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How to Write a Professional Business Plan for a Loan

• March 27, 2024

11 Min Read

So, are you thinking of getting a loan or funding to start an exciting business journey?

That’s great! But before you go any further, it’s very important to have a solid business plan in place.

Well, we understand that creating a successful plan for a loan can be a daunting task. That’s why we’re here to help you!

This investment-ready business plan template for loans will help you include all the essential elements in your plan, from summarizing your business concept to projecting the financial data. It not only impresses business loan lenders but also sets the stage for success.

Ready to get started? Let’s first understand how business plans will help you with loan proposals.

How business plans help in loan applications?

A business plan is a professional document that serves as a written loan proposal if you want to secure a loan for capital investment. It details every aspect of your business, including its concept, goals, market opportunity, and financial data.

Whether you’re a new entrepreneur or a small business owner, you’ll need a well-prepared business plan. It helps you persuade potential investors or lenders of its viability and potential for success.

Here are a few primary reasons why business plans are necessary in loan applications:

It helps you showcase your vision

A well-written business plan communicates your business vision effectively and allows you to demonstrate your clarity of purpose and strategic direction. It offers lenders a compelling narrative of what your business is aimed for and how it will achieve its goals.

It helps you prove your financial feasibility

Well, lenders need assurance that they’re making a wise investment. A detailed business plan presents them with realistic financial projections, along with how your business will earn money and repay the loan. This infuses confidence in lenders and convinces them that your business is a safe bet.

It helps you mitigate potential risks

Once you start your business, it naturally involves fair enough risks. However, a good business plan clarifies that you’re aware of those challenges and have backup plans or strategies to mitigate them. This shows lenders that you’ve considered different situations and keep contingency plans in place.

It helps you demonstrate your preparedness

A business plan shows lenders that you’ve carefully outlined every aspect of your business—from conducting market analysis to predicting finances. It assures that you’re serious about your business and well-prepared to manage the ups and downs of starting a business.

In short, having a solid business plan can be the cornerstone of a successful loan application that explains your business idea and how you plan to utilize the loan money to get started.

Now that you know how business plans help in a loan application, it’s time to check out and understand the key elements of a business plan for a loan template.

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Key components of a successful business plan for a loan

1. executive summary.

An executive summary is the first section of the plan, providing a concise overview of the entire business plan.

Generally, it is written in the last, as it summarizes the most important components you mentioned in your plan.

Since the potential investors or lenders would read this section first, make sure that you keep it simple, crisp, and compelling to build their confidence in your business. Also, it should not be more than 1 or 2 pages.

You may write your executive summary with a precise explanation of your business concept, the type of business you operate, and its status.

Here are a few primary elements you must add to your summary:

• Your company’s mission statement
• The product or service you intend to offer
• Market Opportunity
• Management team’s background and experience
• Growth plans or long-term objectives
• Financial projections and funding needs

2. Company Overview

As you’ll give a brief introduction in the executive summary, this chapter will expand on it, providing an in-depth understanding of your business.

Company description includes all the business-related facts, such as the startup concept, vision-mission statements, company location, etc. Also, it explains the problems or challenges you aim to solve.

In addition to that, consider answering a few questions that would help lenders to grasp the significance of your business:

• What is the legal structure of your business?
• Who is the business owner?
• Do you have any business partners?
• Why did you start this business, and when it was founded?
• What are your business accomplishments to date?
• Who will get benefits from your company’s product or service?

Note that the company overview section can be regarded as your extended elevator pitch.

So, it’s a good opportunity to present your business’s specific details and structural aspects that the financing partner needs to know.

3. Market Analysis

The market analysis section provides readers with a deep understanding of the specific industry or market in which you plan to serve.

This seems unnecessary but serves different purposes. Those who are looking to fund a franchise business should do some serious work for this section, as lenders will review it very closely.

To carefully draft this section, you should conduct thorough market research and industry analysis to define your target customers, industry trends, market demand, and competitors.

This will demonstrate that you understand the market dynamics and validate the demand for your products or services.

Here are a few elements you should include in your market analysis section:

• Ideal target market
• Market size and growth potential
• Customer segments
• Competitive analysis
• Emerging trends
• Applicable government regulations

4. Product or Service Offerings

In this section, you may provide a detailed description of your products and service offerings, along with their features, benefits, and pricing structure.

It helps you highlight what your business offers to its ideal customers, how your offerings will satisfy their needs and explains the value proposition of your products or services.

You may consider including these points in the product or service section:

• A brief description of your product & service
• Pricing details
• Intellectual property, copyright, and patent filings
• Quality measures
• Any additional offerings

5. Sales and Marketing Strategies

Your marketing and sales plan elucidates how you intend to market your products or services in greater detail. It helps you outline the marketing and sales strategies you’ll use to attract and retain potential customers.

The primary goal is to give a flexible and practical marketing and sales strategy that persuades the lenders you know how to advertise or develop a public relations campaign to reach the company’s revenue goals.

For a well-crafted marketing plan, you might consider adding the following details in your plan:

• Your target audience and brand positioning
• Detailed marketing strategy
• Sales and marketing goals and KPIs
• Sales and marketing budgets
• Customer retention plan

While reviewing your loan application, lenders would like to know how you plan to make money and how you overcome marketing and sales challenges, so ensure that this strategy is always relevant.

6. Operations Plan

The operations plan section provides a clear picture of your company’s day-to-day operations and activities. It is a detailed-oriented section that outlines how you’ll manage to run your business smoothly.

Also, operational excellence is necessary to achieve your goals, satisfy client commitments, and maximize results. So, try to mention your operational intricacies and showcase efficient systems and processes.

Here are a list of details you must include in your operations plan:

• Staffing & training
• Operational processes
• Inventory needs and supplies
• facilities & technology
• Regulatory compliance

By offering insights into these operational aspects, this section helps you instill confidence in lenders about your ability to effectively handle and grow your company.

7. Management Team

Your management team section introduces the key individuals who are responsible for driving your business ahead.

It helps lenders easily understand your team’s roles & responsibilities, educational qualifications, industry experience, and how you plan to compensate your leadership team.

Even this will assure lenders that your team is capable enough to navigate challenges, make informed decisions, and reach strategic objectives. Also, they feel confident giving you a loan—even if it’s your startup.

So, you may consider including the below information:

• Company owner profile
• Resume-styled summary of key executives
• Organizational chart
• Compensation plan
• Details of advisory board members(if any)

8. Financial Plan

A well-written and comprehensive financial plan is one of the most crucial sections of your plan, as it helps you prove to lenders your business’s financial health, growth potential, and ability to repay the business loan.

So, your financial analysis must include the projected financial statements for three years or more. The following are the key financial projections that you should add:

• Income statements
• Cash flow statements
• Capital expenditure budgets
• Balance sheet
• Break-even analysis
• Funding requirements

As well as you should also list hard or soft collateral if you possess it so that you can put it up to get a loan. Even lenders may request to add more granular data(such as cost of sales or cost per product/service).

Note that if you’re a startup and don’t carry enough data to highlight, consider including estimated costs, revenue streams, and other strategic future projections you may have.

9. Appendix

The appendix is the last section of a professional business plan that typically provides supplementary information and other supporting documents the lender may need for better understanding.

You may include the following details in an appendix:

• Business licenses and permits
• Contractual agreements or other legal documents
• Letters of reference
• Credit histories and tax returns
• Key managers’ resumes and certificates
• Product photos

By adding these details, you offer more detailed explanations or validation for your business plan, strengthening your discussions and claims.

What factors do lenders look for in a business plan

When you submit a business plan to secure funding, lenders will analyze it to evaluate the viability and creditworthiness of your loan application. Here are several key factors they look for:

Character of your management team

Lenders will assess a business’ character that includes subjective or intangible qualities like whether its owners or key executives are perceived as honest, competent, or committed. Also, they consider educational background, industry experience, skills, leadership capabilities, and credit histories. This can be critical for evaluating prospects as most lenders don’t wish to lend to whom they don’t feel trustworthy.

Your capability to repay loans

Loan officers also spend a lot of time analyzing the borrower’s ability to repay the loan. They will thoroughly examine the financial statements such as projected revenue, expenses, cash flows, growth plans, and loan payments. Further, lenders analyze the financial history to see how much revenue you have generated or how much profit you have made in the past.

The capital amount you’re seeking

While reviewing loan applications, lenders will go through your financial information that highlights how much funding you’re seeking, how much cash you carry on hand, and how much debt you have. Also, they assess your personal financial investments as a sign of commitment and seriousness. So, make sure your business plan clearly outlines your investment amount and funding needs.

Collateral or personal guarantees

In some cases, lenders may request collateral or personal guarantees to secure the loan. Thus, you should document any assets or valuable items you can offer as collateral or additional security. Even lenders may still approve your loan without collateral if you have a good credit history and a reliable business plan.

By understanding these key considerations, you can prepare a business plan that resonates with the lender’s interests and concerns. Now, let’s move to a few business plan examples for a loan.

Business plan examples for a loan

When you’re just venturing into your entrepreneurship journey, crafting a comprehensive business plan for a loan application can be overwhelming.

So, try to consider some sample business plan templates or resources to get started on the first draft of your plan. Here are a few business plan examples that you may find helpful:

• Sample business plan outline
• Small business plan template
• Comprehensive business plan writing
• Business Plan Workbook for Loan Applications

Start preparing your business plan

Finally, you understand the importance and key elements of drafting a business plan for securing a loan or funding. But it requires some extra effort to find success down the road.

If you’re still confused about where to start, Upmetrics could be a great choice. It’s a modern business plan app that helps entrepreneurs or small business owners create an actionable plan quickly.

With Upmetrics, you’ll get easy-to-follow guides, a library of business plan templates , AI support, a financial forecasting tool, and other valuable resources to streamline your entire business planning approach.

So, don’t wait and start preparing your business plan for a loan!

Build your Business Plan Faster

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Frequently Asked Questions

Do i need a business plan to get a loan.

Of course, most lenders or financial institutes require a solid business plan, even if you are a well-established business. A well-crafted business plan helps you highlight every essential information about your business and demonstrate to lenders that you have a realistic plan in place to generate income and repay the loan.

Can I write a business plan myself?

Definitely, you can write a business plan by yourself. Also, you can get help from various resources available, including business plan templates and guides, to create a comprehensive plan. But, if you’re unsure or need assistance, you may consider having a business plan software or hiring a professional writer.

How long should my business plan be?

The length of your business plan should be concise and focused,  typically depending on its purpose. A one-page business plan is a single-page document, a lean or mini business plan comprises 1-10 pages, while a comprehensive business plan can range from 15 to 35 pages and beyond.

What's the most important element of a loan-seeking business plan?

The financial plan is the most crucial element of a loan-seeking business plan, as lenders want to check realistic and well-structured financial forecasts that present your ability to repay the loan. Also, this section can make or break a lender’s confidence and willingness to raise capital.

What format should I use?

It’s essential to select a format that can effectively convey your business idea, strategy, and financial projections to the lenders. Following are a few common options to consider:

• Traditional text-based document
• PowerPoint or Keynote presentation deck
• Executive summary or a pitch deck

So, whatever format you choose, it should align with your preferences, the lender requirements, and the complexity of your business.

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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What Lenders Look for in a Business Plan

Helena Hauk

3 min. read

Updated October 27, 2023

Your business plan is the foundation of your business. It defines your vision and mission, and serves as a road map as you move forward. It’s one of the most important documents you’ll ever create. It’s also an invaluable tool when it comes time to apply for a business loan. What lenders look for in a business plan may surprise you, but knowing what they want (and how to give it to them) will dramatically improve your chances of getting the money you need to continue to drive your business forward.

When lenders ask for a business plan, they are looking specifically for the following items:

• History of the business

Where did your business start and how has it grown? Be sure to note any unique challenges you faced and how you addressed them, as this will demonstrate your business acumen and your ability to adjust to changing market needs.

• How revenues are generated

Lenders want to get their money back, so they are especially interested in knowing how you make yours. Explain exactly how customers are served, how the product or service is delivered, and how money is collected.

Let lenders know who is at the helm and what relevant skills, knowledge, and experience they bring to the table. I emphasize the word “relevant” here because lenders want to see how adept your management team is at leading and growing your specific business.

Lenders want to know who you serve, how large the population is, and how viable the market is (e.g. affluence, room for growth, etc.). Lenders also want to know who you are competing with in this space and how you are setting yourself apart. Note all marketing and publicity you are doing (regular social media, strategic partnerships, presentations, broadcast advertising, etc.) so you can demonstrate activity toward continual revenue creation and growth.

• Historical financials with debt coverage ratios

Detailed financials showing all revenue, assets, liabilities, and repayment structures are necessary to give lenders a clear snapshot of the financial health of the business. This is one area where many business loans are killed either because of poor or inaccurate accounting by the business or due to insufficient cash flow and debt service coverage ratios – in other words, not having enough cash on hand to make your loan payments.

• Projections

Lenders also want to see what you expect to happen financially, looking forward. Discuss both what will occur without funding as well as what projected growth you expect should you receive financing. Be sure to include projections regarding job creation, market growth (e.g. if you receive financing, you will be better able to serve your market or serve additional markets), product development, and anything else impacted. It is also important to consider seasonal changes or cyclical changes to the business and what financial impacts those changes might have.

What assets does the company currently own? Include any patents, real property, or other collateral that can be leveraged against your debt. Personal property that is available like rental properties, ranch land, etc. can also provide additional collateral for underwriting consideration.

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• Purpose of the project

Last but not least, you need to state why you are asking for this loan. What need does it serve? Is it to expand, to open a new location, to move to a better location, to install new equipment, or some other business goal? Be as detailed as possible, especially if you are looking to get an SBA loan or other economic incentive that is tied to specific policy directives. They want to know exactly where their money is going.

Of course lenders look for items beyond the business plan, including things such as secondary repayment sources (for certain loans), residency, criminal record, and more. Be responsive to all lender requests, no matter how daunting or seemingly unnecessary the request, as this will help keep the process moving. The key is to be as prepared as possible with as much information as possible so you can demonstrate to the lender that your company is “good for it.” With lending the way it is today, you need to do everything you can to improve your chances. Don’t let your business plan be the thing that keeps you down.

See why 1.2 million entrepreneurs have written their business plans with LivePlan

As the President of 5th Gear Consulting Helena Hauk assists small to mid-sized businesses with preserving and generating capital, project management, strategic planning, and business development.

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Why Do I Need a Business Plan?

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• Small Business

How to Write a Business Plan for a Loan

How to secure business financing

Matt Webber is an experienced personal finance writer, researcher, and editor. He has published widely on personal finance, marketing, and the impact of technology on contemporary arts and culture.

A business plan is a document that explains what a company’s objectives are and how it will achieve them. It contains a road map for the company from a marketing, financial, and operational standpoint. Some business plans are more detailed than others, but they are used by all types of businesses, from large, established companies to small startups.

If you are applying for a business loan , your lender may want to see your business plan. Your plan can prove that you understand your market and your business model and that you are realistic about your goals. Even if you don’t need a business plan to apply for a loan, writing one can improve your chances of securing finance.

Key Takeaways

• Many lenders will require you to write a business plan to support your loan application.
• Though every business plan is different, there are a number of sections that appear in every business plan.
• A good business plan will define your company’s strategic priorities for the coming years and explain how you will try to achieve growth.
• Lenders will assess your plan against the “five Cs”: character, capacity, capital, conditions, and collateral.

There are many reasons why all businesses should have a business plan . A business plan can improve the way that your company operates, but a well-written plan is also invaluable for attracting investment.

On an operational level, a well-written business plan has several advantages. A good plan will explain how a company is going to develop over time and will lay out the risks and contingencies that it may encounter along the way.

A business plan can act as a valuable strategic guide, reminding executives of their long-term goals amid the chaos of day-to-day business. It also allows businesses to measure their own success—without a plan, it can be difficult to determine whether a business is moving in the right direction.

A business plan is also valuable when it comes to dealing with external organizations. Indeed, banks and venture capital firms often require a viable business plan before considering whether they’ll provide capital to new businesses.

Even if a business is well-established, lenders may want to see a solid business plan before providing financing. Lenders want to reduce their risk, so they want to see that a business has a serious and realistic plan in place to generate income and repay the loan.

Every business is different, and so is every business plan. Nevertheless, most business plans contain a number of generic sections. Common sections are: executive summary, company overview, products and services, market analysis, marketing and sales plan, operational plan, and management team. If you are applying for a loan, you should also include a funding request and financial statements.

Let’s look at each section in more detail.

Executive Summary

The executive summary is a summary of the information in the rest of your business plan, but it’s also where you can create interest in your business.

You should include basic information about your business, including what you do, where you are based, your products, and how long you’ve been in business. You can also mention what inspired you to start your business, your key successes so far, and your growth plans.

Company Overview

In this section, focus on the core strengths of your business, the problem you want to solve, and how you plan to address it.

Here, you should also mention any key advantages that your business has over your competitors, whether this is operating in a new market or a unique approach to an existing one. You should also include key statistics in this section, such as your annual turnover and number of employees.

Products and Services

In this section, provide some details of what you sell. A lender doesn’t need to know all the technical details of your products but will want to see that they are desirable.

You can also include information on how you make your products, or how you provide your services. This information will be useful to a lender if you are looking for financing to grow your business.

Market Analysis

A market analysis is a core section of your business plan. Here, you need to demonstrate that you understand the market you are operating in, and how you are different from your competitors. If you can find statistics on your market, and particularly on how it is projected to grow over the next few years, put them in this section.

Marketing and Sales Plan

Your marketing and sales plan gives details on what kind of new customers you are looking to attract, and how you are going to connect with them. This section should contain your sales goals and link these to marketing or advertising that you are planning.

If you are looking to expand into a new market, or to reach customers that you haven’t before, you should explain the risks and opportunities of doing so.

Operational Plan

This section explains the basic requirements of running your business on a day-to-day basis. Your exact requirements will vary depending on the type of business you run, but be as specific as possible.

If you need to rent office space, for example, you should include the cost in your operational plan. You should also include the cost of staff, equipment, and any raw materials required to run your business.

Management Team

The management team section is one of the most important sections in your business plan if you are applying for a loan. Your lender will want reassurance that you have a skilled, experienced, competent, and reliable senior management team in place.

Even if you have a small team, you should explain what makes each person qualified for their position. If you have a large team, you should include an organizational chart to explain how your team is structured.

Funding Request

If you are applying for a loan, you should add a funding request. This is where you explain how much money you are looking to borrow, and explain in detail how you are going to use it.

The most important part of the funding-request section is to explain how the loan you are asking for would improve the profitability of your business, and therefore allow you to repay your loan.

Financial Statements

Most lenders will also ask you to provide evidence of your business finances as part of your application. Graphs and charts are often a useful addition to this section, because they allow your lender to understand your finances at a glance.

The overall goal of providing financial statements is to show that your business is profitable and stable. Include three to five years of income statements, cash flow statements, and balance sheets. It can also be useful to provide further analysis, as well as projections of how your business will grow in the coming years.

What Do Lenders Look for in a Business Plan?

Lenders want to see that your business is stable, that you understand the market you are operating in, and that you have realistic plans for growth.

Your lender will base their decision on what are known as the “five Cs.” These are:

• Character : You can stress your good character in your executive summary, company overview, and your management team section.
• Capacity : This is, essentially, your ability to repay the loan. Your lender will look at your growth plans, your funding request, and your financial statements in order to assess this.
• Capital : This is the amount of money you already have in your business. The larger and more established your business is, the more likely you are to be approved for finance, so highlight your capital throughout your business plan.
• Conditions : Conditions refer to market conditions. In your market analysis, you should be able to prove that your business is well-positioned in relation to your target market and competitors.
• Collateral : Depending on your loan, you may be asked to provide collateral , so you should provide information on the assets you own in your operational plan.

How Long Does It Take to Write a Business Plan?

The length of time it takes to write a business plan depends on your business, but you should take your time to ensure it is thorough and correct. A business plan has advantages beyond applying for a loan, providing a strategic focus for your business.

What Should You Avoid When Writing a Business Plan?

The most common mistake that business owners make when writing a business plan is to be unrealistic about their growth potential. Your lender is likely to spot overly optimistic growth projections, so try to keep it reasonable.

Should I Hire Someone to Write a Business Plan for My Business?

You can hire someone to write a business plan for your business, but it can often be better to write it yourself. You are likely to understand your business better than an external consultant.

Writing a business plan can benefit your business, whether you are applying for a loan or not. A good business plan can help you develop strategic priorities and stick to them. It describes how you are going to grow your business, which can be valuable to lenders, who will want to see that you are able to repay a loan that you are applying for.

U.S. Small Business Administration. “ Write Your Business Plan .”

U.S. Small Business Administration. “ Market Research and Competitive Analysis .”

U.S. Small Business Administration. “ Fund Your Business .”

Navy Federal Credit Union. “ The 5 Cs of Credit .”

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How To Write a Business Plan For a Loan | Money

G etting the funds you need is a critical step for any new business . Many startups rely on business loans to get off the ground, but securing that loan hinges on a strong business plan . This plan acts as a roadmap for your small business by outlining your goals, strategies and financial projections . It convinces lenders of your viability and increases your chances of getting approved.

While writing a business plan might seem intimidating, understanding its key components and how lenders evaluate them can empower entrepreneurs to create a persuasive document. Here’s what you need to know.

Do you need a business plan to get a loan?

Absolutely. A business plan is essentially a detailed loan proposal. It addresses the questions lenders have about your business, showcasing its potential and your preparedness. It demonstrates the time and effort you’ve invested in planning and research, building confidence in your venture.

If you want to borrow money to fund your company, then, you need a business plan that’s detailed and requires a plethora of information. It tells the lender the business type, target market, strategies and more. It also reveals how you plan to make money, your projected expenses and expected revenues. Before taking on this challenging task, you must learn how to write a business plan .

Key elements of loan-focused business plan

Creating a business plan for a loan takes time, thought and effort. And it needs to contain the following components:

Executive summary

Even though the executive summary is the first paragraph in a business plan , it’s the last section you should write. The executive summary summarizes the main points of your plan and tells the lender why it should invest in your business idea . It’s a snapshot of your business’s highlights and states how much money you want to borrow.

You can choose a business plan template for loan requests to simplify the plan’s writing process instead of starting from scratch. Many templates suggest including your mission statement in the executive summary . The core goal of this initial section is to spark the lender ‘s interest in your company. If you can do that, the lender will continue reading it.

Company description

This section tells the lender your business type and the industry it’s in. It allows business owners to highlight their previous work, jobs and skills to demonstrate experience in the field. It states where your business will operate and who will run the company.

This section also provides the ideal opportunity to explain your commitment to the startup . Be as transparent and detailed as possible when describing this new endeavor. The number one goal of this section is for the lender to fully understand what your business does. Describing the business model you plan to use is also helpful, along with the growth plan you propose if you are successful.

Products or services

Every business sells products, services or a combination of both. Selling something — whether it be a product or a service — is how a business generates revenue. Start by describing in detail what your business will sell. Next, highlight the features that set your products and services apart from those of your competitors. List the patents or copyrights of your goods, if applicable, and list the things your business needs to operate. For example, you might need a building from which to operate or equipment to produce products.

Market analysis

Creating a business that offers a unique product or service is nearly impossible today. As a result, your business will likely compete with other businesses. You must address this by presenting a competitive analysis of your venture’s business goals and how it will stand out from others in the field.

What other local businesses have similar products or services? How do you plan to attract some of this market? Do you own relevant intellectual property that may help you to achieve success?

Include the results of your market research in the market analysis section of your business plan . You might include some details about your target customers, such as their demographics, and your planned pricing . Finally, include a brief synopsis of your marketing plan in this section..

Competitor analysis

Lenders want to know if your business will succeed before they approve your loan proposal. Therefore, they want to know that you’ve thoroughly researched your competition. You can list your competitors in this section, including their products and services, and what you see as your competitive advantages over them.

Next , give a more detailed analysis of what differentiates your services and products from theirs. What is unique about your company? What advantages will your company have over its competitors? Keep in mind that lenders base loan decisions on risk levels. If the lender can’t see the need for your business’s products, they might turn down the loan. The goal of this section is to convince the lender that there is a demand for your company’s products and services..

Marketing plan

Next , include specific details about your marketing strategy , including financial plans . How much money will you spend on marketing efforts? What methods will you use? How do you know they’ll be effective? Marketing is a massive part of a business strategy, so your plan must answer these questions.

Operational plan

The operational plan explains how you’ll execute your business startup to the lender . It reveals more details about your company’s location, its target market and the equipment and software you’ll use. Additionally, it explains the processes you’ll use to produce or sell your goods.

Management structure

A business plan must also list your management team . You might be the sole owner of the business, but will you work alone? If not, who will work for you?

Not only should you list colleagues’ names, but you should also describe each person’s experience, skills and qualifications. Additionally, explain staffers’ roles, duties and responsibilities and the hierarchy of the management structure.

Funding request

The purpose of writing a business plan is to request a loan. Therefore, you must include your funding requirements in the business plan . How much money do you want to borrow? How will you spend it? You should explain in detail how you will spend the funds, as this validates your need for the loan. The lender can see if you have a clear plan and if the plan makes sense.

Financial projections

This next section outlines your company’s projected profitability, which is vital for repaying the money you borrow. Lenders spend a lot of time reading through the financial parts of a funding request .

When writing this section, begin by stating your projected annual revenues for the next three to five years. Next , include income statements to highlight your company’s potential net profits. You can also include forecasted balance sheets , which help the lender see your assets, liabilities and capital. Graphs and other elements can be useful in this section.

Be sure to cover how business financing will allow your plan to flourish. Including a break-even report is helpful. This metric reveals how much you must sell to cover your expenses. For a lender , it reveals safety margins, helping lenders assess risk levels.

This section offers a place to add supporting documents to the plan. It should contain a list of your business licenses and permits needed to operate the company. You can also include your management teams ‘ resumes and a copy of your lease agreement for the space you’ll rent. Include any other documents the lender might want to see, such as contractor or business arrangements.

Many businesses hire lawyers to create their business entities. Include these legal documents if you created a business entity. If you haven’t created one yet, you should consider which type to use. An LLC is a good option, as it provides tax benefits and liability protection. You can look for the best LLC loans if you choose this route.

How lenders score your business loan application

You submit a business plan to secure funding, but a lender must approve the plan before you receive the loan. Lenders determine how to respond to business loan requests by analyzing the business plans they receive. To do this, they look at five primary things.

Your character reveals intangible qualities about you and those who will work with and for you. Lenders look for integrity and honesty and try to answer the question, “Is this person trustworthy?”

Lenders analyze your personal credit history and assess your credit score to determine your creditworthiness. In addition, lenders evaluate your job experience, reputation and qualifications. They also look at your previous endeavors to determine the risk level associated with offering you a business loan.

Lenders spend a lot of time analyzing a borrower’s ability to repay the money they borrow, and they call this capacity. Are you capable of repaying the money if they approve the loan? To determine the answer, your lender will thoroughly review your projected revenue.

Additionally, lenders analyze the forecasted financial statements , including such financial information as cash flow statements . Lenders review the products and services you’ll offer to ensure there is demand and consider your funding request and your plans for using it.

Next , the lender looks closely at your capital. They want to see how much money you have invested in the business and compare it with the amount you’re requesting.

Your investment shows your level of commitment. A large investment into your business startup shows the lender you’re serious about making it work. It also tells them you’ve researched it, worked hard on planning it and expect to make a good profit from it. Therefore, make sure your business plan clearly indicates your investment amount.

In addition to your investment, the lender wants to know what you can offer as collateral. For example, you could offer the building you’ll operate out of as collateral if you own it or have equity in it. You could also use equipment, machines or vehicles. Being willing to offer assets as collateral improves your odds of getting the loan.

Finally, lenders will look at the following conditions:

• Demand for your service: Proving a high demand for your products is critical to get a loan approved.
• Competition: Your lender will evaluate the competition and look for things that distinguish your business from your competitors.
• Trends and marketing strategies: Will there be a demand for your products in the future? If so, does your plan outline how you’ll reach more people? Lenders look at your digital marketing strategies, as this is the newer trend. It also looks at your advertising strategies, including your website, SEO strategies and inbound marketing plans.

Summary of Money’s how to write a business plan for a loan

Learning how to write a business plan for a loan is essential. Your chances of getting approved for startup funding are significantly higher with a clear, thorough and well-researched business plan. Your plan should contain a comprehensive description for each section, allowing the lender to learn as much as possible about your business endeavor. After submitting it, the lender will use the 5 Cs to analyze your loan proposal. A well-written and researched business plan is imperative for any new business startup or newly formed company that needs to borrow some cash.

© Copyright 2024 Money Group, LLC . All Rights Reserved.

This article originally appeared on Money.com and may contain affiliate links for which Money receives compensation. Opinions expressed in this article are the author's alone, not those of a third-party entity, and have not been reviewed, approved, or otherwise endorsed. Offers may be subject to change without notice. For more information, read Money’s full disclaimer .

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What Lenders Look for in a Business Plan

A business plan is the foundation of your business. It shows the vision and mission and serves as a road map as you move forward with your business. A business plan is one of the most important documents you will ever create. It is an invaluable tool when it comes time to apply for a business loan. What lenders look for in a business plan might surprise you but knowing what they want will improve your chances of getting the money you need to continue to drive your business forward.

When lenders ask for a business plan, they are looking for the following information:

History of your business

Be sure to mention how your business started and how it has grown. Not any unique challenges you faced and how you addressed them, it will show your business acumen and ability to adjust changing market needs.

How revenues are generated

Lenders want to get their money, so they are interest in knowing how you make yours. Explain how customers are served, how the product or service is delivered and how much money is collected.

Let lenders know who is at the helm and what relevant skills, knowledge, and experience they bring to the table. I emphasize the word “relevant” here because lenders want to see how adept your management team is at leading and growing your specific business.

Lenders want to know who to serve, how large the population is, and how viable the market is. Lenders want to know who you are competing with in this pace and how you are setting yourself apart. All marketing and publicity you are doing should be noted so you can show that activity toward your business revenue creation and growth.

Historical financials with debt coverage ratios

To give lenders a clear idea of the financial health of your business, you need to show detailed financials of the revenue, assets, liabilities, and repayment structures. This is one area where many business loans are killed either because of poor or inaccurate accounting by the business or due to insufficient cash flow and debt service coverage ratios . Lenders want to make sure that you are financially stable so that you can make your loan payments.

Projections

Lenders want to see your future projections about what you expect to happen financially in your business. Discuss both what will occur without funding as well as what projected growth you expect should you receive financing. Be sure to include projections regarding job creation, market growth, and product development. Consider seasonal or cyclical changes to your business if any and how those changes can impact your business.

Include any assets that your company currently owns including patents, real property, or other collateral that can be leveraged against your debt. Additional collateral can include personal property like rental properties.

Purpose of the project

The last thing you need to mention is why you are asking for this loan. What does your business serve? Do you need to expand or open a new location? Do you need to install new equipment? No matter what your business goal is, be as detailed as possible. If you are looking to get an SBA loan or other economic incentive that is tied to specific policy directives. Lenders want to know exactly where their money is going.

The Bottom Line

Lenders look for other things other than the business plan including secondary repayment sources, residency, criminal records and more. Be sure to be responsive to all requests from lenders and give them as much information as possible so that you can prove that you are a good fit for them. You need to do everything you can to improve your chances. Do not let your business plan be the thing that keeps you down.

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Insider Tips: What Lenders Want to See in Your Business Plan

• June 8, 2018

As a small business lender, Pursuit has “insider” knowledge about what lenders really look for in business plans. Ensuring that your plan includes the key points outlined in this article will help lenders better understand your business and your funding needs.

Every business needs a plan. While they’re critical during the startup phase, they’re just as essential during growth periods to keep leadership focused. Down the road, your business plan can provide a framework for decisions on expansion opportunities and to help you re-focus efforts to align with your mission. They’re also required for small business lending from reputable lenders, including Small Business Administration (SBA)-backed loans.

Lender’s perspective: business plan narrative

To be effective, there are some essential elements that you must include in your plan’s narrative. From a lender’s perspective, here’s what they’ll want to see:

• Business purpose : What does your business do? Include a simple, straightforward description of the fundamentals of your business. In one to two sentences, the lender should be able to learn how your business does or will make money.
• Who are your key suppliers?
• What are some key products/services that serve as core revenue streams?
• If you’re carrying inventory, where is it stored, and how exactly is it shipped to customers?
• Are you paid immediately upon delivery of products or services, or do you bill on 30-, 60- or 90-day terms?
• The business owner : Potential lenders want to have confidence in your ability as the owner ability to run your business successfully. Tell them about your relevant expertise and include your resume in your plan’s appendices (the section at the end of your plan that includes more detailed information). Do you have industry experience? Do you have a financial background? Lenders want to see that you know your market, so if you have prior industry experience, be sure to highlight it. If there are gaps in the ownership team’s background knowledge, who will be hired to fill those gaps?
• Financing : In addition to financial projections (the next section), provide a brief narrative section on how you’ll fund your business until it becomes self-supporting. What is your financial contribution? Where will you get the rest of the funds needed? What will the loan be used for, and specifically, how will that help the business grow? Lenders want to see details and evidence of a thoughtful growth plan in your answer to this question. A generic response such as, “I want $100,000 to hire people and grow the business,” isn’t enough. Instead, dig into the details of how the loan will specifically contribute to your plans for growth. For example, “I want to buy a higher-capacity printer that costs $50,000 so that I can raise my pamphlet-printing business’s weekly production runs to increase revenue.”
• Industry analysis : Lenders like to work with industries that have growth potential. What’s the demand for your goods or services and how do you plan to meet that demand? What factors could impact your growth potential? How do you plan to leverage opportunities or overcome challenges?
• Competitive research : Talk about businesses within your industry that are similar to yours, and what makes yours different or better. Perhaps you offer new products or services, or maybe you’ve developed a more cost-effective way to produce your products. Are you marketing your brand as a luxury product or service? If you have a brick-and-mortar location, are you the first to bring an existing product or service to your geographic market? Everyone has competitors, so be clear about yours. (If you haven’t yet read Blue Ocean Strategy , we recommend it to help you develop your strategy).
• SWOT analysis : When you include a SWOT analysis—strengths, weaknesses, opportunities and threats—you demonstrate that you understand your business and industry, as well as its challenges, and are prepared to meet them. There are many good examples and templates for SWOT analyses available online.
• Marketing plans : It’s never enough to hope that news of your business will spread via word-of-mouth—potential lenders want to see how you’ll get and keep your customers. It’s also not sufficient to say that your target market is “everyone.” Even if that’s your ultimate goal, who is most likely to buy your products or services first? Specifically identify your target market as well as how you’re going to reach that audience. What do you know about them? How do your products or services align with their needs? Where do they shop and what are their buying habits (or how do they use your services)? Keep in mind that your marketing plan doesn’t have to be expensive to implement, but it must effectively reach your target clients.

Lender’s perspective: financials

While it’s a common practice to lead with the narrative portion of your business plan, when lenders review plans they typically focus on the financials first. Then they’ll reference the narrative to gain a sense of how these assumptions are supported by the written plan. You can put your best foot forward by creating a great cash flow forecast. Here are some tips to get started:

• Lenders understand that your projections are exactly that: assumptions that you’re making about revenues and expenses based on your best estimates. Most won’t challenge your projections if they appear credible and reflect what you say you’ll do in the narrative.
• Lenders don’t expect startups to be profitable right away, so be realistic and somewhat conservative in your projections. Include a ramp-up period to demonstrate that you’re realistic and have planned for likely cash-flow shortages early on. It’s also okay to also include a best-case scenario and show that you’re aiming high.
• Rather than roll revenue items into a single line item, provide revenue details on the types of products and services you plan to offer. To the extent that it makes sense for your business, revenue projections should include broad categories by types of products and services or by market segments.
• Lenders will review common financial ratios for your industry and how your projections compare. You can get this information for free from your local Small Business Development Center or local business library. If your assumptions skew either stronger or weaker than industry standards, address that with good supporting information.
• One of the hardest parts of this process is projecting working capital needs during ramp-up periods, but good advisors or lenders can help. With this projection, be sure to also provide accurate estimates for hard costs such as equipment and inventory, as well as soft costs, which include deposits and professional fees.
• Finding the optimal ratio of your own financial contribution and funds lent by others is essential to your business’s survival in the early years. A lender will know you’re on the right track when your projected annual cash flow exceeds your projected annual debt service.

*If you want to brush up on lending lingo before you apply for a business loan, see our guide on common lending terminology .

Lender’s perspective: executive summary

An executive summary that highlights the key points from each section of your plan is usually the last thing that you’ll create, although it’s typically the first page (or two) of your plan presentation. Narrow this down to only the key information, with detailed information in the rest of the plan and in the appendices.

Create a plan that you and your lenders will love

By the end of reading your business plans, a lender should know how your business will become and stay profitable. More than anything, you want to create a business plan that’s useful in your day-to-day operations and strategic planning—but if you also create one that lenders love, you’ll demonstrate that you’re knowledgeable, competent, and informed about your industry and prepared for the ups-and-downs of business ownership.

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What Do Lenders Look For? How To Get Approved

When you apply for a consumer loan such as a credit card or auto loan, you probably know that most lenders will look at your credit score and your income to decide whether to approve your application. But small business loans can be more complicated. There are many different types of loans, each with different approval criteria. Most of them use three main factors to evaluate loan applications: revenues/cash flow, time in business and credit. 

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Revenues/Cash Flow

Most lenders want to understand whether the business has the capacity to repay the loan. Depending on the type and size of the loan, there may be different types of documentation required.

For a bank loan, for example, you will likely have to provide two years (or more) business tax returns along with at least three months of business bank statements.

Most online lenders won’t require detailed financial statements. Instead, they will analyze bank account activity to make a quick credit decision. With this type of loan, the lender may request business bank account statements (3-6 months’ worth). It may require you to link your bank account so the lender can review your bank account activity. Each lender is somewhat different, but they will be looking for things like:

• Deposits, including the number of monthly deposits and the amounts.
• Trends in balances and whether business is declining or improving.
• Low balance days, including how many days the balance falls below a minimum amount (which varies by lender) and number of times the account is overdrawn.
• Undisclosed debt payments.

Some businesses try to keep cash deposits “off the books” to minimize taxes. Understand that if you do that, you may not be able to get as much financing as you would if that income was documented.

Time in Business

Many businesses fail, and those that don’t make it often fail in the first few years. As a result, lenders want to see a successful track record. Here, they will take into account how long your business has been in operation.

Many lenders prefer to lend to businesses with at least two years in business. Make sure you have established an official start date for your business, whether that’s the date you incorporated or the date you received your Employer Identification Number (EIN) or a business license. Be consistent and use that date when applying for credit.

Credit History

Some small business lenders check business credit, some check personal credit, and a few don’t check credit at all.

If a lender checks your business credit through commercial credit bureaus, it may be looking at your business credit score , checking your to see if your business has a positive payment history, or it may simply be checking for red flags such as late payments, tax liens or collection accounts. 

Sometimes lenders will review business credit reports to check for UCC filings. UCC filings are a type of court record that indicate other creditors have a security interest in property of the business. 

Many small business lenders also check the owner’s personal credit. That credit check may be a soft inquiry which doesn’t impact your scores, but that is not always the case. If you’re concerned about a credit check, ask the lender about its policy.

Banks, credit unions and other traditional financial institutions (including those that make SBA loans) will usually require good credit (or even excellent credit). They may check credit scores on each business owner with a specific ownership percentage. (In the case of SBA loans, a credit check is usually required for any business owner that owns 20% or more of the business.)

Credit scores may be used both to approve a loan as well as to help determine the interest rate that will be charged. 

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There is a fourth factor that will likely impact your loan options, and that’s the industry in which you operate. Small business lenders may prefer to lend to businesses in certain industries, or they may avoid others they deem too risky or that simply aren’t a fit. These will be referred to as “restricted industries” by the lender. (For example, some lenders specialize in medical or veterinary practices, for example. Others won’t lend to businesses involved in certain types of real estate construction, used car lots or adult entertainment venues, for example.) 

What are the 5 C’s of Lending?

You may have heard of the 5 C’s of lending. These are used to help describe the eligibility factors lenders may look for during the underwriting process. Here are some of the questions a loan officer may have in mind as it reviews your loan application: 

Character : Will you repay the loan? Here the lender will review your credit history to see whether other debt has been paid on time. 

Capacity : Can you repay the loan? Does your business have sufficient monthly income and cash flow to make payments? The lender may look at financial ratios here. In the consumer lending world, it would be a debt to income ratio, while in the business financing world it may be a debt service coverage ratio. 

Collateral : Do you have some type of collateral that could be repossessed if you don’t pay it back? This may include equipment or other physical assets of the business, personal assets such as home equity or even future receivables of the business. 

Capital: How much have you invested in the business? You may hear this referred to as a down payment, equity injection, or informally as “skin in the game.”

Conditions : What are the terms of the loan—interest rate along with daily, weekly or monthly debt payments— that may impact your ability to repay it? The lower your interest rate, the lower your monthly payments will be, if all other factors are equal. What are the conditions in the industry and/or economy that may impact the business and its future success? Some banks may want a business plan to help document this. 

Keep in mind that even an online business loan application may include an automated review of some of these factors. While a loan officer may not review each credit report, for example, there may be a minimum credit score. Or by linking your bank account, revenues may be evaluated to help determine whether the new loan payments will be affordable.

How to Prepare To Qualify for a Small Business Loan

If this leaves you feeling overwhelmed, you’re not alone. Small business lending can feel confusing. There are a few simple steps you can take to make it easier, though:

1. Use a business bank account . Make sure you are using a business bank account for all your business income and expenses. Don’t mix personal expenses; if you need to make a personal purchase, pay yourself and then pay for those expenses through your personal accounts. Keep your bookkeeping up to date so if a lender requires financial statements, it won’t be difficult to pull those together.

2. Check and monitor your business and personal credit . If you have business partners, it’s a good idea to discuss your credit scores with each of the major credit bureaus so you all know what to expect if you decide to apply for financing with a lender that checks personal credit. ( Here’s a list of 138+ places to check your credit scores for free .)

3. Look for financing before you need it . Borrowers who scramble for financing rat the last minute are not likely to get a great loan. At a minimum, you may want to secure a line of credit or at least get a business credit card so you’ll have that credit available if an opportunity (or crisis) comes along.

This article was originally written on October 21, 2021 and updated on October 22, 2021.

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Gerri Detweiler

Education Consultant, Nav

Known as a financing and credit expert, Gerri Detweiler has been interviewed in more than 4000 news stories, and answered over 10,000 credit and lending questions online. Her articles have been widely syndicated on sites such as MSN, Forbes, and MarketWatch. She is the author or coauthor of five books, including Finance Your Own Business: Get on the Financing Fast Track. She has testified before Congress on consumer credit legislation.

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Part 4- What Lenders Look For In A Business Plan

• By Craig Darling
• Banking Law Blog Family Business Unit Insights Legal
• November 12, 2021

A business plan is the foundation of your business. It shows the vision and mission and serves as a road map as you move forward with your business. A business plan is one of the most important documents you will ever create. It is an invaluable tool when it comes time to apply for a business loan.

So what are some of the key headlines that lenders look for in a business plan?

Showcase your expertise

Lenders want to see how adept your management team is at leading and growing your specific business.  They want to know who is steering the ship and who’ll be doing what in your business to make it a successful and profitable business. So they shall want to understand who everyone is and what are their relevant skills, knowledge, qualifications and track records.

Be Clear About What You are Selling

Your plan needs to show the lender that you’re clear about what you’re selling, who’s going to buy it and why and how you’re going to reach those buyers. Explain what you’re selling in plain English. This may seem obvious, but a lot of plans leave lenders guessing what the product or service being sold is, or why anyone would buy it.

What is your Market?

Lenders want to know who your customers are, how large the customer population is, how much they’ll spend and how viable the market is and why they will buy from you. Lenders want to know who you are competing with in this pace and how you are setting yourself apart – why is your business better or distinct from your competitors.  They want confidence that you know your industry backwards

How much do you need?

This may seem obvious, but know how much you need, versus how much you want; there is a difference. And, for what purpose? You need to clearly itemize why you need business financing, what amounts you’re requesting (both current and prospective for the next five years), and what you will use the amounts for.

The amount you ask to borrow should match the financials in your plan. For example, don’t try to show that you don’t need any money; if you didn’t, you wouldn’t be borrowing. But don’t show that you need much more money than you can afford to borrow. Your cash flow should be realistic, and it should show how much money you need and why you need it.

Current Financials, projections and cash flow

To give lenders a clear idea of the financial health of your business, you need to show detailed financials of the revenue, assets, liabilities, and repayment structures.. Lenders want to make sure that you are financially stable so that you can make your loan payments.

Lenders expect to see the three main financial statements — income, balance, and cash flow — projected monthly for the first year, and annually for a couple of years after that. Cash flow is the most important part of your plan. Most loan applications are declined because the cash flow projections don’t convince the lender that the business will make enough to repay the loan. Lenders need to see that your assumptions are supported by concrete evidence from the industry, your own past sales, or even your competition’s sales, if you can get those.

Your financial projections need to be realistic.  Lenders will compare your projections to industry reports. If you project margins way better than industry averages, you will need to explain why and how you are going to accomplish that.  Be sure to include projections regarding job creation, market growth, and product development. Consider seasonal or cyclical changes to your business if any and how those changes can impact your business.

Of course, in deciding whether or not to lend lenders look at more than just your business plan.  But the business plan is the platform from which you can demonstrate your skills, expertise and industry knowledge and your drive, control and vision for your business.  A good business plan is persuasive and answers queries rather than raises more questions, deriving confidence in you from those that read it.

Should you have any questions on any of the articles in this series please contact:

Craig Darling by email :  [email protected]  or by phone: 0141 530 2044/07841 920 467

The information and opinions contained in this blog are for information only. They are not intended to constitute advice and should not be relied upon or considered as a replacement for advice. Before acting on any of the information contained in this blog, please seek specific advice from Gilson Gray.

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How Do Potential Lenders and Investors Evaluate a Business Plan?

When it comes to securing funding for your business, a well-crafted business plan is essential. But how do potential lenders and investors evaluate your plan to determine whether or not they should invest in your business? In this article, we will explore the key factors that lenders and investors consider when evaluating a business plan.

Executive Summary

The executive summary is the first section of your business plan and is often considered the most important. It should provide a clear and concise overview of your business, including your products or services, target market, competition, and financial projections.

Potential lenders and investors will use the executive summary to quickly determine whether or not your business is worth further consideration. As such, it is essential that your executive summary is well-written, engaging, and highlights the most important aspects of your business.

Some key elements to include in your executive summary are:

• A brief overview of your business
• A description of your products or services
• Information about your target market
• An overview of your competition
• Your financial projections

Market Analysis

The market analysis section of your business plan should provide a detailed analysis of your target market, including its size, demographics, and purchasing behavior. It should also provide an overview of your competition and how you plan to differentiate your business from theirs.

Potential lenders and investors will use the market analysis to determine whether or not your business has a viable market. They will also look at your competition to assess the potential for success in your chosen market.

Some key elements to include in your market analysis are:

• A description of your target market
• Information about the size and demographics of your market
• An analysis of your competitive advantage

Marketing and Sales Strategy

The marketing and sales strategy section of your business plan should provide an overview of your marketing and sales plans, including how you plan to reach your target market and convert them into customers.

Potential lenders and investors will use this section to determine whether or not your business has a solid plan for generating revenue. They will also look at your marketing and sales strategy to assess the potential for success in your chosen market.

Some key elements to include in your marketing and sales strategy are:

• Information about your marketing channels
• Your sales strategy and tactics
• Projected sales numbers

Management Team and Personnel

The management team and personnel section of your business plan should provide an overview of your key personnel, including their backgrounds and experience. It should also provide information about your organizational structure and how your team will work together to achieve your business goals.

Potential lenders and investors will use this section to determine whether or not your business has a solid leadership team and the potential for success. They will also look at your organizational structure to assess the potential for growth and scalability.

Some key elements to include in your management team and personnel section are:

• A description of your key personnel
• Information about their backgrounds and experience
• Your organizational structure
• Information about any advisors or mentors

Financial Projections

The financial projections section of your business plan should provide detailed financial projections for your business, including your income statement, balance sheet, and cash flow statement. It should also provide information about your funding requirements and how you plan to use the funds.

Potential lenders and investors will use this section to determine whether or not your business has a solid financial plan and the potential for profitability. They will also look at your funding requirements to assess the potential for investment.

Some key elements to include in your financial projections section are:

• Your income statement
• Your balance sheet
• Your cash flow statement
• Information about your funding requirements
• How you plan to use the funds

Risks and Challenges

The risks and challenges section of your business plan should provide an overview of the potential risks and challenges that your business may face, as well as how you plan to mitigate them. It should also provide information about any regulatory or legal issues that may impact your business.

Potential lenders and investors will use this section to determine whether or not your business has a solid plan for managing risk and the potential for success in the face of challenges. They will also look at any regulatory or legal issues to assess the potential for investment.

Some key elements to include in your risks and challenges section are:

• An overview of potential risks and challenges
• How you plan to mitigate these risks and challenges
• Information about any regulatory or legal challenges
• Your plan for managing risk

Competitive Analysis

The competitive analysis section of your business plan should provide an overview of your competition, including their strengths and weaknesses. It should also provide information about how you plan to differentiate your business from theirs.

Potential lenders and investors will use this section to determine whether or not your business has a solid understanding of the competitive landscape and the potential for success in your chosen market. They will also look at your competitive advantage to assess the potential for investment.

Some key elements to include in your competitive analysis section are:

• Their strengths and weaknesses
• Your competitive advantage
• How you plan to differentiate your business

Company Description

The company description section of your business plan should provide an overview of your business, including its history, mission, and vision. It should also provide information about your products or services and your target market.

Potential lenders and investors will use this section to get a better understanding of your business and the potential for investment. They will also look at your mission and vision to assess the potential for growth and scalability.

Some key elements to include in your company description section are:

• An overview of your business
• Your company history
• Your mission and vision
• Information about your products or services

Exit Strategy

The exit strategy section of your business plan should provide information about your plans for exiting the business, including selling it or going public. It should also provide information about how you plan to maximize the value of your business.

Potential lenders and investors will use this section to determine whether or not your business has a solid plan for exiting and the potential for return on investment. They will also look at your plans for maximizing the value of your business to assess the potential for investment.

Some key elements to include in your exit strategy section are:

• Your plans for exiting the business
• Information about selling the business or going public
• Your plan for maximizing the value of your business
• Projected returns on investment

In conclusion, a well-crafted business plan is essential for securing funding for your business. Potential lenders and investors will evaluate your plan based on several key factors, including your executive summary, market analysis, marketing and sales strategy, management team and personnel, financial projections, risks and challenges, competitive analysis, company description, and exit strategy.

By providing detailed and well-researched information in each of these sections, you can increase your chances of securing funding for your business and achieving success in your chosen market.

Frequently Asked Questions

What are the key components of a business plan that potential lenders and investors look for.

The key components that potential lenders and investors look for in a business plan are a clear and concise executive summary, a detailed description of the business and its products or services, a market analysis that identifies target customers and competitors, a marketing and sales plan, a management and organizational structure, financial projections, and an exit strategy. The executive summary should provide a snapshot of the business and highlight the most important aspects of the plan.

The market analysis should include research on the target market and competitors to show that the business has a viable market. The marketing and sales plan should outline how the business will reach its target customers and generate revenue. The management and organizational structure should demonstrate that the business has a strong team in place to execute the plan. Finally, the financial projections should be realistic and based on market research and industry benchmarks.

How do potential lenders and investors evaluate the financial projections in a business plan?

Potential lenders and investors evaluate the financial projections in a business plan by analyzing the assumptions, the revenue and expense projections, the breakeven analysis, and the cash flow projections. They will examine the assumptions that underlie the projections to determine if they are realistic and based on sound market research and industry benchmarks. They will also look at the revenue and expense projections to see if they are reasonable and achievable.

The breakeven analysis is important because it shows the point at which the business will start generating a profit. Potential lenders and investors will examine this to determine if the business has a viable business model. Finally, they will look at the cash flow projections to see if the business will have enough cash on hand to meet its obligations and to fund growth.

What are some red flags in a business plan that can turn off potential lenders and investors?

Some red flags in a business plan that can turn off potential lenders and investors are unrealistic financial projections, lack of market research, incomplete or inconsistent information, lack of clarity in the executive summary, and unproven or untested products or services. Unrealistic financial projections can signal that the entrepreneur has not done their homework or is overestimating the potential of the business.

Lack of market research can indicate that the entrepreneur does not understand the market or the target customers. Incomplete or inconsistent information can make it difficult for potential lenders and investors to evaluate the plan. Lack of clarity in the executive summary can make it difficult to understand the key points of the plan. Finally, unproven or untested products or services can be a red flag because they may not have a market or may not be profitable.

What is the role of the management team in a business plan?

The role of the management team in a business plan is to demonstrate that the business has a strong and experienced team in place to execute the plan. The management team should have a clear understanding of the market and the industry, and should have the skills and experience needed to lead the business to success.

Potential lenders and investors will examine the management team to see if they have the necessary experience and qualifications to run the business. They will also look at the organizational structure to see if the team is well-organized and has clear roles and responsibilities. Finally, they will look at the compensation structure to see if it is reasonable and aligns with industry standards.

Why is an exit strategy important in a business plan?

An exit strategy is important in a business plan because it shows potential lenders and investors that the entrepreneur has a plan to sell or exit the business in the future. This is important because it provides a clear path for potential investors to realize a return on their investment.

The exit strategy should be realistic and based on market conditions. It should also be flexible enough to adapt to changing market conditions or other unforeseen events. Potential lenders and investors will examine the exit strategy to determine if it is viable and if it provides a clear path to a successful exit.

What Lenders and Investors Want – financewithoutfearacademy.com

Moreover, lenders and investors will want to see that the entrepreneur has a solid understanding of the market and the competition. They will also look for a strong management team with a clear and realistic plan for growing the business. Overall, a business plan should be clear, concise, and persuasive to help secure funding and investment.

In summary, crafting a strong business plan is crucial for entrepreneurs seeking funding and investment. It should be well-written, detailed, and convincing to potential lenders and investors. By understanding how these professionals evaluate business plans, entrepreneurs can better prepare themselves to secure the funding they need to grow their business.

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What Lenders Look for in a Business Plan

• December 11, 2021
• By James Gussie

Every day, thousands of small businesses enter the market with hopes to build a successful company. The most important first step for entrepreneurs is crafting an effective business plan that helps lenders understand their vision and how they will achieve it. What should be included in your business plan? Experts offer eight tips to help you get started!.

A business plan is a document that outlines the company’s goals, objectives and financial projections. Lenders and investors look for three things in a business plan: an executive summary, a marketing plan, and a financial analysis. Read more in detail here: what lenders and investors look for in a business plan .

The basis of any company is your business strategy. It expresses your vision and objective and acts as a guide as you progress. It’ll be one of the most crucial papers you’ll ever write. When it comes to applying for a company loan, it’s also a great resource. What lenders look for in a business plan may surprise you, but understanding what they want (and how to offer it to them) can greatly enhance your chances of acquiring the funds you need to keep your company moving ahead.

When a lender requests a business plan, they are searching for the following components in particular:

The company’s history What is the history of your company and how has it grown? Make a note of any unique issues you experienced and how you dealt with them, since this will show your business acumen and ability to adapt to changing market demands.

How are profits generated? Lenders want their money back, so they’re particularly curious in how you make yours. Describe how clients are serviced, the product or service is supplied, and money is collected in detail.

Management Make sure lenders know who is in charge and what necessary skills, expertise, and experience they have. Lenders want to see how capable your management team is at managing and expanding your unique firm, which is why I underline the term “relevant.”

Market lenders want to know who you serve, how big your market is, and how profitable it is (e.g. affluence, room for growth, etc.). Lenders also want to know who your competitors are in this market and how you’re differentiating yourself. Keep track of all marketing and PR efforts (regular social media, strategic alliances, presentations, broadcast advertising, and so on) so you can show that you’re working to increase income and expand your business.

Financial data from the past, including debt coverage ratios To offer lenders a comprehensive picture of the financial health of the firm, detailed financials covering all income, assets, obligations, and payback mechanisms are required. Many business loans are killed in this area, either as a result of the company’s bad or incorrect accounting, or as a result of inadequate cash flow and debt service coverage ratios – in other words, not having enough cash on hand to meet your loan installments.

Projections Lenders also want to know what you plan to do financially in the future. Discuss both what will happen if you don’t get money and what you anticipate to happen if you do get funding. Include forecasts for job creation, market expansion (e.g., if you get finance, you’ll be able to better service your market or serve new markets), product development, and anything else that would be affected. Seasonal or cyclical fluctuations in the company should also be considered, as well as the financial implications of such changes.

Collateral What are the company’s current assets? Include any patents, real estate, or other assets that may be used to pay off your debt. Rental properties, ranch land, and other personal property might be used as supplementary collateral for underwriting consideration.

The project’s goal is to Last but not least, you must explain why you need this loan. What purpose does it fulfill? Is it to grow, establish a new site, relocate, install new equipment, or achieve some other company objective? If you’re applying for an SBA loan or any economic incentive related to particular policy directions, be as clear as possible. They want to know where their money is being spent.

Lenders, of course, examine for elements other than the company plan, such as supplementary repayment sources (for specific loans), domicile, criminal history, and so on. Respond to all lender demands, no matter how difficult or insignificant they seem to be, since this will assist keep the process going. The objective is to be as prepared as possible with as much information as possible so that you can show the lender that your business is “up to the task.” With the current state of financing, you must do all possible to boost your prospects. Don’t allow your company strategy get in the way of your success.

Watch This Video-

The “ bank business plan example ” is a document that lenders will want to see in order for them to approve your loan. The lender will review the business plan and determine if it is viable or not.

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Frequently Asked Questions

What banks look for in a business plan.

A: The banks are looking for a plan that has the following criteria. It should have three to five years of cash flow projections, be written in an understandable language and show what you will do with your money.

Why would a lender look for a business plan?

A: Lenders might look for a business plan to assess the companys creditworthiness and also as an indication of how much capital they can expect from a loan.

Do lenders require a business plan?

Related tags.

• business plan for banking industry
• business plan for bank loan example pdf
• business plan for loan company
• business loan proposal sample pdf
• business plan for bank pdf

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7 Things Investors Are Looking for in a Business Plan

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A business plan is a comprehensive document that outlines a company’s mission, goals, finances, revenue, and market data.

The primary purpose of a business plan is to convince banks and/or investors to loan you money, but there are several other benefits.

Business plans help create accountability within an organization, offer a holistic view of the company, and can repeatedly be used as a frame of reference.

Ultimately, a business plan mitigates risk. It summarizes all business areas and details how those areas ( marketing , operations) impact growth.

And there’s no way around it; if you want to fund from an investor, especially if you’re just starting your business , you need a business plan.

Any entrepreneur would be lucky to meet with an angel investor or venture capitalist. But the initial pitch, meeting, and presentation are all the tip of the iceberg.

What comes next is most important.

The potential investor will want a detailed business plan and will conduct due diligence to ensure you’re a worthy investment. With that in mind, here’s what investors are looking for in a business plan:

Strong Executive Summary

The executive summary is the first portion of your business plan and should be captivating enough to give a solid first impression.

Think of your executive summary as your website landing page. If visitors come to your website and can’t find what they’re looking for, they’ll move on to the next best thing.

Your executive summary should introduce the company and explain what you do and what makes you unique. It gives investors a complete overview of your business and should summarize key details in other business plan sections. This section is typically one page long and should be written last.

Start your executive summary by introducing yourself; follow up with an explanation of why your business matters and how it fills a gap in the market or solves a particular problem. Take a business plan example for inspiration for writing a practical executive summary.

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Complete Financial Forecast

Whether you have no sales or are generating revenue in the hundreds of thousands, every investor will scrutinize your financial plan to determine financial feasibility accurately. This section of your plan needs to be fully fleshed out and leave no grey area or room for further questions.

It’s essential to put yourself in the shoes of an investor. Based on your financial outlook, do you see yourself as a risky or promising investment? Your financial forecast should include the following:

Projected profit and loss statement Projects how much revenue you’ll generate and the profit you’ll make on those sales

Break-even analysis A detailed look at how many products you need to sell to cover fixed and variable production costs

Projected balance sheet Estimate of total assets and liabilities

Cash flow statement Details all cash inflows and outflows

Business ratios Calculations that illustrate the relationship between items (i.e., total sales and the number of employees).

To accurately build out your financial forecast, you must assess your market share (your market research section is also crucial to investors). Start from the bottom by highlighting your total addressable market and the percentage you’ll be targeting. Then you can dive a little deeper by outlining your segmented addressable market and share of the market. Investing sites can also help you better perceive the state of the market and other data for a more accurate forecast.

Want free financial templates for your business plan?

You will find a terrific collection of important templates, including a SWOT analysis, sales forecast template, profit and loss template, cash flow template, and balance sheet template, in this comprehensive guide on how to write a business plan.

Customer Acquisition Costs

Investors want to know how much it will cost to acquire new customers.

Understanding your customer acquisition costs (CAC) helps you grow healthy and scalable and shows investors that you know exactly what it takes to get a customer on board.

Knowing your CAC is more important than ever; the cost of acquiring new customers has increased by 60% over the past five years .

Customer acquisition costs are determined by examining the total cost of sales and marketing necessary to acquire new customers. You can calculate your CAC by dividing the total cost of marketing and sales by the number of customers acquired.

Your CAC can also help simplify your decision-making process, optimize your marketing strategies to focus on customer lifetime value, and paint a complete picture of your payback period (the amount of time it takes to recover the cost of an investment).

Strong Execution

A business plan is like an image. And as the age-old saying goes, “An image is worth a thousand words.”

Similarly, your business plan reveals much about who you are as a business owner. Let’s say that you have strong sales and an optimistic financial forecast. Is your business plan missing the necessary documentation and data points that support this? Is it rife with grammatical errors and improper formatting?

Execution is telling. How you communicate your business and your mission is just as important as the details within the plan. A hastily written or ambiguous business plan will result in more questions and hesitance.

If you can’t take the time to write a solid business plan, what else will you take shortcuts on?

The Financial Ask & Answer

The financial ask and answer addresses two crucial questions: How much money are you asking for, and what will you do with it?

The investment you’re seeking should be clear in your business plan (typically mentioned in the executive summary and expounded upon in the financial plan). How you intend to use the money should also be clear and logical.

Investors need to know that you’ll spend their money responsibly and that there’s proof that how you spend the money will result in revenue growth. Every dollar should be allocated to a specific destination for a good reason.

For instance, you cannot ask for a $500,000 investment without explaining how and why you arrived at this number. The business plan in the below example of a functional company called Culina states how much they’re asking for and why. In this case, Culina is raising $15 million to ramp up hardware manufacturing, improve UX and UI, expand marketing efforts, and fulfill pre-orders before the holiday season.

Strong Management

Your business plan should prove that you have a strong management team.

Many investors run their portfolios with a people-first mentality. This means that who you are is just as important as what you offer. Your business plan’s “Management” or “Team” section is great for humanizing your company and highlighting your strengths.

What makes your team especially capable of running and guiding this business toward profitability? What’s your background? Have you won any awards or participated in any incubator programs? Do you have relevant experience (either in running a business or working in the industry)?

Answer these questions to show investors that you’re uniquely qualified to lead.

Thorough Understanding of Your Market

Is there a market for your product or service, how can you reach your market, and what share of the market do you have a stronghold on?

Demonstrating a thorough understanding of your market and target demographic is crucial. Many businesses have failed because they didn’t conduct market research or speak to their customers and clients. Product validation should precede fundraising efforts.

“Market size” is a basic number that every investor looks for. Your competitive analysis , market research, metrics, and customer surveys should all be factored into the equation.

If you’re struggling to understand your market and position, you can start by gathering primary data from the Census and Labor Bureau. Many industries also have formal associations and publish their research online. You can purchase these studies or commission a market research firm to spearhead your research.

An interested investor can make or break your business and should be taken seriously. You wouldn’t rush through an Ivy League college application and shouldn’t submit a hastily written business plan.

Take the time to detail every aspect of your business and consider working with a business plan writer to ensure you communicate your message effectively. If an investor is impressed with your business plan, chances are you’ll score pivotal funding.

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Small businesses continue to face challenges beyond their control. In the past year alone, they’ve weathered increasing prices, high interest rates and stricter credit standards. Despite these obstacles, many entrepreneurs are moving forward with plans to get much-needed financing.

In fact, 67% of U.S. small-business owners plan to pursue funding for their business within the next 12 months, according to a new NerdWallet survey conducted online by The Harris Poll among 335 small-business owners.

Accessing financing during an ever-changing economic climate, however, can be difficult and expensive. While a loan can help fund the purchase of new equipment, stock shelves, hire employees and otherwise help a business survive or even thrive, it can also become a burden if payments become overwhelming.

Here are three tips to help small-business owners find and get the most affordable capital right now.

1. Leverage your existing financial relationships

Nearly half (45%) of small-business owners plan to pursue a traditional term loan in the next 12 months — and 18% are specifically looking for a bank loan, according to the survey.

Bank business loans tend to offer long repayment terms and low interest rates, but can be difficult to qualify for — especially since lenders have tightened their credit standards over the past year. Getting a bank loan isn’t impossible, however.

Some banks, especially local or community institutions, may be more flexible with their qualification requirements or offer other benefits, like interest rate discounts, if you already have a relationship. Consider starting your bank loan search with the institution that administers your business bank account or one that has issued you a loan in the past.

2. Strengthen your application profile

With or without an existing financial relationship, applying for a small-business loan can be intimidating: 17% of small-business owners are concerned about being rejected for the funding they need for their business in the next 12 months, according to the survey. To improve your chances of approval, you can:

Build your credit score

A strong credit score shows lenders that you repay your debts. In general, the stronger your credit history, the better loan rates and terms you’ll receive. To build your credit score , you can look for errors on your credit reports and dispute them with the appropriate credit bureau, make debt payments more frequently and pay down or pay off existing debt.

Offer collateral

Traditional lenders, like banks and credit unions, may require you to secure your loan with collateral . Offering additional collateral (e.g., equipment, inventory, real estate) — or providing it when it isn’t required — can help bolster your loan application, as it offsets the risk a lender faces when working with your business.

Double-check your paperwork

When you complete a loan application, it’s important to verify all requirements and read each question carefully. Providing incorrect or outdated information can significantly slow down the application process — and sometimes result in an automatic rejection.

If you’re applying for a loan online, for instance, and the lender uses automated underwriting technology, inputting inaccurate data can trigger a rejection regardless of the strength of your credentials. Before submitting your application, it can also be helpful to ask an employee, partner or business advisor to review it.

3. Seek expert advice

Although banks remain the most common source of credit for small businesses, there are many other funding options entrepreneurs can consider, including online loans, small-business grants , and equity financing. Twenty-one percent of small-business owners, however, say understanding all of the financing options available to them is a concern for their business in the next 12 months, according to the survey.

To help guide your funding search, it can be useful to work with a free or low-cost business advisor through an organization like SCORE or your local small-business development center. Experts from these organizations can help you organize your finances, compare funding options, and even prepare and submit loan applications.

Some lenders, like community financial development institutions (CDFIs) and nonprofit organizations, offer similar advisory services, in addition to their own loan options.

This survey was conducted online within the United States by The Harris Poll on behalf of NerdWallet February 13-15, 2024, and February 20-22, 2024, among 335 U.S. adults ages 18 and older who own a small business. The sampling precision of Harris online polls is measured by using a Bayesian credible interval. For this study, the sample data is accurate to within +/- 6.4 percentage points using a 95% confidence level. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact [email protected] .

NerdWallet disclaims, expressly and impliedly, all warranties of any kind, including those of merchantability and fitness for a particular purpose or whether the article’s information is accurate, reliable or free of errors. Use or reliance on this information is at your own risk, and its completeness and accuracy are not guaranteed. The contents in this article should not be relied upon or associated with the future performance of NerdWallet or any of its affiliates or subsidiaries. Statements that are not historical facts are forward-looking statements that involve risks and uncertainties as indicated by words such as “believes,” “expects,” “estimates,” “may,” “will,” “should” or “anticipates” or similar expressions. These forward-looking statements may materially differ from NerdWallet’s presentation of information to analysts and its actual operational and financial results.

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Business Loans

Top long-term business loans: Best options for March 2024

Kiah Treece

Ashley Harrison

“Verified by an expert” means that this article has been thoroughly reviewed and evaluated for accuracy.

Published 11:00 a.m. UTC March 26, 2024

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Long-term business loans can help business owners secure capital for significant investments, such as expansion, equipment purchases or even refinancing existing debts. These loans generally offer repayment terms longer than two years, which can provide you with affordable monthly payments.

The best long-term business loans of 2024 not only come with these lengthy terms but also a variety of loan amounts, lenient credit score requirements and fast funding.

Best long-term business loans

• National Funding equipment financing : Best for fair credit.
• Kapitus business loan : Best for large loans.
• Rapid Finance business loan : Best for fast funding.

Best for fair credit

National funding equipment financing.

Loan amounts

Repayment terms, what you should know.

With an equipment financing loan from National Funding, you can borrow up to $150,000 and choose a repayment term from two to five years. If you’re approved, you can get your funds as soon as the next business day. Plus, if you opt to pay off your loan early, you can get a 6% discount on the remaining balance.

National Funding accepts credit scores as low as 600, which could make it ideal if you have fair credit (usually considered to be a score from 580 to 669). To qualify, your business must also have been in operation for at least six months, depending on your situation. Additionally, your business must generate at least $250,000 in annual revenue, and you’ll need to provide an equipment quote from a vendor with your application.

Note that National Funding charges an origination fee from 1% to 5%, which can impact your borrowing costs. It also doesn’t disclose its interest rates for equipment financing. To see what you might be eligible for, you’ll need to apply and discuss your options with one of the lender’s funding specialists.

Pros and cons

• Accepts fair credit scores.
• Discount available for early repayment.
• Fast funding.
• Doesn’t publish interest rates online.
• Charges an origination fee.
• Lower loan maximum compared to some lenders.

More details

• Loan amounts: Up to $150,000.
• Repayment terms: 2 to 5 years.
• Perks: Early repayment discount (6% of remaining balance).
• Fees: Origination fee (1% to 5%).
• Min. credit score: 600.
• Required time in operation: 6 months.
• Required annual revenue: $250,000.
• Time to fund: Within 1 to 3 business days after approval.

Best for large loans

Kapitus business loan.

Kapitus offers long-term business loans from $10,000 up to $5 million with terms as long as five years. This can make it a good choice if you’re looking to borrow a large amount.

To qualify, you’ll need a credit score of at least 625. Your business must also have been in operation for a minimum of two years, and it must generate at least $250,000 in annual revenue. If you’re approved, you could get your funds as soon as the next business day.

Keep in mind that Kapitus doesn’t disclose its interest rates online, so you’ll have to contact the lender to see what your borrowing costs could look like. Fees could also apply for late payments.

• Can borrow up to $5 million.
• Higher time-in-business and annual revenue requirements compared to some lenders.
• Fees for late payments can apply.
• Loan amounts: $10,000 to $5 million.
• Repayment terms: Up to 5 years.
• Perks: None.
• Fees: Late fee (amount not disclosed).
• Min. credit score: 625.
• Required time in operation: 2 years.
• Time to fund: As soon as the next business day after approval.

Best for fast funding

Rapid finance business loan.

Rapid Finance can be a good option if you’re facing time-sensitive opportunities or unexpected financial demands. You can borrow $5,001 up to $1 million and choose a term from three months to five years. If you’re approved, you could get your funds as soon as the next day — sometimes even as fast as a few minutes or hours after approval.

Prospective borrowers can apply online with a valid form of identification, a business bank account number and routing information as well as the last three months of business bank statements.

Note that Rapid Finance doesn’t disclose its minimum qualification requirements. However, it does identify itself as an alternative funder. This means you might have an easier time getting approved for a business loan from Rapid Finance compared to traditional financing options.

This lender also doesn’t publish its interest rates online. While it does specify that fees can apply, Rapid Finance doesn’t disclose what these fees might be and how much they could cost you. To see what your overall borrowing expenses might look like, you’ll need to contact Rapid Finance.

• Can borrow up to $1 million.
• Considers alternative lending criteria.
• Doesn’t disclose fees (if any).
• Doesn’t disclose minimum qualification requirements.
• Loan amounts: $5,001 to $1 million.
• Repayment terms: 3 months to 5 years.
• Fees: Does not disclose.
• Min. credit score: Does not disclose.
• Required time in operation: Does not disclose.
• Required annual revenue: Does not disclose.
• Time to fund: As soon as the next business day after approval (potentially within minutes or hours of approval).

Compare the best long-term business loans

Methodology

Our expert writers and editors have reviewed and researched multiple lenders to help you find the best long-term business loan. Out of all the lenders considered, the three that made our list excelled in areas across the following categories (with weightings): loan details (40%), loan cost (20%), eligibility and accessibility (15%), customer service (10%) and application process (15%).

Within each major category, we considered several characteristics, including maximum repayment terms, APR ranges, loan amounts, late fees and prepayment penalties. We also considered each lender’s minimum requirements for credit score, time in operation and annual revenue as well as funding time and customer experience.

Why some lenders didn’t make the cut

Of the business loan lenders that we reviewed, only a handful made the cut. This was mainly due to the majority of lenders having maximum terms of only two or fewer years. Some also didn’t receive high enough scores due to not publicly disclosing eligibility information, not disclosing funding speeds or having poor customer reviews.

What is a long-term business loan?

A long-term business loan is a type of term loan that provides a business with a lump sum of capital that can be repaid in installments over an extended period — typically three to 10 years, depending on the lender. This can be ideal for financing major investments, such as the purchase of real estate, the acquisition of another business or large capital projects. 

These loans often come with fixed interest rates, which means your rate and payment will stay the same throughout the life of the loan. Another advantage is that by opting for a longer term, you can keep your payments lower and more affordable. However, this also means you’ll pay more in interest over time.

Current business loan rates

Business loan interest rates vary by lender as well as by the type of financing and the borrower’s qualifications. For example, traditional bank loans typically have lower interest rates than alternative lenders like online platforms or peer-to-peer (P2P) lending. As of Feb. 7, 2024, the average rates with private business loan lenders range from 8.49% to 36% for a business term loan, 8% to 60% for a business line of credit and 7.5% to 24% for equipment financing, according to Lendio.

Keep in mind that several factors can affect the rates you’re offered on business loans — including your personal and business credit, how long your business has been in operation and the amount of annual revenue it generates. Generally, you’ll need good credit to qualify for the best interest rates. While some lenders offer business loans for bad credit , these can come with higher interest rates and more fees compared to good credit loans.

Getting approved for a long-term business loan

While qualifications can vary by lender, here are some common requirements that you’ll typically need to meet for a long-term business loan:

• Personal and business credit: Lenders will generally consider your personal credit score when making an approval decision — especially if you have a newer business that hasn’t yet generated significant revenue. A good personal credit score is usually considered to be 670 or higher. A lender might also review your business credit history.
• Time in operation: Your business will typically need to have been in operation for at least six months to two years. This shows stability and a track record of success.
• Annual revenue: Lenders also want to see that your business has stable and consistent revenue streams. In general, lenders prefer an annual revenue of $100,000 to $250,000. They may also look at your profit margins and overall financial health.
• Collateral: Many traditional lenders require collateral to secure a business loan, such as equipment, real estate or other valuable business assets. There are also some lenders that offer unsecured business loans . However, because unsecured loans are riskier for lenders, they can come with more stringent requirements and higher interest rates. Also note that business loans often require a personal guarantee, which is an agreement that you’ll repay the loan with your personal assets if your business defaults. 
• Business documentation: A lender might ask to see a solid business plan outlining your goals and your business’s financial statements. You’ll also need to specify how you plan to use the loan funds.
• Industry and market conditions: Lenders will generally consider your business’s size and industry as well as market conditions when reviewing your application. If your business operates in a high-risk industry or if the market is uncertain, you could have a harder time getting approved. Lenders also sometimes restrict the types of industries they’re willing to work with, so be sure to double-check before you apply.

Easier to qualify for newer businesses: Compare the top startup business loans

Best for poor credit

Credibly business loan, time to fund.

Choosing the best long-term business loan: How to compare

To choose the best long-term business loan for your needs, it’s crucial to carefully compare the available options. Here are some important points to keep in mind when weighing your loan choices:

• Interest rates: Your interest rate will play a major role in your overall borrowing costs. Also keep in mind that some business lenders charge factor rates instead of traditional interest — this is essentially a flat fee based on your original loan amount.
• Loan amounts: Business loans can range from as little as a few hundred dollars up to $5 million, depending on the lender. Be sure to borrow only what you need to keep your repayment costs manageable.
• Repayment terms: While most business loans have terms of two or fewer years, long-term business loans give you more time to repay your loan. Just keep in mind that the longer your term, the more you’ll pay in interest over time. In general, it’s best to choose the shortest term your business can afford to avoid excessive interest charges.
• Eligibility requirements: Remember that you’ll generally have to meet underwriting criteria for credit score, time in operation, annual revenue and more to get approved. However, exact requirements can vary by lender.
• Fees and penalties: Some lenders charge fees, such as origination fees and late fees. These can add to your overall costs.
• Collateral requirements: Consider whether a secured or unsecured loan will better suit your needs. If you opt for a secured loan , be prepared to offer business assets to act as collateral . Also remember that you’ll likely have to provide a personal guarantee.
• Funding speed: Some lenders offer faster processing times than others. If you need the funds right away, you’ll want to work with a lender that offers quick funding speeds.

How to apply for a long-term business loan

If you’re ready to apply for a long-term business loan , follow these steps:

1. Check your credit 

Lenders will review your personal credit history (and business credit, in some cases) when you apply for a loan — so it’s a good idea to see where you stand before you apply. You can use a site like AnnualCreditReport.com to review your personal credit reports . To check your credit score , you can use an online credit-monitoring service or see if it’s available through your bank or credit card issuer. 

Your business credit report is available through several third-party companies, including Dun & Bradstreet as well as the credit bureaus Experian and Equifax . However, accessing it might come with a fee, depending on the service you choose.

Tip: If you find any errors in your personal or business credit reports, report them to the appropriate credit bureau to potentially boost your credit score .

2. Evaluate your borrowing needs

Consider what type of expenses you need to cover to determine what type of business loan is right for you. For example, you might opt for a general term loan or equipment financing. Also estimate how much you need to borrow and what you can reasonably afford to repay.

Tip: Use our business loan calculator to see what will fit comfortably in your budget.

3. Compare lenders and pick a loan option 

Before you apply, take the time to compare your options with as many business loan lenders as possible. This way, you can find the right long-term loan for your needs. Consider important factors like interest rates, loan amounts, fees and eligibility requirements when weighing your choices. After you’ve done your research, pick the loan option that works best for you.

Tip: Some lenders allow you to get pre-qualified with only a soft credit check that won’t hurt your credit score. This will give you an idea of what rates and terms you might get approved for if you apply.

4. Prepare your documentation 

Gather all necessary documents, such as business and personal tax returns, financial statements, business licenses and a business plan.

5. Apply for financing

After you’ve gathered your documentation, you’ll need to submit a formal application. Depending on the lender, you might be able to complete the full application process online while other lenders require you to discuss your options with one of the company’s loan specialists.

6. Get your funds 

If you’re approved, the lender will have you sign a loan agreement before the funds are disbursed. You might get your funds as soon as the same or next business day, depending on the lender. 

Alternatives to a long-term business loan

While long-term business loans are a popular financing option for many businesses seeking stability and extended repayment periods, there are alternative financing solutions that could be more suitable depending on your business’s needs, financial health and growth stage. Some options to consider include:

• Business line of credit: If you prefer flexible access to a revolving credit line, a business line of credit could be a good choice. With this option, you can borrow as needed and will pay interest only on the amount you use. 
• Short-term business loan: A short-term business loan will generally have a repayment term of two or fewer years. This can be ideal for businesses that need quick funding for immediate needs.
• SBA loan: The Small Business Administration (SBA) backs these loans, which in turn reduces the risk for lenders. Because of this, SBA loans can come with more competitive rates and terms compared to traditional business financing.
• Business credit card: If you need to cover small, routine expenses, a business credit card can be a good choice. Some cards also provide rewards and perks to help you build business credit. However, you can’t charge some types of business expenses, such as inventory and payroll.
• Invoice financing: With this option, you’ll sell your unpaid client invoices to a factoring company in return for a fee. The company will be responsible for collecting client payments for you, and you’ll get an advance on the amount you’re owed. While this can help with cash flow, you’ll lose some of your funds to the interest and fees charged by the factoring company. 
• Personal loan for business use: A personal loan can be a viable option for sole proprietorships or startups without an established business credit history. Note that many personal loan lenders don’t allow their loans to be used for business purposes. However, others do, such as Upstart . 
• Angel investors or venture capital: These funds are investments from individuals or firms in exchange for equity in the business. If you have a startup with high growth potential, working with an angel investor or venture capitalist could be worth pursuing.

Which is right for your business’s needs? Business loans vs. business lines of credit

Frequently asked questions (FAQs)

The longest term for a private business loan is generally 10 years — though maximum terms will vary depending on the lender. Government-backed SBA loans, on the other hand, sometimes come with longer terms, depending on the type of loan. For example, you could have up to 25 years to repay an SBA 7(a) loan for real estate.

Yes, it’s possible to get a business loan with a 10-year term. However, remember that terms vary by lender, and you might have to meet more stringent requirements to qualify for the longest terms.

While lenders generally don’t offer 30-year repayment terms on business loans, you might be able to negotiate a longer term with your lender if you’ve been approved. For a successful negotiation, you’ll likely need strong credit and a well-established business history. You might also need to offer collateral to secure a longer term. You might also have an easier time negotiating with a lender you’ve previously worked with, provided you were a good customer. 

Interest rates on long-term business loans vary by lender. As of Feb. 7, 2024, the average rate for a business term loan ranges from 8.49% to 36%. Remember that your rate will also depend on your creditworthiness, market conditions and other factors.

The average term of an SBA loan varies by program. For example, SBA 7(a) loan terms extend up to 10 years for equipment, working capital or inventory, but they can range up to 25 years for real estate. SBA 504 loans are also available for up to 25 years.

Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.

Blueprint has an advertiser disclosure policy . The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.

Kiah Treece is a small business owner and former attorney with extensive experience in business and consumer finance. She focuses on demystifying debt so individuals and business owners can take control of their finances. Her work has been published on Forbes Advisor, Investopedia, The Spruce, Rolling Stone, Treehugger and more.

Ashley is a USA TODAY Blueprint loans and mortgages deputy editor who has worked in the online finance space since 2017. She’s passionate about creating helpful content that makes complicated financial topics easy to understand. She has previously worked at Forbes Advisor, Credible, LendingTree and Student Loan Hero. Her work has appeared on Fox Business and Yahoo. Ashley is also an artist and massive horror fan who had her short story “The Box” produced by the award-winning NoSleep Podcast. In her free time, she likes to draw, play video games, and hang out with her black cats, Salem and Binx.

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Coinbase must face US securities regulator's lawsuit

A federal judge in Manhattan on Wednesday said the U.S. securities regulator's lawsuit against Coinbase can move forward, but dismissed one claim the agency made against the largest U.S. cryptocurrency exchange.

The 4% mortgage rate and other sweet offers from lenders hoping to stave off commercial real estate doom

• Borrowers are pumping in millions, while lenders are slashing debts and interest to avoid defaults.
• An estimated $929 billion of mortgage debt is set to mature this year.
• By sharing financial pain now, lenders and borrower hope they can buy time for a market rebound.

Faced with moribund office demand and cratering property prices, the New York investor RXR Realty was ready to surrender the commercial tower it owns at 61 Broadway in Lower Manhattan.

But in an increasingly common twist, the 33-story building's lender, a group of financial institutions led by Aareal Bank, has been unwilling to seize control of the asset and unable to sell the debt to an investor who might.

Instead a deal is now being negotiated to trim the size of the property's $240 million mortgage and potentially extend the loan at below-market interest rates in an attempt to revive the property's fortunes.

"We went to the lender and said it doesn't work under the current capitalization," Michael Maturo, RXR's president, said. "If you'd like to work with us, we'd like the building. But we need relief on the loan."

Maturo said that reworking the property's debt could allow RXR the leeway to cut rental rates and attract tenants amid the difficult market conditions. It is also considering a conversion of the building to residential space.

In exchange, RXR and its investment partners in the property would potentially pour millions of dollars into the turnaround if the mortgage is "reduced to a level that, based on our business plan, supports putting in new money," Maturo said.

The negotiations show that as hundreds of billions of dollars of commercial real estate debts come due or have already tumbled into default, deals are being arranged behind the scenes to try to stave off financial catastrophe.

Borrowers and lenders hope that, by sharing some financial pain now, they can buy time to allow market conditions for troubled property assets to rebound and ultimately lessen their losses or even recover their investments.

Jack Terzi, for instance, said his New York-based real estate investment company, JTRE Holdings, recently arranged for the mortgage tied to a retail building it owns at 240 East 54th Street in Manhattan to be reduced to $42 million from $58 million. The property had fallen into default during the pandemic. As part of the restructuring, the debt was extended through 2027 at an interest rate of roughly 4% – below the 7% or more that Terzi estimated he would likely have had to pay if it had reset to market rates. Terzi handed $8 million to the lender to cover half the debt's writedown.

Pouring in more cash was a risk after nearly losing the property and all of his equity, but Terzi is convinced it will pay off in the long run.

"At one point, this was a $70 million building," Terzi said, noting that if the property had been seized and sold today it might have fetched half of that. "I believe, in the long term, New York City will be back and values will reach new heights."

More borrowers and lenders have sought to buy time

There is mounting evidence that such negotiations are taking place more widely.

The Mortgage Bankers Association estimates that $929 billion of debt is set to mature this year. But $270 billion of that total was debt that had been due in prior years and pushed into 2024.

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"Many loans that were set to mature in 2023 have been extended or otherwise modified and will now mature in 2024, 2026, 2028 or in other coming years," Jamie Woodwell, the head of commercial real estate research at the MBA said in a February research report.

Of the roughly $9.7 billion of commercial mortgage backed securities tied to office assets that fell into default last year, roughly 20%, about $1.9 billion, was subsequently pulled out of distress and extended, according to data from Trepp – and that number may grow.

The deals show how some special servicers, the financial parties that negotiate on behalf of CMBS bondholders, have also chosen to negotiate with borrowers instead of seizing properties or forcing sales.

"Why would I want to accept a really high loss severity today to flush an asset?" Stephen Buschbom, a research director at Trepp said, speaking of the perspective of servicers. "If I have a borrower that stands ready and willing to contribute capital and we can help this thing kind of leap forward into the future."

There have been concerns that trillions of dollars of upcoming commercial property debt maturities could inflict heavy losses that could weigh on investors and lenders across the property market and even cause systemic issues in the banking sector. The MBA says that roughly $2.3 trillion of commercial property loans are set to come due by the end of 2027, roughly half the $4.7 trillion of total outstanding debt in the sector.

The continued practice of pushing off maturities could ultimately spread that mountain of expiring mortgages out over a longer period of time and reduce the damage, experts say.

Federal regulators, including the Treasury Department, encouraged workouts in a policy statement last year that stated: "examiners will not criticize a financial institution for engaging in loan workout arrangements," so long as they were done prudently.

"There is going to be some distress," Alan Todd, the head of CMBS strategy at Bank of America said. "But I think the level, the amount of distress and the losses that one might infer, is wildly overstated."

Reticent lenders may drive a hard bargain 

The effort to extend the due dates for property debts anticipates that, over time, interest rates will fall and property prices will rise.

"Nobody thinks we're in a 7.5% to 9% rate zone for a long term, otherwise the whole assessment would change," said David Blumberg, a managing director at 601W Companies.

601W reached a deal last year to extend its more than $500 million securitized mortgage at Aon Center, an 83-story office tower it owns in Chicago, for three years. Blumberg said the firm committed $40 million of cash to lease the property and anticipates a recovery of the office and financing markets in the coming years that will allow it to eventually refinance with fresh debt.

Some borrowers, however, may not share that optimism, and some lenders may be wary to put off tough decisions in a deteriorating market. Although the Federal Reserve is expected to make three rate cuts in 2024, its policy moves are notoriously difficult to forecast and interest rates could ultimately remain higher than investors and lenders hope, resulting in property distress for years to come.

Robert Ivanhoe, an attorney at Greenberg Traurig who oversees its real estate practice, said that he is currently representing a hedge fund in its purchase of a package of 10 commercial property loans from a bank at a roughly 20% discount. The deal is part of a growing number of sales by some lenders to cut down their exposure to commercial real estate.

Last year, Ivanhoe worked on a deal to hold off default on $1.3 billion of CMBS debt for Workspace Property Trust, an owner of suburban office assets. Although a two-year extension was eventually arranged, Ivanhoe said the process was fraught.

"These negotiations are very challenging, believe me," Ivanhoe said. "It was hammer and tongs among the various parties in the capital structure and a total game of chicken right up to the maturity date."

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Biden cancels another $6 billion in student loans, this time for public service workers

Borrowers looking for forgiveness have until the end of april to consolidate loans.

78,000 public service workers qualify for this new round of forgiveness.  ( iStock )

More student loan forgiveness is here, this time for 78,000 public service workers. Nurses, teachers, firefighters and a large array of other workers qualify for President Biden’s $6 billion in forgiveness, the White House recently announced . 

Due to fixes to the Public Service Loan Forgiveness (PSLF) program, workers that never received forgiveness are now having their debts partially forgiven or canceled. Only about 7,000 public service borrowers received forgiveness prior to the Biden Administration, now that total hovers closer to 870,000, the announcement said.

This forgiveness comes on the tail of other educational fixes the Biden Administration says it has implemented.

"Today’s announcement comes on top of the significant progress we’ve achieved for students and student loan borrowers in the past few years," the announcement stated. "This includes: providing the largest increases in Pell Grants in over a decade to help families who earn less than roughly $60,000 a year; fixing Income-Driven Repayment plans so borrowers in repayment for years get the relief they earned; and creating the most generous Income-Driven Repayment plan in history – the SAVE plan."

If you have private student loans, this federal relief doesn't apply to you, unfortunately. If you want to lower your monthly payments and ease the burden of student loan debt, consider refinancing. You can easily check your loan rate options via the online marketplace Credible .

THESE 10 STATES HAVE GOTTEN THE MOST STUDENT LOAN FORGIVENESS UNDER BIDEN’S SAVE PLAN

Older generations still paying student loans risk losing Social Security

A recent group of representatives wrote a letter to Congress, hoping to address the issue of seniors still paying down student loans. Currently, under the Treasury Offset Program (TOP) , the government can collect funds, such as tax refunds and Social Security, to pay outstanding student loan balances.

"Under the TOP, the federal government can withhold up to 15 percent of monthly Social Security or disability benefits for defaulted student loans," the lawmakers explained in their letter.

This program leaves millions of older Americans at risk of losing vital income. Democratic representatives urged the Biden administration to act. The letter had 30 total signatures from other Democratic leaders.

"Given alarming reports exposing the crushing impact of offsets on older Americans dependent on Social Security, we urge you to consider seeking an end to administrative offset of student loan debts for all Social Security benefits," the letter said.

To see if you can qualify for lower interest rates, an online tool like Credible can help you compare student loan refinancing rates from multiple lenders .

STUDENT LOAN PAYMENTS HINDER RETIREMENT SAVINGS – HERE'S HOW EMPLOYERS ARE HELPING

Time is running out for borrowers to apply for forgiveness

For students who want to take advantage of student loan forgiveness, the expanded timeline is coming to an end on April 30.

To earn forgiveness, the following loan types must be consolidated into a Federal Direct Loan :

• Commercially held Federal Family Education Loan (FFEL)
• Parent PLUS loans
• Perkins loans
• Health Education Assistance Loan (HEAL) Program loans

Once consolidated, borrowers with Direct Loans will receive at least three years of credit towards loan forgiveness. Some may see their loans forgiven automatically if they’ve been making payments long enough. This adjustment is intended to help borrowers who were due to receive forgiveness in the past, but never did. The adjustment is set to take place through the end of July, so borrowers should see the credit reflected by then.

If you can qualify for a student loan refinance at a lower rate than you're currently paying, there are few downsides to refinancing. You can use Credible to compare student loan refinancing rates without affecting your credit score .

SOME STUDENT LOAN FORGIVENESS PROGRAMS ARE SET TO END THIS YEAR – HERE’S WHAT TO DO IF THIS AFFECTS YOU

Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.

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Community reinvestment plan – loan guarantee fund - lender participation.

In 2022, the Washington State Legislature set aside $200 million in the Community Reinvestment Account for the Department of Commerce to invest in communities with disproportionately harmed by the historical design and enforcement of state and federal criminal laws and penalties for drug possessions. Before authorizing Commerce to distribute this funding, the Legislature directed the agency to develop a Community Reinvestment Plan (CRP) to guide funding distribution from the Community Reinvestment Account. The final report outlines recommendations to implement $200 million in state resources that the Legislature appropriated to Commerce, in collaboration with state and community partners, including the Office of Equity, will distribute the funds through 17 grant programs falling across four program areas: economic development, civil and criminal legal assistance, community-based violence intervention and prevention services, and reentry services, in alignment with recommendations detailed in the final report.

The office of Economic Development and competiveness (OEDC) in Commerce will coordinate the implementation of the Community Reinvestment 17 Million dollar Loan Guarantee Fund. CRP Economic Development - Washington State Department of Commerce

The Loan Guarantee Fund is a pool of resources that provides funding and loan loss reserve to lenders across the state, including Community Development Financial Institutions (CDIFIs), local municipalities, and non-profit organizations in Washington. These lenders are able to leverage the pool for up to 10 times the fund amount (for example, $15 million can leverage $150 million in funding). These organizations offer financing and financial services to underserved communities that traditional banks often overlook. A loan guarantee fund is a fund set up to ensure the lender against default on the part of the borrower. This means that if the borrower fails to repay the loan, the guarantor (the entity managing the loan guarantee fund) will repay the loan to the lender on the borrower’s behalf. Loan guarantee funds are often used to encourage lending to small businesses, startups, individuals and other entities that might be traditionally considered “high-risk” borrowers. By guaranteeing the loan, the fund reduces the risk to the lender, making them more likely to issue the loan in the first place.

The initial fund is $17 million, and a single entity will oversee the fund, which community-based lenders can apply to access. Approval is based on lending history, underwriting processes, track record of serving or commitment to serve the intended beneficiaries, and report loan volume, loan averages, and assist in tracking committed guarantees from the fund until it is $100% committed. Impact investors and donors can contribute to the fund.

OEDC, through the Department of Commerce, is seeking information from potential intermediaries, lenders or both that address current market capabilities and operational processes that will ensure successful administration of these funds.

This RFI can be located on WEBS under Community Reinvestment Plan – Loan Guarantee Fund - Lender Participation - CRPLGFLP-3-26-24-RFI

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