial Accounting & Reporting Business Taxation
  • Law, Transactions, & Risk Management
    Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
  • Marketing, Advertising, Sales & PR
    Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
  • Business Management & Operations
    Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
  • Economics, Finance, & Analytics
    Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles
  • Professionalism & Career Development
  • Courses
+ More
Next Article: Business Plan for Equity Back to: LAW, RISK, and TRANSACTIONS

Using a Business Plan

The business plan describes the current activities, aims and objectives, and how they are going to be achieved over a set period of time. The primary sections of the business plan are:

  • Concept
  • Marketing
  • Management and Operations
  • Financials

The basic premise is to show:

  • Who you are.
  • What do you make or what service you provide (what is the value proposition?)
  • How you make it.
  • How you sell it.
  • The value exchanges that take place. (What money goes where.)

Crafting a Business Plan to Obtain a Loan

To craft an effective business plan, you have to focus on the audience. Appealing to a commercial lender is far different from appeal to an equity investor. A lender is going to be concerned with the ability to service loan payments, risk of default, and securing the loan with business collateral (taking a security interest in business assets).

  • Break down the loan request into its essential elements
    • Show how much is required for inventory, supplies, signage, prepaid expenses, working capital, etc.
    • Demonstrate the availability of capital and other security for the loan.
  • Cash Flow
    • Your financials should demonstrate that you will have enough cash flow to repay the loan amount.
  • Amount of Loan
    • You will need to lay out in detail the requested loan amount and the use of the capital.
    • As previously discussed, lenders prefer for loans to be used to purchase collateral, such as equipment or real estate.
    • Think strategically, as some loan amounts are difficult to obtain:
      • Because of internal bank structuring, loans in the range of $20-50K are the most difficult to get.
      • The consumer division generally services personal credit or consumer loans up to $20K.
      • The commercial division is most focused on loans of $100K or more, so you have to work harder to peak their interest in a smaller loan or line of credit.
    • Try to break down your debt needs into smaller phases until you can secure the money from personal credit sources.

Was this article helpful?

Yes
No

Related Articles

  • Management and Information Rights - Term Sheet
  • Carve Out (Finance) - Definition

©2011-2021. The Business Professor, LLC.
  • Privacy

  • Questions

Definition by Author

0
0
Expand