How to get a Business Loan
For a new business, a lender looks to your business plan for information needed to evaluate the loan request. A business plan is a written document that combines your personal enthusiasm for the business with real life facts, figures, and details. It also serves as a guide for your company's progress and should change and expand with your business.
A strong business plan will address four core questions. 1) What service or product does your business provide and what need(s) does it fill? 2) Who are the potential customers and why will they purchase from you? 3) How will you reach or market to your potential customers? And 4) where will you get the financial resources to start your business?
A business seeking a loan should speak to the following areas in its business plan:
1) Executive Summary - Brief description of the business, its goals and objectives
2) Service or Product Line - Detailed description of the product or service being sold.
3) Market Analysis - What is the target market? What is the competition? How will the business differentiate itself? What are your competitor's strengths and weaknesses? How will the business counter their strengths and exploit their weaknesses?
4) Company Description, Organization & Management - how will the business/company be structured. Who are the owners/managers, what are their backgrounds and what expertise do they have in this field?
5) Marketing & Sales Management - Who is going to be responsible for these areas? Describe the marketing plan.
6) Financials - if an existing business, include the historic financial performance. If a new business, include projections on a monthly basis, including the assumptions on which the projections are based. The projections should incorporate any investment by the owners as well as any borrowing that is part of the plan.
7) Funding - How is the business to be funded and what are the sources of that capital? If a loan is part of the plan, the actual request would be included here. Describe the collateral offered if any.
8) Appendix - The owners' personal financial information would be in this area. This would include personal financial statements, complete tax returns and current income information. Permits, licenses etc would be included here. This is a place to add any other information that the owner believes would add support for the plan as a whole.
A couple of areas that are often overlooked when planning a new business include, what if the projections don't materialize? How long can the owners support the business in those circumstances? How far off can the projections be and the business still be viable?
Brought to you by:
Debi Choate
Sr. Community Relations Officer
Texas Trust Credit Union
dchoate@texastrustcu.org
