Small Business

How to Prepare a Business Plan for an SBA Loan Application

As any small business entrepreneur will tell you, the most important—and often the hardest—part of securing a sizable business loan is preparing the written loan proposal! The SBA, as well as lenders and banks, pay a sizable amount of attention to how well your business plan articulates your vision, your venture’s potential for success, your financial data, and product strategy.

The SBA can grant you as much as $5 million in small business loans, provided your business plan is good enough to thoroughly convince them to make such a major investment.

But beyond the need to secure a loan, the roadmap you create when seeking a loan will also help you stay on track, remember your vision, and expedite your way to success. Writing up a business plan for your small business is a mammoth task that requires research, writing skills, as well as a clear vision of what you envision your business to be.

Here are a few tips on creating a compelling business plan guaranteed to get you your loan:

The X Components of a Great Traditional Business Plan

Executive Summary

In this introductory section, you will introduce your company, talk about the factors that are bound to make it successful and establish your mission statement. You’ll talk about the products or services you hope to sell, as well as some basic background information on yourself, your employees and your management team. Provide a basic overview of your financial standing, credit scores, as well as your growth plans for the company heading forward.

This initial part will serve as a basic summary of everything else you include in the plan. You may write this after finishing the rest of your business plan.

Company Description

In this section, you will provide detailed information into your future company. Talk about all the products and services you hope to sell and what problems they would solve for your potential clients. Include your target audience, whether your business hopes to be a B2B or a B2C company, what competitive advantages you might have over your competitors, and what makes you different.

Convince your lenders that offering you a business loan would be a viable investment. This section is where you list all your company’s strengths.

Market Analysis

No smart lender will accept your SBA loan proposal if you do not have enough information about the market you hope to enter! The lender wants to be sure you know what you’re doing, are serious about it, and will be able to bring your plans to fruition.

Do your research. Find out market trends, themes, and the names of your most powerful competitors. What makes you different from them? How can you contribute to the market?

Organization and Management

Who are the people who will be running your business? What qualifications do they have? Will your business be operating as a C corporation or an S corporation? Are there going to be partners?

Include the resumes and CVs of the most important people of your team. Discuss how each contributes to your vision and what each member’s responsibilities within the organization will be.

Product or Service Information

What are your plans for overcoming copyright issues? What specialty do your products or services have that make them different from others? How are you going to manage intellectual property problems?

Determine Your Business Plan Format

Is your business plan going to be a lean startup plan? Or is it a traditional business plan? Knowing the difference between the two can help you create a better business plan according to your startup’s needs!

Lean Startup Business Plan

These are short, precise, and easy-to-write business plans that only contain the key elements of your startup’s category, expectations, the experience of employees, and some other small details. While they may suffice if you only need a smaller loan, it’s always helpful to create a traditional business plan when looking for larger loans. Many lenders or banks may ask you for additional information, even after perusing your lean business plan.

Traditional Startup Business Plan

Detailed, research-oriented, comprehensive, and elaborate, a traditional startup business plan tells an investor how serious you are about your future business, depending upon how well it is written.

It generally contains all of the necessary information about you and your employees’ prior experience, educational and career backgrounds, your vision for the business, and where you see it going, as well as statistics and research to prove your business will be successful.

Marketing & Sales

In this section, you will be describing your marketing strategies, your plans on attracting customers and creating a loyal, returning customer base. This section will also help you and your lender visualize how much you’re willing to spend on marketing your business.

Request for Funding

Here comes the most important part: your formal funding request.

In this section, you’ll lay down the amount of funding you’ll require over the course of the next five years, what it will be used for and how you intend to repay it. Talk about whether you want debt or equity, how long you need the loan for, the terms you want to be applied, and discuss how you’re going to be using the funds. Discuss your future plans for the business.

Financial Projections

If your business is already set up and working, provide proof that your revenues are increasing by the year, income statements, cash flow statements, balance sheets, and capital expenditure budgets. You need to prove that your business is stable and will not tank within the next few years!

On the other hand, if you’re looking for a loan to start your business, you need to have a clear-cut view of how you’re going to meet monthly loan payments. Devise a vision for where you see your business heading in the next few years, and provide your own personal financial statements to prove that you’re not a defaulter. Remember, your goal is to convince your reader!

Matthew Smith is a Sr. Editor at Content Development Pros – a leading inbound marketing company that provides comprehensive content solutions and custom business plan writing services to small and mid-sized businesses.

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Matthew Smith is a Sr. Editor at Content Development Pros – a leading inbound marketing company that provides comprehensive content solutions, web design and development, SEO, and content writing services to small and mid-sized businesses.

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