Know how much money you need (not how much you want) If you are writing a business plan for a lender, you’re hoping that someone will make a loan to help you start or grow your business.
Know how the money will be used For example: Are you buying equipment? Or will you use the loan to manage cash flow? Are you paying salaries? Or, buying inventory?
Tell us how you plan to repay the loan Lenders look closely at how the businesses we loan money to expect to repay the loan. You will need to show us how you plan to generate enough revenue to cover your operating expenses and pay back the loan.
We want to see your assumptions These are all the details about your start-up costs. Such as: Advertising expenses, Licenses and permits, Insurance, and any unexpected expenses.
Show us how much you plan to personally invest We’d like to see that you have enough confidence in your success to risk your own money before we’ll risk our money. The amount of equity you are putting into your business speaks volumes to us.
Cash flow Cash flow is a key component to obtaining approval for a loan. Most loans are denied due to cash flow. We have to be certain that you will have enough cash flow projections to repay the loan. Not only do costs and profits have to balance, we want to see evidence from the industry, your competition, or your own sales that you have the ability to repay the loan. As a rule, be prepared to share three cash flow scenarios. One should be conservative, another should contain realistic sales, and a third should include a more aggressive projection.