A business loan is a financial product specifically designed to help entrepreneurs and businesses acquire the capital they need to start, sustain, or grow their operations. As the term implies, business loans are tailored to meet the needs of businesses, and key features include more significant loan amounts, longer repayment periods, and sometimes lower interest rates.
These business banking loans are typically used to fund equipment purchases, improvements in a business’s inventory, facility expansion, and other large expenses. The funds from business loans can also be relied on for financial support during challenging times without immediately depleting a company’s cash reserves. Small- and medium-sized enterprise (SME) owners are spoiled for choice when it comes to available loan programs to apply for, including the Philippines’s Maya Flexi Loan by Maya Business for those who are based in the country.
However, to successfully apply for most business loans, entrepreneurs must be ready to present a compelling business plan to their lender. This is a formal document that outlines a business’s goals, strategies, and financial projections, essentially serving as its roadmap for operations. Your business plan is also meant to show lenders that your venture is actually viable and that it has the potential to generate sufficient revenue to repay the loan. For any business loan you apply for, you’ll want your business plan to be detailed and complete.
If you want to increase your chances of loan approval, here are the key sections you should include when crafting your business plan:
1) An Executive Summary
The executive summary is the first section a lender or loan officer will read, and it sets the stage for the rest of your business plan. Think of it as a high-level overview of your business, summarizing key points about it concisely and clearly. Explain what your business does, who it serves, and what makes it unique in this section.
You should also include specific information about the loan you’re requesting in the executive summary. Detail the amount of funding you need, how you plan to use it, and how it will contribute to the growth and profitability of your business. These details will allow lenders to see a clear purpose for the loan and form an understanding of how it will impact your business operations.
2) Your Marketing Plan
No winning business plan is complete without a well-thought-out marketing plan. This section of your business plan should illustrate how your business will generate revenue.
Here, you should define your target market, including the demographics, needs, and preferences of your ideal customers. Your marketing plan should also detail the strategies you’ll use to attract and retain customers, whether you plan to employ traditional or contemporary digital marketing efforts.
You should also provide a competitor analysis to demonstrate your understanding of your industry and your competition. Explain who your main competitors are, what sets you apart from them, and how your business plans to capture market share. This level of insight assures lenders that you have a realistic strategy for growing your customer base, which directly impacts your ability to repay the loan.
3) Production or Operations Plan
Another thing you need to include in the business plan is the production or operations plan, which dives into the day-to-day processes of your business. This allows lenders to know how efficiently your business operates and whether it can handle growth without straining its available resources.
To craft this section, explain your operational workflow, from sourcing raw materials or products to delivering the final product to the customer. If you’re in the food business, outline how ingredients are sourced, how food is prepared, and the logistics of delivery or service. Moreover, you should provide details on your supply chain, discussing relationships with suppliers and how you’ll manage inventory.
4) Organization Plan
In this section, you’ll need to introduce the key people behind your business. Lenders pay close attention to the qualifications and expertise of your management team, as their skills are critical to the success of the business.
You can start by listing the members of your management team, highlighting their roles, relevant experience, and qualifications. This helps lenders envision who is responsible for what, which can provide reassurance that the business is being led by competent individuals.
5) Key Financial Data
The financial section is perhaps the most critical part of your business plan, as it directly addresses the lender’s primary concern: your ability to repay the loan. With this in mind, make sure to include key financial documents that offer a clear picture of your business’s financial health. These include projected income statements, balance sheets, and cash flow forecasts. Provide your income statement as well to show your expected revenue, operating expenses, and profit margins over the next few years.
Moreover, provide a break-even analysis to your lender, which shows at what point your business will cover its costs and start turning a profit. This is particularly important for newer businesses that may not yet be profitable.
Lastly, be sure to include a loan repayment plan that outlines how you will use the funds and, more importantly, how you will pay them back. This part of the plan should detail your repayment timeline and show that your revenue projections are sufficient to cover loan payments along with other operating expenses.
6) Supporting Information
Lastly, if you want to further strengthen your business plan, provide evidence that you’ve done thorough research and are prepared for any potential risks. For example, include industry research that supports your business’s potential for growth, like data on industry trends, market size, and growth projections in the Philippines if you’re based in the country.
Additionally, include copies of leases for your business premises, which will reassure lenders that you have a stable operational base. Permits and licenses are also crucial documents to include, as they verify that your business complies with local regulations and industry standards—information your lender will need before they give you their final approval.
The detail and exhaustiveness of your business plan may help you win a significant amount of funding for your operations. Be sure to include the different sections mentioned above in your business plan so that you can present lenders with a comprehensive view of your business and give them enough reason to trust in your future success.