How to write a good business plan to get a loan

Introduction

Organisations such as the Start-Up Loan Company are designed to help people who are at the very early stages of launching their business. By their very nature, these people tend to be less experienced, and to have more gaps in the knowledge. You may be an excellent kitchen fitter, or a world class lawyer, but that does not necessarily mean you have all the skills to run a business from day one.

In this situation, a good business plan fills two needs. Firstly, it gives the business owner a space to write down their aims for the business, as well as the tactics and strategies they will employ to get there. This process will help to identify the gaps in their knowledge and experience, and to plan how they will fill those gaps. Secondly, it gives the lender reassurance that the business owner has thought about this, and is not being complacent.

What needs to be in my business plan?

The business overview covers what the business will do. This section should explain why you think there is a gap in the market for you and your product.

Objectives will describe how you and the business define success? These could be financial or sales targets, or could be related to customer feedback. However, the objectives should always be SMART (specific, measurable, achievable, relevant and time bound).

Defining the people in your business will help a lender to decide whether or not to take a risk on you. As well as your idea, you have to convince them that the people in the business are worth investing in. You should include detail on the management’s relevant experience and skills.

Products and services will explain what you are selling. Whether it is a product or a service, every business needs something to sell. The more specific you are here, the better. Perhaps you could include a price list and how your prices compare with your competition.

Define your market and who you are selling it to. This is crucial. The most innovative product in the world will not sustain a business if nobody knows about it! Who are your customers? How will you market to them? Some businesses create a separate marketing plan, but certainly a substantial marketing section within the business plan is a must.

What will be your location? It is important to define whether you will have premises for the business or will you be working from home? Are the premises appropriate for the business, and have you taken costs in to account?

Set out your financial information, as loan companies will often ask you to provide a 12-month cash flow forecast. However, plugging numbers in to the spreadsheet is only half the job. Those numbers have to be credible. You should be able to justify the figures in some detail.

You might have estimated footfall in your shop, then you can estimate a conversion rate – what percentage of those people will buy? Then you can estimate an average spend per customer, and thus calculate the total sales forecast. Of course, not every business is a retail outlet, but there should always be some level of thought behind your forecasts, rather than just plucking a figure out of the air.

If you are a brand new business applying for a start-up loan through organisations like the Start-Up Loan Company, they are unlikely to expect the same detail in your plan that a bank would expect from a multi-million pound business. However, they do expect you to have given this some thought, and the business plan is your way of collecting those thoughts in one place and showing the lender that you are serious.