Business Plan Components Lenders Check Before Approving a Loan
When you write your business plan, you’re creating a framework for the success of your business. When applying for financing, lenders ask for your business plan to be able to understand your business’s vision and mission so they know where their money is going. Lenders look for different highlights in a business plan before agreeing to sign off a check.
By learning what they look for in a business plan, you can master how to give it to them for increased chances of success. Here are some of the top business plan components lenders check before awarding a loan.
Executive Summary
A well-written executive summary is a crucial section of your business plan that invites potential investors to a summary of your business objectives, financial highlights, and products or services. It’s the first thing they will read and can easily make or break the deal depending on how it’s crafted.
You must ensure that the readers get a clearer idea of what your company is all about, even before you talk to them about it. Your company’s mission and vision statements should be a part of the executive summary to help with the complete introduction of your company. Whether you’re applying for hard money loans from the Pacific Northwest Capital loan programs or pitching a venture capitalist, have a succinct executive summary that speaks for your business.
Revenue Generation and Financial Projections
The revenue generation and financial projection information can all be captured under the financials section of your business plan. Investors will be trying to find out how their money will be earned back if they invest in your business. They’ll try to see how you make your money and the financial projections you have for the next few years. This includes your business costs, profit margins, and cash flows for the past three to five years that capture a clearer picture of your financial performance over the years.
Market Analysis and Marketing Strategy
A satisfactory market analysis captures a detailed breakdown of your industry, market trends, competitive landscape, and customer demands. It helps lenders know who you serve, how viable the market is, and the population size in your industry. They’ll also know from this information who your direct competition is and how you’re performing against them.
In your marketing strategy, you can include the various advertising strategies you’ve employed to beat the competition. Let them know if you’ve done social media advertising, presentations, strategic partnerships, broadcast advertising, or any other form of advertising that has earned you impressive results.
Management Team
It’s important for potential investors to know who is at the helm of the business they want to finance. Provide information on the main members of your management team, including their professional background, credentials, qualifications, and roles and responsibilities. Knowing who will be in charge of spearheading the anticipated business growth is as important as knowing the traits of those you’re trusting your money with. The right team will undoubtedly earn the desired results more easily when the money comes.
If you’re planning for an expansion soon and are looking for various financing options, having a robust business plan can help you stand out and attract more investors. Ensure your business plan is updated to include the relevant information lenders look for before awarding loans to improve your chances.
