One of the most crucial steps to apply for a business loan is to prepare your business plan.
This is in addition to any loan application form the bank may provide. But preparing a solid business plan is not a lightweight task, or one to be done in a hurry.
Nor is it a task to be handled by the company’s accountant or finance manager, although he or she will have a key role to play in the plan’s completion.
It needs full engagement from all the business owners and stakeholders.
There are some key questions for the business owner to address at the onset:
If you don’t know where to start, the Australian government’s free, downloadable Business Plan Template and Guide provides a practical, four-part framework for your plan, together with a summary. The four parts are:
This section will provide information about the:
This is where the plan explains the target market — with customer demographics — and lays out the business’s marketing strategy.
The Market section should also include a Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis.
That will require having good data and hard-nosed self-assessment about any competitors who may be able to take away market share or even dominate a particular market.
Showing an awareness of where threats to the business exist or may come from should be seen by the bank as evidence of good business sense.
This is where you share your vision for the future of the business and the key strategies you are going to pursue to achieve that vision.
Include your vision statement and mission statement. The section will also include long term and short term goals.
Obviously, getting the Finances section right is crucial.
It will include your overall financial objectives in the form of sales or profit targets.
It should also include a detailed statement on the finance required from the bank — how much, for how long, by when to be repaid — a balance sheet forecast, profit and loss forecast, cash flow analysis and a break-even analysis.
Even though the business’s accountant may be doing most or all of this, business owners who are not financial specialists should be fully across what is being included in this section.
Those not already familiar with some basic financial terms and concepts should get up to speed as part of their preparation for presenting their business plan.
In particular, a basic understanding of terminology about financial ratios would help, especially the five key financial ratios listed and explained on the Commonwealth Bank of Australia website.
The template provided by the Australian Government says your summary should be no more than a page. That may be good advice, but I have seen persuasive argument for some businesses to write no more than 3 pages, when you have more to summarize.