If you have started your company, definitely you must have a business plan along with you for your assistance. But, if not, don’t worry as you can make one now. However, business plans are not just needed at the beginning of the business; they are required at every step of the business.
For instance, if you want to apply for a loan, a business plan for the bank becomes necessary, and you should provide an excellent business plan for your loan approval, as stated by OGScapital.com. So, below we are going to discuss some factors that you need to consider while formulating your business plan.
Some Important Factors To Consider While Making A Business Plan For The Bank:
Now, let us explain these factors in detail so that you can keep them in mind while creating your business plan:
1. Background
The fundamental thing that banks consider is your background. What is your identity, what you have done, and what your company has done before? Intangible and also tangible, both of the attributes are considered.
Some frequently inquire Questions Include here:
- How old is your business?
- What were you achieving before starting this business?
- What is your business serving?
- How will you make adequate money?
- Is there any partner in the business?
You should be aware that bankers actually want to create an understanding of your personality. Verifying your past success and knowing about the weaknesses will help bankers to develop a picture of who you are.
Assurance For Bankers:
The fundamental thing bankers will try to ensure in your business plan is whether your team possesses the right skills. For instance, if you started your business just a few years ago and you have been working as an engineer in any other firm for 20 years, you can show your previous projects and experience as it will be really beneficial.
Furthermore, if you are a more experienced technician and not a salesperson but providing details of your professional salesperson in your team to grow your business, you will also cover up your weakness of selling. You should also explain that in your absence, your business will be sustainable.
2. Market Analysis
The second step is to provide details about your industry’s knowledge and the challenges that are important for your business. Also, mention your competitors because it will develop credibility.
General questions inquired for market analysis:
- What are you selling?
- Why will people buy?
- How large is your market?
- What do you know about your competitors?
- How are your products different?
Example Of Market Analysis:
For instance, when any cement company will ask for a loan, bankers will inquire the owner how they will produce a surplus product that can be imported to the United States for sale domestically. Also, bankers will ask how the organization will make a profit from the products.
3. Financials
The most important for a company is its cash flow statement. This statement of the cash flow will help you in formulating well-documented principal and interest. And, the company with a good cash flow statement can obtain a loan very quickly. Thus, your business plan must contain your entire cash flow statement.
Bank Requirements:
According to banks, the most credible financials for a company are those that any public accounting firm formulates.
In addition, bankers want to make sure that the entered figures are genuine and the business owner can talk about them as it is a fact that knowledge equals credibility.
Business Owners Should Be Able To Answer:
According to the financials of a company, the business owner should be able to answer the following questions.
- Why the cost of goods has changed?
- Why a considerable amount of money is taken out from the bank?
- How will you prepare a balance sheet for overcoming the economic downturn?
If you are just going to deliver some projections to the banks, your assumptions should be realistic in the future. When the company is selling numerous products, the bankers would demand progress for every product so that they can know on which product the company is depending on and the company focuses on other products.
4. Challenges
In the next step of your business plan, you should add about the company’s challenges that you can have in the future. The best thing to mention is how your company will overcome those challenges, and what further hurdles are going to come for the company.
Managing The Problems:
For example, if the company owner is good at engineering and not very expert in managerial skills, it defines how you can find a solution for this problem as you have hired a professionally skilled manager or a temporary CFO. Besides this, if you have a partner in your business, how your partner is working with you to overcome the company’s weakness.
5. Utilization Of Proceeds
According to different researches conducted on businesses applying for the loan, you should be able to answer the below-mentioned questions.
- How much capital is required?
- How will your business utilize the money?
- How will the company repay the loan?
- What will be the situation if the company can’t repay the loan?
Bankers are trying to observe what you have invested in your business and what you can continue to invest. They also want the surety that how you will use the borrowed funds.
Such as, if you have applied for any line of credit in a short-term bridge till your receivables are paid, you need to show that how much it is important for you to pay the line down. It will help you get credit in the future, too.
Finally, after considering all the aspects of the business plan that you are going to present to the bank, you should be satisfied that you are happy. When you are entirely prepared for answering all of the questions, there will be no mistakes or errors.
Winding Up!
By considering the factors mentioned above, you can develop a good business plan that you can present to banks and investors for obtaining investments or loans. If your business plan will be perfect, the bank will not perform so much inquiry on your business and you would be able to take loan from the bank.
Nicola Holder