If you’re thinking about starting a small business, or if you’ve been a business owner for a while but have never applied for capital, you may be wondering where and how to go about it. The good news is that documenting a business plan for SBA loans doesn’t have to be a difficult task. In fact, it can be fun!
A good business plan walks you through each stage of establishing and managing your small business. You’ll use your SBA business plan as a guide to organize, run, and grow your new company. It’s a way to structure through the key elements of your company.
SBA business plans help you get the required capital or acquire new clients or business partners. Investors want to feel convinced and optimistic they’ll see a return on their investment. Your SBA business plan is the weapon you’ll use to persuade people that working alongside your business or investing in your business is a smart choice. That being said, here’s everything you need to know about SBA loans and business plans and how you can increase your chances for success.
What is an SBA Loan?
If you’re a small business owner, you’re in luck. As the name implies, SBA loans are loan programs issued by banks and credit unions backed by the U.S. Small Business Administration (SBA) or a member of its network of supported participating lenders. This means that if you cannot pay back your loan, the government helps repay the traditional lender (bank) that provided the loan.
The SBA requires guarantees from your business partners who own at least 20% of the business, implying if you get an SBA loan, you are putting your assets at stake in case you’re unable to repay the loan. Additionally, companies that have at least 2 years of strong business and financials are mostly eligible for SBA loans. However, if your small business is struggling to make ends meet, an SBA loan may not be the right fit for you.
Irrespective of the personal guarantee requirement, SBA loans are one of the most popular ways to get capital to grow and manage your small business. Not only can you leverage their flexible repayment terms, but you can also take advantage of their low-interest rates to grow your small business. If you want to learn more about it, here’s our guide on SBA business loans.
But before we move any further, let’s take a look at what the SBA is.
The Small Business Administration (SBA) is a government agency in the U.S. that offers help and counseling to small businesses and startups by providing tools such as business planners, small business loans, and other training programs.
It also offers professional business documentation to guide small companies and startups through the procedures for applying for a small business loan. To do so, you must have a strong sense of what your business goals are and what your company does, along with a solid plan.
If your business plan isn’t convincing and effective, you might have difficulty getting an SBA business loan. This is why it is important to have a clear vision of the business goal you want to achieve while working on the documentation.
In this article, we’ll take a look at what an SBA business plan includes.
Why You Need a Business Plan for SBA Business Loans
SBA business loans require a significant amount of documentation highlighting your business goals and your personal finances. You’ll need to mention your previous tax returns, bank statements, and different application forms based on the type of SBA business loan you require.
Alongside your past financial statements, the traditional lender issuing the SBA business loan would want to know about the future of your business. They’ll ask you about your plan on how you’d utilize the loan on your business and that your future cash flow estimates indicate that your company can afford loan repayments.
This is where SBA business plans come into the picture. Besides providing other documentation required for the loan, you’ll need to draft a business plan to go with the rest of the loan application. Not only will your SBA business plan describe your business to your lender, but it will also have financial statements that the bank will require to help identify if you qualify for a loan.
Now, let’s take a look at what the SBA business plan template includes.
Writing an SBA Business Plan: A Comprehensive Guide
Learning how to write a brilliant SBA business plan is a crucial step toward creating a fruitful business. Put simply, a business plan explains exactly what your product or service is and why consumers would want to purchase it, alongside how you will handle any market challenges and environmental risks. It can help you determine what you want to achieve and how you plan to achieve your business goals. This, in turn, can help you to market your business, motivate your teams, and thereby make well-informed decisions.
A strong SBA business plan can also serve as a communication tool for future investors and potential loan providers. It will help you portray your present financial status, active revenue sources, and how you plan to meet revenue estimates. Even though a business plan isn’t relevant for all types of credit, it plays a crucial role in SBA business loans. While no two business plans are similar, every plan should have the following elements:
1. Executive Summary
Your business plan’s executive summary is your only opportunity to introduce your business to potential investors and lenders, which is why it needs to be concise and powerful. This summary should provide a brief gist of the history and background of your business that should be engaging enough for your readers. Oftentimes, it is helpful to write this part at the end – after you’ve spent considerable time examining and articulating all the details of your business.
2. Company Summary
Explain what your product or service does and why consumers or businesses will want to purchase it. Make sure to highlight all the areas where your product or service has leverage over the competition.
On the other hand, add the pending or established copyrights or trademarks, as well as the present or future plans for further research and development (R&D).
3. Market Analysis
Mentioning the strategy would highlight the marketability of your business, your competition, and your position into the competitive landscape.
In the marketing analysis, provide all the information about your target industry, including the market size, target market, the market requirements, and hurdles to entry, like legal conditions and supply issues. Additionally, any information on the market tests you have undertaken should be included in your business plan. You must also include your direct and indirect competition in the market analysis section.
4. Marketing Plan
In your marketing plan, consider highlighting how to promote your business and generate leads for revenue. Describe the functionalities or characteristics of your product or service and how it helps consumers.
Mention how your product or service differs from your competitors in the market and how you will grow your business and generate revenue. Additionally, provide details about your product’s life cycle and intellectual property issues.
5. Management Team
To highlight your human capital, describe your business in terms of structure and leadership. Let your readers know the roles of your employees and their qualifications. Elaborate on this in your documentation, and try providing their resumes as well.
6. Financial Summary
Funding and financial analysis are two of the most crucial areas in your business. Highlight the funding your small business would require and provide supporting financial data on your previous and future financial activity.
Add necessary documents that portray your company’s present financial status, including cash flow statements, income statements, revenue sheets, and balance sheets. Mention your expectations for revenues along with the expense of your products, rent, fuel, electricity, utilities, salaries, and other aspects.
7. Appendix
There are different ways you can organize and present the information given above so you can share it with potential lenders and investors, current and future team members, management teams, and anyone who needs to go through the vision of your company.
Conduct your research and find a business plan format that suits your business goals. There are multiple SBA business plan types for different readers, including investors and employees, so you can change your plan based on your target audience.
Here are a few things you must keep in your mind:
- Create a business plan in a way such that it’s easier to find key information. Create a cover page and table of contents (ToC) that makes basic information easier to find. Moreover, it’s recommended to use dividers with tabs if you’re making hard copies of the documentation and putting them in a binder.
- Make it as detailed as possible. Based on your product or service, you may also want to add a section on Action Plans, which includes data on compliance and safety processes, legal landscapes, regulations, operational & management plans, an employee manual, job descriptions of your staff, and everything you’d want to put on the hard copies (or in the digital document).
- Use an Appendix for highlighting additional information. The Appendix is where you attach supporting documents, including financial and market analyses, staff resumes, logo & branding examples, and so on.
Why more businesses are working with BSBCON
Nowadays, more and more business owners and entrepreneurs are trying their luck in the ever-competitive market.
Business is a vast landscape. There are a number of ways you can leverage to build and promote a marketing idea. However, the first thing you need to promote a product or service is a solid plan, and to propose this plan, your company needs business plan writers.
Think of BSBCON as a crucial and cost-effective extension of your own business. BSBCON is a leading company that offers SMB consulting solutions, including providing thorough business plans, pitch decks, strategic planning, and more, that save you both time and resources.
If you want to increase your chances of securing capital, grants, or investors, partner with BSBCON and get a solid business blueprint with a professional business plan.
BSBCON’s SBA business plan writers offer all such insights, including marketing plans & strategies, pitch decks & storyboards, market research & in-depth analysis, business planning, bookkeeping & accounting, financial modeling – and the list goes on!Get in touch with BSBCON’s SMB consultants today to see how they can help you. With BSBCON, you get guidance to build a strategically designed, SBA-approved business plan that offers everything potential investors need to evaluate your business and business goals.