The business plan is a formal document explaining in detail your strategy for developing a financially successful business. The submission of a good business plan is a must if you expect to receive financing. Virtually all sources of financing require a plan. This plan is usually the basis for the decision of a lender or investor on whether or not to finance the business. If you decide to seek equity, venture capital, or sell shares of stock your business plan must be both comprehensive and complete. Most sources of financing will prefer that your financial statements be developed with the assistance of a reputable accountant or business consultant. The following paragraphs detail the information required in a typical business plan.
CHECKLIST & HELPFUL HINTS
Starting a business can be overwhelming. The following provides a list of items to consider before opening your new business:
-Business plan
-Business license
-Bank account
-Insurance (business and medical)
-Accounting system
-Accountant
-Attorney
-Office Space
-Office furniture
-Computers, phones, copiers, etc.
-Voice and data services (phone, fax, website, email)
-Employees
-Marketing and advertising plan
-Industrial health and safety regulations
-Environmental regulations
DESCRIPTION OF A BUSINESS
Describe the type of business or service to be conducted, how you will operate the business, and how you will use the loan to build a successful operation. If yours is an existing business, then give a complete history of it and what changes (if any) you will make by using the loaned funds. If you are proposing a new business, then describe what typed of business entity it will be: proprietorship, partnership, limited liability company (LLC), or corporation.
Include:
A. History and nature of business
B. Products and pricing strategy
C. Competition
D. Marketing or service area
E. Main customers
F. Main suppliers
G. Staffing plan
H. Facilities and operations
MANAGEMENT
Provide complete personal resumes for the principals, and a description of their experience of their experience and management capabilities that will help ensure the success of the business. List professional advisors: accountant, attorney, members of board of directors or advisors, etc.
EQUITY
Indicate how much cash you will inject without borrowing. If you plan to borrow equity from friends or relatives, then detail the terms of repayment. List any outside collateral you plan to use in the business.
COLLATERAL
Banks generally require collateral to secure a loan. Collateral includes fixed assets of the business (land, buildings, and equipment) and personal property that are clear of liens, and may include inventory and accounts receivable. List available collateral and estimate its value. Attach all appraisals currently available.
FINANCIAL INFORMATION
Business plans should always include:
A. Financial statements (include balance sheets and income statements) for last three years.
B. Current financial statement for most recent interim period since last fiscal year ended.
C. Projection of your sales, expenses, and profits for three years after you receive the loan. This is known as a proforma income statement.
D. Proforma cash flow statement and Proforma balance sheet. (3 years)
E. Personal financial statement(s) of owner, each partner or stockholder owning 20 percent or more of the business.
USE OF LOAN FUNDS
Explain the purpose of the loan. It is important to itemize the proposed use of funds. Estimate the funds needed for operation capital, accounts receivable buildup, equipment and machinery, remodeling expense, etc. If real estate construction is involved, then detail the land cost, land improvements, and utilities, and present a firm written estimate from the contractor, including the performance bond cost. Indicate the total dollar amount required, and the primary source of repayment.
