The Importance of a Business Plan to Support your SBA Loan Application – and How to Prepare One

woman is filling document on glass table, shallow depth of field

How to Write a Business Plan to Support your SBA Loan Application

A key requirement for any business loan application is a business plan. Not only does it demonstrate that you have a clear roadmap for growth, backed by research, financial data, and product strategy, it will also ensure that your lender matches you to the right loan program, based on your needs, goals, and financial projections.

But a business plan is more than that, it plays a functional role in your path to success. Alongside your financial statements, it helps you steer your business to success, long after your loan gets approved.

If you’re new to business planning, take a deep breath and try not to think of the process of writing a business plan as a mammoth, encyclopedic exercise. Instead approach the exercise in manageable chunks.

Here are some tips for preparing a business plan that your banker will love.

Find a Template

The Internet is awash with free online business plan templates. SCORE, for example, offers two templates: one for start-ups and one for established businesses. Another option is SBA’s Build a Business Plan. This interactive online tool guides you through the process of creating a plan step-by-step. It’s a useful resource that ensures you include all the right information and can be completed at your own pace. Just save it as you go and download it as a PDF when you’re ready.

Understand and Address the Key Elements

As these templates show, any business plan should include several key elements. As you build your plan, the goal is to tell a story about your business, how it’s structured, the market you operate within, your sales and marketing plans, your product or service and any intellectual property you own (patents, etc.), and financial statements. Cap it all off with an executive summary (best written once everything else is on paper). The summary should set the stage for your plan, tease the reader as to its contents, and succinctly touch on key targets (business and financial), and your plans to achieve them.

Explain How You’ll Use the Funds

This is something that you’ll need to repeat on your loan application form, but it’s useful to work this into your business plan too.

What assets need to be purchased to help you achieve the goals of your plan? How much will you need? How will the funds be used (equipment or real estate purchase, refinancing debt to support growth, long term capital to pay operational expenses, etc.)?

Include a Repayment Plan

How will you repay that debt based on your financial projections (your lender can help with this based on the type and term of the loan)? A repayment plan will also indicate that you’re serious about your business and understand the responsibilities of financial management.

Try to break everything down into specifics as to how the loan will be spent.

Gather Your Financials

A key requirement of the loan application process is to gather key financial statements and documents, but you’ll also need to include them in your plan. So take some time to assemble cash flow (projections and statements), business credit reports, three years of tax returns, and additional financial statements (balance sheet, profit and loss statement, bank statements), accounts receivable and payable. Most banks look for 2-3 years of financial history and a one-year forecast for cash flow and P&L.

Some time with your accountant can be invaluable at this stage.

Talk to your Lender

The SBA loan application can be a complex process; the good news is that your SBA-approved lender is there to guide you through the process. If you already have a relationship with a bank, arrange a face-to-face meeting to learn more about the application process and what they look for in your business plan based on your business profile, funding goals, and the type of loan you’re hoping to secure.

Keep it Going – Revisit, Refresh, Renew

While a business plan is a key ingredient in your loan application, a well-prepared plan, that you revisit often, can also help guide your business for years to come.

Try to think of it, not as a document, but as a living, breathing process that grows as your business grows. While it may start out with the basic goals, metrics, projections, market sizing/opportunity, etc. add to it, reflect on results to date, the changing market landscape, and any new benchmarks for success.

A useful technique is to break your plan down further. Add a plan for each area of your business – IT, marketing, sales, product development, operations, and customer service. Engage your team for input or have them take ownership of their field to drive greater accountability across your business.