There’s a common foundation that many businesses start on, despite their uniqueness, and that’s a business plan. It’s an essential step that not only helps to secure funding for startup costs and growth but also to lay out your enterprise’s strategic road map.
A business plan is a vital precursor to starting or growing a small business. That’s because other than seeking financing or investors, you’ll keep sight of your vision while obtaining an understanding of your market. You’ll also set benchmarks and goals with insight into your enterprise’s competition, which helps with profitability.
The Small Business Administration, or SBA, is an independent federal agency that’s mandated with the function of aiding, counseling, and assisting small business interests. It aims to promote and bolster the economy by preserving free enterprise, and it fulfills this mission by offering and guaranteeing startup loans.
To implement a sound business strategy for your small or medium enterprise, you must be armed with a robust, well-executed business plan. It’s a standard factor that lenders require when you’re seeking financing, along with your assets, credit score, and history.
Your financial projections are a crucial element that showcases the viability and sustainability of your proposed enterprise. When crafting a business plan for your SBA loan, aspects such as sales strategies, financial statements, plans, and projections help to gauge your business’s chances of success.
A strong business plan also outlines your enterprise’s goals and objectives, along with your intended route for achieving them. That gives your potential lender, the SBA, a clear understanding of the following;
Besides financial projections and the projected strategy for achieving goals and objectives, a robust business plan is a strategic roadmap for your business’s operations. It’s a guide to you as the business owner as it defines the size of your addressable market and your business’s competitive advantage.
A well-executed business plan also details your enterprise’s revenue generation model, which includes realistic projections and pricing strategies. Besides capital requirement breakdowns, lenders such as the SBA will require clarity in your business’s path to growth, plans for expansion, or timelines of new market forays.
You’ll require weeks of research and considerable amounts of time for strategic thinking to come up with a strong SBA business plan. That’s because the chances of rejection are high if you submit a half-baked plan that hasn’t covered every indispensable aspect of your startup requirements.
Your startup or business growth loan application hinges on your plan’s ability to communicate how you’ll make money and the likelihood of success. Common mistakes that entrepreneurs make when constructing SBA business plans include;
If you’re looking to catch the attention of lenders such as the SBA, your first impression must carry significant weight. Potential investors might not have the time to read through your entire plan, and your executive summary should define your business’s viability with clarity and conciseness.
As your business plan’s brief, the executive summary should summarize your enterprise’s strategy while describing details persuasively to catch a lender’s interest. These include your business background, market, customer base, competition, and qualifications.
An SBA business plan that’s focused on securing financing should clarify how much capital you’re seeking and how you plan to use this money. Your summary must discuss the business opportunity, and strategy for competitiveness in your target market to build the lender’s confidence.
Your SBA business plan should represent the best-case scenario with projections that grapple with the marketplace’s reality, entrepreneurial landscape, and financial truths. Being realistic requires that you’ve done concrete research, are honest with yourself, and are willing to ask hard questions.
Padding or over inflating financial projections will make your business plan appear like you’re not in touch with reality, besides communicating dishonesty. It’s a red flag that will leave a lender like the SBA suspecting that you’ve not properly accounted for the required capital, and you’re bound to default in repaying the loan.
Without an up to date market research you can’t make realistic competitor, customer performance, and product or service viability projections. It’s erroneous to submit a business plan that doesn’t describe how you’ll persuade your target base or attract interest to your enterprise’s offering.
Being disorganized in your SBA business is a nuisance that may end up wrecking your chances of a startup or enterprise growth loan. There are document requirements that you must follow before starting your application process, along with supporting paperwork.
Working with a business plan expert is the best strategy for maintaining organization and submitting a successful application. You may need to have your personal and business tax returns, financial and income statements, schedules of liabilities, and balance sheets in order. While paying attention to organizational practices, you’ll also work to improve paperwork security.
Lenders look for character in a business plan, which includes qualities such as your perceived honesty, determination, and competency. They investigate these intangible aspects through your personal credit and businesses financial history, which work to establish trust and integrity.
How much money you’re asking to borrow and how you plan to repay is a crucial aspect that the SBA lenders look at when reviewing your application. Besides your business financial history, they want to know if you can repay based on your projections and personal credit scores.
The most significant concern that a lender will have is whether your business will realistically succeed. They’ll judge your enterprise’s chances of success based on your business plan and current market conditions. As such, your business model, marketing or sales strategy, financial projections, and risk management must come together seamlessly.
When identifying the common mistakes to avoid in your SBA business plan, knowing that it’s your first interaction with a potential lender is your top attribute. Besides clarity in details and conciseness, ensure there’s no poor wording or grammar, and don’t use an off-putting style or sloppy formats.
Make no assumptions in your SBA business plan, and don’t ignore the challenges and risks or your countermeasures and competitive advantage. Your model should also showcase how your enterprise aims to benefit its customers with realistic objectives and conceptual strategies.
All rights reserved by MovaslearningOU @2023
