Top 5 Things You Should Make Sure You Include in your Business Plan when Applying for an SBA Loan
Are you planning to apply for an SBA loan in order to secure the funding you need for your business? The Small Business Administration makes it clear on its loans page that, although eligibility requirements vary from one type of loan to another, all lenders will want to make sure that the businesses they fund meet the size standards, have a sound business purpose, and will be able to repay the loan.
The easiest way to prove all these is by putting together a sound business plan. In fact, most SBA lenders will request it as part of the loan application documentation. It is a written presentation of your business, covering its current situation, its goals, and its strategies for achieving them from at least three perspectives: marketing, finances, and operations.
“Your business plan helps provide a background on the people who will be running the business, the intended use of the funds, and helps you show the lender that your business concept will not only be profitable but also allow for you to effectively re-pay your loan,”
– Gerald Padilla, Joorney VP of Sales & Marketing
How do you prepare it? If you do your homework, you will find numerous business plan samples online, as well as advice for crafting your own. No matter what approach you choose to follow, there are five fundamental elements that can make or break your loan application, so be sure to include them in your business plan.
The 5 Most Important Elements of a Sound SBA Loan Business Plan
1. Your Resume
As a business representative and loan applicant, you are the first person the lender will look at when trying to determine if your business is worth investing in. They will want to know what qualifications and experience you have, whether or not you are able to drive your business to the necessary success in order to repay the loan.
Do not let them guess or ask for further details! Show them that you understand the way they think and you are on the same page by including your detailed resume. Be sure to highlight the studies, experience, and skills that could be important to the success of your business. Think accounting, management, marketing, etc.
Also, do not hesitate to mention previous achievements, your family situation if it inspires stability and reliability, and even your hobbies and interests, if they are in any way related to your business. The lenders need to feel that they know you. This is your chance to convince them to trust you with their money.
2. Product or Service Description
You know your business better than anyone, there is no doubt about that. However, if you want to get your loan application approved, you need to help them get to know it and share your perspective. Therefore, provide a detailed description of your main products or services. Make sure to explain their place on the market, to show that they answer an new or existing and preferably immediate need.
3. Market Research
Having a great product or service idea is not enough. We live in competitive time, so lenders want to make sure the products or services you plan to sell will not be overwhelmed by the competition. Show them that you did your homework, you know your main competitors, and you have your own plans and strategies to outrun them.
You should also prove that you know your target customers, what they want from products and services like yours, and how much they would be willing to pay for them. You can do that with statistics, consumer reports, buyer profiles, surveys, market trends analyses, and more.
4. Finances and Projections
Another thing your lenders will want to know is how much your business is worth at its current stage, what assets you have (perhaps they will ask for collaterals) how much money you need to make it profitable, and what profits you think you can drive, all against a clear timeline.
Therefore, be sure to include a clear presentation of your current financial situation, as well as realistic estimates of the investments required and of the anticipated profits. Provide enough details so as to allow your lenders to understand how you came to those figures.
While it is normal for you to hope for the best, they want to make sure that, even if reality does not live up to your expectations, you will still be able to repay the loan. Put yourself in their shoes and ask yourself if your financials are clear and convincing enough.
5. Action Plan / Milestones / Intended Use of Funds
Let’s say your loan application is approved and you receive the funds you need. How will you use them? Detail the steps you intend to take, the acquisitions you intend to make, how you will market and sell your products and services, and how much it will all cost you.
Show your lenders that you have taken all costs and risks into account and nothing will prevent you from making your business profitable. Set clear milestones for measuring your progress and, if necessary, reviewing your strategy. They need to see that you are more than a dreamer. Show yourself as a responsible, experienced, and ingenious businessperson that they can safely trust with their money.
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.