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What Makes an SBA Loan Business Plan Unique

Updated 26.03.24 15 minutes read
AdvisoryBusiness PlansIndustry InsightsJoorney Updates

A business plan is always one of the essential building blocks that turn an idea into a fully functional business. Of course, one of the other key pieces is getting the funding to turn a business idea into a reality. Thankfully, small business loans are designed specifically for entrepreneurs to raise capital. However, these loans aren’t handed out to just any business. Whether seeking out a loan backed by the Small Business Administration (SBA) or through another source, a quality business plan is absolutely essential to raising startup money or getting a cash insertion for an existing business.

However, an SBA business plan varies from other types of business plans due to three key elements. First has to do with the tone and message your plan needs to convey based on the audience. The second is content requirements. Finally, the financials section is geared/written towards proving the feasibility/ability to re-pay the loan plus interest.

SBA Business Plans Audience & Tone

When writing any type of business plan the first thing that you should always consider is the intended audience and tone. This is key for determining what sections need the most attention, what overall message you are trying to speak, and what your business plan should prove you will accomplish should you get funding.

One of the most important things to understand is that the person who will be reading your business plan and processing your application is simply an employee of the bank and is quite literally unaffected by your application (he/she doesn’t make any more or less money having handled your application) so long as he/she sticks to the set requirements (a checklist) for the SBA to be able to approve the backing/guaranteeing of your loan for the bank/lender. At the end of the day, the simplest message your plan should convey to the loan originator is that you will use the loaned funds to grow your business and have a proper return on investment to be able to pay back the loan on schedule.

SBA Business Plans Need Specific Section Requirements

As mentioned before, one of the main priorities of the loan officer who will be reviewing your business plan and application is to run through a checklist of requirements laid out by the SBA in order for your loan to be secured and lower the bank’s risk so you should always make sure that your business plan should include all of the following:

  • Explanation of your product, service, and value proposition
  • Analysis of your competitors
  • Marketing/advertising strategy
  • 3 to 5 years of financial projections
  • Historical financial statements (for existing businesses)
  • Terms of any existing debt.
  • Use of loan proceeds

As a general outline the SBA recommends the following outline of sections and page lengths:

  • Introduction (3 to 5 pages)
  • Market Analysis (9 to 22 pages)
  • Company Description (1 to 2 pages)
  • Organization & Management (3 to 5 pages)
  • Marketing & Sales Strategies (4 to 6 pages)
  • Product or Service (4 to 10 pages)
  • Equity Investment & Funding Request (2 to 4 pages)
  • Financial Information (12 to 25 pages)

For a more detailed breakdown of the sections and the recommended content for each section feel free to refer to the website or CLICK HERE to be directed to a page with more information.

Gear Financial Section Towards Proving Ability To Re-Pay Your Loan

Although there are many required sections, an SBA business plan should focus a lot of attention on the financials. In fact, according to the SBA website, the financial information section of your business plan should be as many as 25 pages long, making it the longest and most important section of the business plan. The information found in the section is particularly detailed, including financial data about the business owners, forecasts of the business’s five-year financials, and at least three fiscal years of existing financial data, if available. SBA Business Plans also needs to detail plans to repay the loan plus interest.

It is best to put yourself in the mindset of the final reader when reviewing your plan and look for inconsistencies in the plan, ensure you have feasible projections, and look for a healthy cash flow coming into the business to ensure you show the ability to make timely loan payments.

Also, keep in mind that since you are dealing with a bank/lender and not an investor the burden of proof falls on you to convince them of your plans on how you plan to pay back the loan plus interest. Unlike an investor, a creditor cares less for “promises” or “great ideas” and instead like to see the business asking for capital to invest in tangible assets, ROI driven investments such as marketing, additional inventory, or equipment because the bank then has more collateral or liquefiable assets they can acquire from you should your default on your loan, so keep the above in mind when writing your financials and explaining how you will use the capital they will lend you.

Final Thoughts

A good business is evolving constantly and, as such, many business plans evolve regularly as well. In fact, a normal business plan can be a living and breathing document, changing with circumstances or as the business evolves. This is not the case with an SBA-focused business plan. Potential creditors will be on the lookout for any possible inconsistencies or errors in the business plan and, generally, once an SBA business plan has been submitted to a financial institution, they do not allow any amendments. This makes attention to detail and overall accuracy incredibly important for an SBA business plan and winging it will have consequences.

Should you decide you would like professional assistance with your SBA business plan writing, do not hesitate to contact our team of professional writers who can provide proper guidance to give your business the best chances of receiving loan approval.

Now you know the basics of putting together a sound SBA loan business plan. However, the road from theory to practice can be quite challenging. We definitely do not expect you to become a business plan writing expert from reading one article so should you prefer to leave the job to a professional and want with your SBA Loan business plan feel free to reach out to our team of professional business plan writers to get the upper hand and increase your chances of securing your SBA loan.