Your business plan is the document lenders go-to when evaluating the request you’ve made for funds in your loan application. Bank records and another method of measuring creditworthiness through quantitative methods are all cut and dried, and they can’t tell a loan officer if your plan for the money is sound once you get it. Since so many businesses wind up falling short of their goals even when their finances are in order, this document is essentially how banks and other lenders get a look into the practices that will inform your decisions once you get the money. There are a few ways to make sure you’re being clear in ways that help you convince a reader, but you’ve got to know what parts of the plan to bring into focus to make good use of them.
Use the Executive Summary Tactically
A summary is more than just an introduction or an overview, it’s a short pitch for the company that also explains where the rest of your business plan is going. Ideally, after reading your summary, the loan officers should have a clear idea about whether you have all your bases covered. The expanded sections that follow serve to fully document and support the overall strategy explained here. Making your goals and methods clear in the summary without over-explaining or getting bogged down in numbers you can break down later is the key, and a good way to make sure you’ve done that is to get multiple beta readers to go through the document before you submit it.
Make Sure Your Financial Projections Include Reserves and Burn Time
It’s not enough to show that you’re operating within your means or that you’ve got a good plan for reinvestment. Accurate projections can assure a lender that you’re set up for success as long as your operation continues being as successful as it generally has been, but it doesn’t do much to assure anyone about what you will do when faced with unforeseen challenges and earnings shortfalls. One way to work around that is by including projections for your ability to operate off just reserves. By documenting this burn time, you’re able to show a worst-case scenario for your projections that demonstrates you will have a window large enough to allow for a turnaround strategy before your business runs into trouble. It’s best for your application if you can show this burn time is over six months.
Don’t Skimp on the Details
Be clear and don’t get bogged down with too much explanation, but remember that your reader needs details. Whoever evaluates your business plan will be competent to draw a lot of their own conclusions if your methods and operations are clear and you’ve got the numbers in place, so trust them and focus on providing the information they need to draw the right conclusion.