Thanks to financial assistance from lenders affiliated with the Small Business Administration or SBA, you can turn your dream idea into a business. Once you decide on the market niche for products or services you want to operate in, the next step involves writing a business plan.
But to succeed in attracting the attention and investment interest of SBA investors, you must understand the lender’s business plan requirements. Having one of these eligible plans will also act as a roadmap that guides you toward achieving your enterprise’s growth and goals.
Besides a well-executed business plan, following and satisfying the SBAs requirements will guarantee positive results and that your business idea finally takes off. Along with the eligibility requirements, here are several tips and tricks for inviting SBA lenders to trust and invest in your enterprise.
What Are the SBA Business Plan Requirements?
Business plans for SBA loans follow a similar format to traditional ones, which include sections that describe your existing enterprise or ideas. That’s because lenders want a comprehensive depiction of your ideas, finances, and actual or projected performance to determine your creditworthiness and funding eligibility.
Requirements for business plans by the SBA include having the requisite nine sections, including;
- An executive summary
- Company description
- Market analysis
- Organization
- Product Description
- Marketing
- Funding request
- Financial Projections
- Appendix
Executive Summary
The initial chapter of your SBA business plan that acts as an introduction is called the executive summary, containing a brief abstract of your enterprise. It’s intended to give potential lenders a perusal gist of your strategies or business ideas and includes noteworthy points such as;
An Introductory Sentence: This is the part that introduces your enterprise, business ideas, products or services you’re offering, and the purpose of running your operation.
Business Opportunity Description: The section acts as a chance to convince the lender that you’ve identified the problem or gap in the market. It’s where you’ll describe your solution for your intended customers and how your products or services meet their needs.
Target Market: It’s essential to specify your intended customers or for whom your products or services will target in the executive summary.
Business Model: What your business is, who you are, and how you plan to generate sales or profit.
Market Competition: You’ll mention how you’ve identified and mention who your business’s potential market competitors are.
Marketing And Sales Strategy: Explain how you plan to implement your customer attraction and retention strategy to meet your business’s objectives.
Financial Projections: In this section, you’ll also forecast your business’s future revenues and expenses.
Company Description
You’ll detail how you plan to solve a specific customer problem in the company description section of your SBA business plan. Here you shall address who your customers are, the strength of your enterprise, and any competitive advantage it has over others.
In the company description section, you’ll highlight several essential points that include;
- Your business identity and objectives: You’ll mention what your company is or is involved in, including its values and ethics.
- Your company’s offerings: explain and detail the definition of your business’s products or services.
- The problem to which your business offers solutions: Specify which customer needs or market opportunity your business solves or offers a solution.
- Your company’s target customers: State the section of the demographic your business targets as customers and mention their values or priorities.
- The business’s strengths or competitive advantage: Include any strengths and advantages your company has or intends to have over the present market competition. List these players and mention how your business is different from theirs.
- Your company’s partners: Does your business have any partners, and how do they contrive to its operations or profits making? If any, also mention what are their partnership periods.
Market Analysis
The market analysis part of your SBA business plan details the market segment you’re operating or plan to venture into. It’s intended to give potential funding investors an understanding of your overall market and how your enterprise fits this scenario.
Critical aspects that you should address in the market analysis section include;
- What other businesses or companies in this segment are doing, and how they fare within the industry
- A detailed explanation of your businesses advantages or strength over these competing companies
- Are any specific market themes or trends taking place
- How these trends are responsible for the success or failure of other companies within this segment
- How can you do what your competitor is doing differently or more efficiently to outshine them
- Whether any of these companies have specific advantages such as strategic locations, or cheap sourcing of raw materials
Organization and Management
You’ll describe the structuring of your business in the organization and management section of your SBA business plan. That includes the organizational and legal structure and your company’s management team as follows;
Legal structure: Describe your business’s legal structure, whether a sole proprietorship, a general or limited partnership, or a Limited Liability Company or LLC. Your enterprise may also be incorporated as an S-Corp or C-Corp, and you should explain in detail how this structure affects your company’s operations.
Organizational chart: Include a copy of your business’s organizational chart, which shows your management team’s structure, including the hierarchy and their job titles.
Offered Product or Service
This section of your SBA business plan fully describes your business’s product or service. Significant aspects that must be highlighted here include;
- A detailed description of your company’s product or service and the intended or target customer base
- An explanation of this product or services pricing, including costs that contribute to the final price
- All possible uses of your product or service and how they benefit your customers
- The life cycle of your product or the stages that include its introduction, growth, maturity, and decline
- Plan indicating the handling of copyrights, patent filings, and other intellectual properties
- Research and development for your businesses products or services
Marketing and Sales
Your SBA business plan should have a marketing and sales section that details your intended strategy for attracting customers and generating revenue. That includes budgets for your marketing strategy and sales channels, and essential points to include are;
- A detailed plan of the strategy to draw customers to your marketed product or service
- The sales channels and processes you intend to use
- Budget details for both your sales channels and marketing strategies
- Goals and objectives of your sales and marketing plans
- A review of your pricing strategies as affected by your sales and marketing operations
Funding or Financing Request
Your SBA business plan’s primary intention is to show potential investors that your enterprise is reliable and viable, and you put these aspects forward in the funding request sections. Critical points to cover in this segment include;
- How much your business needs in terms of financing
- How do you intend to use the funding received
- The type of financing you’re requesting
- Your business’s future financial plan
Financial Projections
You’ll convince potential lenders that your business or idea is viable for financial stability through the financial projections section of your SBA business plan. You’ll include reports and projections as a way to convince investors of your company’s solvency and should make available information including;
- For an existing business, income statements for the last three to five years
- Balance sheets for the same period
- Cash flow statements
- Collaterals you possess and are ready to surrender toward funding
- Financial projections for the next three to five years
Appendix
In the appendix section of your SBA business plan, you’ll include any additional documentation that specifies particular aspects of your enterprise. You may also attach documents exclusive to specific lenders that aren’t necessarily defined in the business plan.
Common entries in this section or details of documents to attach include;
- Personal and business credit histories
- Product and service photos or other describers
- Resumes for proprietors, partners, and management team
- Permits and licenses
- Letters of reference
- Legal documents
- Patents
Conclusion
Capital is essential to any entrepreneur starting a business or looking to expand, grow, or advent into new market segments. The US Small Business Administration, SBA, guarantees loans with competitive rates, repayment periods, and lower down payments through its partner lenders.