How to Create a Business Plan for a Loan

How to Create a Business Plan for a Loan

Out of the 37% of all businesses that apply for a loan, banks deny about 80% of them. Sometimes this is because the lender finds that the company’s industry is too risky for them to fund. 

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Business owners will need to meet certain credit score requirements to get funding. If your score is below 640, there’s a good chance that your application will go in the trash. 

In some cases, people don’t know how to create a business plan for a loan. They don’t give enough information to impress, or they neglect to include a professional cover page with their application. 

These aren’t the only rookie mistakes that you’ve got to avoid when you’re writing up a plan. Check out this business plan guide to learn more. 

Create a Cover Page and Table of Contents 

Your business plan is a professional and official document, and you should treat it as such. Create a cover page that’s got your business name, logo, and contact information on it. 

It’s also helpful to include a table of contents. Think about it. Banks get tons of business loan applications every single day. 

They won’t have a lot of time to read yours before they move on to the next one. Having a table of contents will make it easier for lenders to skip to the important parts of your business plan. 

If you’re emailing the bank your plan, make sure that your table of contents has links that the lender can click on to jump to specific sections. They will thank you. 


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Tell Lenders About the Opportunity

The first thing you’ll need to do when creating a business plan for a loan is to show the lenders that your company is a good investment. 

Present a problem that your products and services can solve, talk about your target audience, and tell the lenders how you plan to overcome your competition. 

Present a Problem and Solution 

Let’s say that you have an issue with time management. That’s what inspired you to come up with an app that can help people like you. 

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Time management is the problem that you’re presenting in your business plan. From there, talk about how the features of your app can create a solution. Provide as many details as possible. 

If you can, interview a few people in your target market. Their words can show lenders that time management is an issue for a ton of people. 

Decide on Your Target Market

Speaking of your target market, if you don’t know who your potential customers are yet, take the time to figure that out now. The bank will need to know who you’re reaching out to. 

Don’t be afraid to get creative. Consider marketing your time management app to freelancers who work for themselves or college students who need help with staying on top of their homework.

Talk About Your Competition 

Open up a Google page and get ready to research your competition. You need to learn about other popular time management apps (or productivity apps in general.)

Take a peek at what they’re doing and tell potential lenders how your app stands out. 

Explain the Execution 

The next thing you’ve got to do when you create a business plan for a loan is to discuss your plan of attack.

How are you going to use your target market and competition research to get your app into the hands of your adoring public? 

Marketing Plan 

It’s one thing to know who your audience is. It’s another to reach out to them. That’s where your marketing plan comes in.  

Tell the banks how your company is interesting to your target audience and talk about what advertising tactics you’re going to use. 

Are you going to buy a billboard with your app’s name in huge letters? Are you thinking about sticking to social media and online ads? 

Are you going to do a little bit of both? 

Operation 

To give the banks a good idea of how much money you’re going to need to fund your business, you’ll have to go over your company operation in great detail. 

Think about the software you’ll need to keep your time management app up and running. Are you going to buy an office building or run the entire business out of your home? 

Management 

If you already have a management team lined up to work on your app, this is where you’ll talk about them. Include how much experience these workers have and how they can use it to help your app flourish. 

Do you not have a management team yet? That’s fine. Highlight the roles that your business needs to fill. 

Write down what kind of candidates you intend to hire. What skills are you going to require out of your future workers? How much experience and education do they need to have to succeed?

Milestones 

Lenders are going to want to know how you plan to turn your dreams into success. That’s why you’ll need to include your milestones in this section. 

These are a series of goals that you’ll strive to hit. Take a second to think about what being successful means to you. 

Is it to get a set number of people to download your app? Do you want to sell a specific amount of add-ons? 

What’s Your Financial Plan? 

Now you’re going to need to tell the banks what your financial plan is. This is the part of your application that lenders are going to pay attention to the most. 

If you mess up here, there’s a good chance that you’ll be declined for your loan. No pressure. 

Money Forecast 

Since you don’t have your app up and running yet, you can’t give the banks specific numbers. What you can do is, write out an estimate. That’s what a forecast is. 

List off all the features of your app and planned add-ons. Talk about how each of them can bring you money. 

Write down your direct costs. This is a general guess of how expensive it will be to create your app and keep it going. 

If you’re going to hire people to help you work on your app, you’ll need to let the banks know how much you’re paying them. 

The last part of your forecast will include your utilities. If you’re working out of an office, how much is the rent on the building? 

Financing 

The financing section of your business plan will highlight how you’re going to use your funding to grow your app. 

If you have family help or any other additional funding coming in to assist you with your business, you’ll list that off here as well. 

Statements 

Lenders are going to use the numbers in your sales forecast and subtract it from other factors to determine if you’re making or losing cash. 

They will also take a look at all your assets to judge how stable your company is as far as money goes. 

The last thing you’ll need to provide a statement for is your projected cash flow. It’s the amount of money you have in your checking and savings account.  

A business advisor can crunch some of these numbers for you and help you fill out this section. It’s for these reasons and more that you should hire one. 

Executive Summary 

The executive summary of your business plan is the first thing that you’ll need to include when you’re stapling everything together, but it’s the last thing that you should write up. 

As the name suggests, it’s a brief summary of your entire plan. It shouldn’t be any longer than a page. 

Think of it as an elevator pitch to get the lender on board with your business idea. You’re not going to include a lot of your company’s money info here. Save that for the financial plan section. 

Submit Your Plan 

Now that you have your plan written up, it’s time to submit it to the banks and lenders in your area. You’ve got a few different options in this regard. 

Your Current Bank

Before you start looking around for business-specific institutions, talk to your current bank or credit union. Since they already know where you’re at in terms of cash, it will be easier for them to make a lending decision. 

This being said, banks don’t play favorites. Your bank isn’t going to give you a loan just because you have an account with them. 

If they don’t think that your business is worth the risk, they’ll either turn you down or not give you the full loan amount. 

SBA Guaranteed Lenders

If you’re having a hard time getting a loan, you should look for SBA guaranteed lenders

It’s a loan that can cover all the costs for your start-up. You’ll go through a private lender to get it, but it’s backed by the government.

If you happen to default on your loan, the government will cut the lender a check for a portion of the amount owed. Since there’s less risk involved for the lender, these loans are easier to get than a regular business loan. 

To qualify, you’ll have to be an established company for at least two years and have a credit score of 690. 

On top of having more reasonable requirements, SBA loans come with competitive rates and low fees. They also have a long repayment term. Since you’ll have a while to pay back your loan, you’ll have more money in your pocket every month to put toward your company. 

Banks With a Business Focus 

If you don’t have a bank to put your business finances in yet, it’s time to get one. Reach out to other company owners in your neighborhood to get a list of banks that cater to businesses. 

We also recommend looking up reviews on a bank before you open an account with them and try to get a loan. 

Online Lenders

Those who don’t want to go through the trouble of writing up a business plan can reach out to online lenders. Most digital institutions pull from your bank to get your financial details. 

There is a downside. Even though it’s easy to get a loan through an online lender, they often come with outrageous interest rates. 

You may also get stuck with a short repayment term that will be difficult for you to take care of while your business is still so fresh. 

Microlenders

The last funding option you have is microlenders. They’re the lenders you turn to when you don’t need a huge loan. 

Most of the time, microlenders are non-profit organizations with the goal of assisting small business owners in their area. Some of these facilities offer counseling services that will give you a nudge in the right direction and help you succeed. 

If you’re having an issue finding a microlender, you can go through the SBA to get in touch with one. 

How to Create a Business Plan for a Loan and Secure Your Funding 

Most business owners don’t have the money needed to get their start-up off the ground sitting in their bank accounts. That means they have no choice but to take out a loan.

As you can see, getting one is more difficult than you may think. If you don’t know how to create a business plan for a loan, you won’t be able to secure your funding. You’ve got to show lenders that it’s okay to take a chance on you. 

For more business tips that will help you open your doors and keep them open, feel free to explore the rest of our blog. 

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