how to put together a business plan for a bank loan

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How to Write a Successful Business Plan for a Loan

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Table of Contents

What does a loan business plan include?

What lenders look for in a business plan, business plan for loan examples, resources for writing a business plan.

A comprehensive and well-written business plan can be used to persuade lenders that your business is worth investing in and hopefully, improve your chances of getting approved for a small-business loan . Many lenders will ask that you include a business plan along with other documents as part of your loan application.

When writing a business plan for a loan, you’ll want to highlight your abilities, justify your need for capital and prove your ability to repay the debt. 

Here’s everything you need to know to get started.

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We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

A successful business plan for a loan describes your financial goals and how you’ll achieve them. Although business plan components can vary from company to company, there are a few sections that are typically included in most plans.

These sections will help provide lenders with an overview of your business and explain why they should approve you for a loan.  

Executive summary

The executive summary is used to spark interest in your business. It may include high-level information about you, your products and services, your management team, employees, business location and financial details. Your mission statement can be added here as well.

To help build a lender’s confidence in your business, you can also include a concise overview of your growth plans in this section.

Company overview

The company overview is an area to describe the strengths of your business. If you didn’t explain what problems your business will solve in the executive summary, do it here. 

Highlight any experts on your team and what gives you a competitive advantage. You can also include specific details about your business such as when it was founded, your business entity type and history.

Products and services

Use this section to demonstrate the need for what you’re offering. Describe your products and services and explain how customers will benefit from having them. 

Detail any equipment or materials that you need to provide your goods and services — this may be particularly helpful if you’re looking for equipment or inventory financing . You’ll also want to disclose any patents or copyrights in this section.

Market analysis

Here you can demonstrate that you’ve done your homework and showcase your understanding of your industry, current outlook, trends, target market and competitors.

You can add details about your target market that include where you’ll find customers, ways you plan to market to them and how your products and services will be delivered to them.

» MORE: How to write a market analysis for a business plan

Marketing and sales plan

Your marketing and sales plan provides details on how you intend to attract your customers and build a client base. You can also explain the steps involved in the sale and delivery of your product or service.

At a high level, this section should identify your sales goals and how you plan to achieve them — showing a lender how you’re going to make money to repay potential debt.

Operational plan

The operational plan section covers the physical requirements of operating your business on a day-to-day basis. Depending on your type of business, this may include location, facility requirements, equipment, vehicles, inventory needs and supplies. Production goals, timelines, quality control and customer service details may also be included.

Management team

This section illustrates how your business will be organized. You can list the management team, owners, board of directors and consultants with details about their experience and the role they will play at your company. This is also a good place to include an organizational chart .

From this section, a lender should understand why you and your team are qualified to run a business and why they should feel confident lending you money — even if you’re a startup.

Funding request

In this section, you’ll explain the amount of money you’re requesting from the lender and why you need it. You’ll describe how the funds will be used and how you intend to repay the loan.

You may also discuss any funding requirements you anticipate over the next five years and your strategic financial plans for the future.

» Need help writing? Learn about the best business plan software .

Financial statements

When you’re writing a business plan for a loan, this is one of the most important sections. The goal is to use your financial statements to prove to a lender that your business is stable and will be able to repay any potential debt. 

In this section, you’ll want to include three to five years of income statements, cash flow statements and balance sheets. It can also be helpful to include an expense analysis, break-even analysis, capital expenditure budgets, projected income statements and projected cash flow statements. If you have collateral that you could put up to secure a loan, you should list it in this section as well.

If you’re a startup that doesn’t have much historical data to provide, you’ll want to include estimated costs, revenue and any other future projections you may have. Graphs and charts can be useful visual aids here.

In general, the more data you can use to show a lender your financial security, the better.

Finally, if necessary, supporting information and documents can be added in an appendix section. This may include credit histories, resumes, letters of reference, product pictures, licenses, permits, contracts and other legal documents.

Lenders will typically evaluate your loan application based on the five C’s — or characteristics — of credit : character, capacity, capital, conditions and collateral. Although your business plan won't contain everything a lender needs to complete its assessment, the document can highlight your strengths in each of these areas.

A lender will assess your character by reviewing your education, business experience and credit history. This assessment may also be extended to board members and your management team. Highlights of your strengths can be worked into the following sections of your business plan:

Executive summary.

Company overview.

Management team.

Capacity centers on your ability to repay the loan. Lenders will be looking at the revenue you plan to generate, your expenses, cash flow and your loan payment plan. This information can be included in the following sections:

Funding request.

Financial statements.

Capital is the amount of money you have invested in your business. Lenders can use it to judge your financial commitment to the business. You can use any of the following sections to highlight your financial commitment:

Operational plan.

Conditions refers to the purpose and market for your products and services. Lenders will be looking for information such as product demand, competition and industry trends. Information for this can be included in the following sections:

Market analysis.

Products and services.

Marketing and sales plan.

Collateral is an asset pledged to a lender to guarantee the repayment of a loan. This can be equipment, inventory, vehicles or something else of value. Use the following sections to include information on assets:

» MORE: How to get a business loan

Writing a business plan for a loan application can be intimidating, especially when you’re just getting started. It may be helpful to use a business plan template or refer to an existing sample as you’re going through the draft process.

Here are a few examples that you may find useful:

Business Plan Outline — Colorado Small Business Development Center

Business Plan Template — Iowa Small Business Development Center

Writing a Business Plan — Maine Small Business Development Center

Business Plan Workbook — Capital One

Looking for a business loan?

See our overall favorites, or narrow it down by category to find the best options for you.

on NerdWallet's secure site

U.S. Small Business Administration. The SBA offers a free self-paced course on writing a business plan. The course includes several videos, objectives for you to accomplish, as well as worksheets you can complete.

SCORE. SCORE, a nonprofit organization and resource partner of the SBA, offers free assistance that includes a step-by-step downloadable template to help startups create a business plan, and mentors who can review and refine your plan virtually or in person.

Small Business Development Centers. Similarly, your local SBDC can provide assistance with business planning and finding access to capital. These organizations also have virtual and in-person training courses, as well as opportunities to consult with business experts.

Business plan software. Although many business plan software platforms require a subscription, these tools can be useful if you want a templated approach that can break the process down for you step-by-step. Many of these services include a range of examples and templates, instruction videos and guides, and financial dashboards, among other features. You may also be able to use a free trial before committing to one of these software options.

A loan business plan outlines your business’s objectives, products or services, funding needs and finances. The goal of this document is to convince lenders that they should approve you for a business loan.

Not all lenders will require a business plan, but you’ll likely need one for bank and SBA loans. Even if it isn’t required, however, a lean business plan can be used to bolster your loan application.

Lenders ask for a business plan because they want to know that your business is and will continue to be financially stable. They want to know how you make money, spend money and plan to achieve your financial goals. All of this information allows them to assess whether you’ll be able to repay a loan and decide if they should approve your application.

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How To Write A Business Plan For A Loan

A solid business plan is often critical to securing funding for your small business. Learn how to create a business plan for a loan that includes the information lenders want to see.

WRITTEN & RESEARCHED BY

Lead Staff Writer

Last updated on Updated August 18, 2024

REVIEWED BY

Editor & Senior Staff Writer

• Elements of a good business plan include an executive summary, company description, products and services, market analysis, marketing and sales plan, organizational structure, and other important information.
• Your business plan should address the "5 Cs of Credit" by demonstrating your business's financial health, investment, repayment ability, market conditions, and available assets.
• To improve loan approval chances, avoid jargon, show clear cash flow projections, document personal investment, seek professional help if needed, and be willing to revise your plan

A business plan is a crucial business document you need to have on hand when applying for business loans. However, the mere thought of writing a business plan for a loan is intimidating to a lot of business owners.

A one-page business plan may be sufficient for certain types of small business loans (for example, online loans), but bank loans and SBA loans typically require a more in-depth business plan that delves further into your financials.

If you need to write a business plan for a loan, you’ve come to the right place. Keep reading to learn more about everything you need to include in your business plan to improve your chances for loan approval.

Table of Contents

What Is A Business Plan For A Loan?

10 key sections to include in your business plan, what do lenders look for in a business plan, business plan examples, resources for writing a business plan for a loan, final thoughts on writing a business plan for a loan.

A business plan is a written document that provides a complete overview of your business, including information about your business’s services, strategies, finances, and goals. All businesses should have a business plan, but a business plan is especially important when applying for a business loan.

Most business plans should include some version of the following sections. Depending on your industry and other factors, such as whether you own a startup or established business, some sections could be condensed or combined. The exact verbiage for section titles can vary, as well.

For a business plan that’s longer than one page, it’s a good idea to preface these sections with a cover page and table of contents.

Executive Summary

This section is a condensed version of your entire business plan. It will likely include:

• Details of when, how, and why you started your business
• Your company mission statements
• High-level financial information about your business
• An explanation of how funding will help your business

Depending on whether you’re a startup or an established business, you may use this section to focus on your growth strategy or your past successes.

Company Description

Use this section to delve deeper into your company’s offerings, core principles, legal structure, and leadership. Your company description should also include your unique value proposition . Describe your company’s unique strengths that will ensure your success.

Products & Services

This section should detail the products and/or services your company provides. Make clear the problem that your offerings solve. Include information such as:

• Information on your raw materials and production process (if applicable)
• Profit margins
• Whether you have or plan to file patents or copyrights

Market Analysis

Use this section to demonstrate your understanding of your overall industry and the specific markets you serve, including market trends, competitors, and the demographics of your target customers. Some companies hire a consultant or agency to perform the research for the market analysis section.

Marketing & Sales Plan

Building off your market analysis, how will you market to your target customers and beat your competitors? How will you sell to them and distribute your product? What are your sales goals and projections? Provide these details in this section.

Organization & Management

Use this section to include your organizational and leadership structure, ideally including an organizational flowchart. Also include job descriptions, qualifications, and years of experience to demonstrate why your team is capable of delivering on your company goals and is worthy of investment.

Operational Strategy

This section is used to describe your day-to-day operational processes, including information about your location, facility, equipment, inventory, and daily production. If you have a service-based business, this section may focus more on your team’s daily activities and how they contribute to long-term goals.

Financial Outlook

This section should tell lenders how much you spend and how much you make in profits. Include up to five years of data if possible, including financial documents such as:

• Income statements
• Cash flow statements
• Balance sheets
• Capital expenditure budgets
• Sales forecasts
• Projected income statements
• Information on any collateral you have to secure the loan

Depending on how much financial documentation you have, you might refer to specific documents in this section and indicate that the full documents can be found in the Appendix section.

Though startups may not have all of this data, you can make projections based on monthly or quarterly data and industry averages.

Funding Request

Now that you’ve laid out your expenses and financial projections, it’s time to make your case for a loan. Be clear about how much money you need, how you will spend it, and how you will repay the loan. Be as detailed as possible.

In the Appendix, include any supporting documents, such as financial documents referred to in the Financial Outlook section. Some other types of documents you might include in this section are:

• Business licenses  or permits
• Credit reports
• Product photos
• Marketing materials
• Letter of intent to purchase business

If you know what lenders are looking for in a business plan for a loan, you will increase your chances of approval. Learn the five things lenders want to see in your business plan, followed by five tips to create a loan-worthy business plan.

The 5 Cs Of Credit

The Five Cs of Credit is a phrase that summarizes what lenders look for when deciding whether to extend a loan to a business. Lenders will, accordingly, look for the five Cs when reviewing the business plan in your loan application. The five Cs are:

• Character: Your knowledge, experience, and creditworthiness
• Capacity: Your ability to repay the loan
• Capital: How much you have already invested in your business
• Conditions: Your market viability, considering your industry as well as overall economic conditions
• Collateral: Assets you can use to secure the loan

5 Business Plan Tips For Loan Approval

Besides emphasizing your “5 Cs,” there are a few other things you can do to make the best impression with your business plan to increase your chances of securing funding.

• Avoid Industry Jargon: Use plain English rather than industry terminology that the lender might not be familiar with. Remember that the loan underwriter may not have deep knowledge of your specific industry.
• Show Cash Flow: Cash flow is one of the most important factors that determine loan eligibility. You can even get a loan with bad credit as long as your cash flow is sufficiently high. The more insight you can provide into your past, current, and future cash flow, the better.
• Show Your Investment: Before extending a loan, the lender will want to see that you have already invested some of your own resources, such as personal savings, into your business. Be sure to include documentation that demonstrates your investment.
• Enlist Help: You will likely need some professional assistance in creating your business plan, whether that means hiring a writer, an industry consultant, or both. At the very least, you should have a third party review your business plan before you submit it as part of a loan application.
• Revise Your Plan As Needed: If this is the first time you’ve taken a close look at your business strategy and financials, you will surely learn some things about your business while creating your plan. For example, you may realize you cannot afford a business loan as large as you planned to ask for. Rather than trying to justify the number you started with, it’s better to modify your funding request (and other aspects of your plan) to align with your financial reality.

It’s easy to find templates and examples of business plans online. Though you may not want to copy and paste from a template verbatim, these samples provide a starting point and show you different ways a business plan can be structured. Here are a few to start with:

• Business plan template for a startup (from SCORE)
• Business plan template for traditional businesses  (from the SBA)
• Business plan template for retail or eCommerce (from Shopify; requires email address)

These tools and resources can help you create a solid business plan for a loan. While some free business plan creation tools are available online, you will have to pay for some options.

SBA Business Plan Resources (Free)

The SBA has a great resource in its online learning center that includes business plan worksheets . In addition to business plan templates, the SBA also helps you connect to free local business counselors who may be able to help you with your business plan.

Business Plan Software ($)

If you need extra help creating a business plan and don’t mind spending a little bit of money, consider business plan creation software. For example, LivePlan ($20/month) is business plan software that connects with QuickBooks to import your financial data to your plan.

Business Plan Writer/Consultant ($$$)

If you’re willing to invest more heavily into your business plan, consider hiring a writer or consultant that specializes in creating business plans. This option costs anywhere from $2,000 to $20,000, with the lower end of that scale typically including only basic writing services and the higher end representing a specialized industry consultant agency.

While it’s helpful to know how to write a business plan for a loan, you can always hire someone to help you draft the plan if the task is too daunting. A business plan is a worthwhile investment no matter what type of business you have or whether you are currently trying to secure business funding. Even if you don’t need a loan right now, it’s important to maintain an updated business plan to serve as a guide for your own business decisions.

Was your loan denied because of your business plan (or another reason)? Learn what to do if your business loan was denied .

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• Mar 30, 2023

The Ultimate Guide to Writing a Business Plan for a Loan: A Step-by-Step Walk-Through

The Ultimate Guide to Writing a Business Plan for a Loan: A Step-by-Step Walkthrough

As a business plan specialist and expert business planner, I'm here to guide you through the process of writing a comprehensive business plan for securing a loan. Whether you're a start-up or an established business looking to expand, a well-crafted business plan is essential for impressing potential lenders and securing the funding you need.

In this extensive, 5,000-word article, I'll cover everything you need to know about creating a top-notch business plan that will boost your chances of loan approval. We'll go through each section in detail, providing you with practical examples and tips to optimize your plan for success. So, let's get started!

Executive Summary

The executive summary is the first and most critical section of your business plan. It's a brief overview of your entire plan, highlighting the key points and giving readers an insight into your business.

Key elements to include in your executive summary:

Business concept: Briefly explain your business idea, the products or services you plan to offer, and the target market.

Company overview: Provide essential information about your company, including its legal structure, location, and mission statement.

Management team: Showcase the expertise and experience of your management team, emphasizing their ability to lead the business.

Market opportunity: Describe the market demand, trends, and target audience, highlighting the opportunity for your business to succeed.

Financial highlights: Summarize your financial projections, including sales, profits, and cash flow.

Loan purpose: Clearly state the purpose of the loan and the amount you're seeking.

Remember, the executive summary is often the first thing lenders read, so make it engaging and informative to grab their attention.

Company Description

The company description section is where you provide a more in-depth look at your business. It should give readers a clear understanding of your company's purpose, goals, and competitive advantages.

Key elements to include in your company description:

Business history: If your company has an existing history, briefly describe its origins and milestones achieved.

Mission statement: Articulate the purpose of your company and the value you aim to provide to customers.

Objectives: Outline the specific goals you want to achieve with your business, both short-term and long-term.

Products and services: Provide a detailed description of the products or services you plan to offer, emphasizing the benefits they provide to customers.

Target market: Identify your target audience, specifying their demographics, psychographics, and buying habits.

Competitive advantage: Explain what sets your business apart from the competition and how you plan to maintain this edge.

Market Analysis

The market analysis section demonstrates your understanding of the industry, market, and competition. It's crucial to show lenders that you've done your homework and have a comprehensive understanding of the market landscape.

Key elements to include in your market analysis:

Industry overview: Provide a high-level view of your industry, including its size, growth trends, and key players.

Market segmentation: Break down your target market into smaller segments, identifying their unique needs and preferences.

Target market characteristics: Describe the specific characteristics of your target market, such as demographics, psychographics, and geographic location.

Market demand: Present evidence of market demand, using data on customer needs, market trends, and buying behaviors.

Competitor analysis: Evaluate your main competitors, analyzing their strengths, weaknesses, and market share.

SWOT analysis: Conduct a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) to assess your business's position in the market.

Marketing and Sales Strategy

In this section, outline your marketing and sales strategy to show lenders how you plan to attract and retain customers, as well as generate revenue. A well-defined marketing and sales strategy is crucial to demonstrate that you have a clear plan for growth and profitability.

Key elements to include in your marketing and sales strategy:

Marketing objectives: Define your marketing goals, such as brand awareness, lead generation, or customer retention.

Target audience: Reiterate your target market, emphasizing their needs and preferences.

Unique selling proposition (USP): Highlight your USP, the main reason customers should choose your products or services over the competition.

Marketing channels: Identify the marketing channels you plan to use, such as social media, email, content marketing, or paid advertising. Explain the rationale behind your choice of channels and how they align with your target audience.

Sales process: Describe your sales process, from lead generation to closing deals. Include details on your sales team structure, training, and compensation plans.

Key performance indicators (KPIs): List the KPIs you'll use to measure the success of your marketing and sales efforts, such as conversion rates, average deal size, or customer lifetime value.

Operations Plan

The operations plan section details the day-to-day activities required to run your business. It shows lenders that you have a clear understanding of the operational aspects of your company and the resources needed to support your growth.

Key elements to include in your operations plan:

Facilities: Describe your business's physical location, including its size, layout, and any equipment or machinery required.

Production process: If applicable, detail your production process, including the steps involved, quality control measures, and production capacity.

Supply chain: Outline your supply chain, identifying key suppliers, procurement processes, and inventory management practices.

Staffing: Explain your staffing requirements, including the roles, responsibilities, and qualifications of each team member.

Management structure: Provide an organizational chart, showcasing your company's management structure and reporting lines.

Legal and regulatory requirements: Identify any relevant legal or regulatory requirements, such as licenses, permits, or certifications needed to operate your business.

Financial Plan

The financial plan is arguably the most crucial section of your business plan when applying for a loan. It demonstrates your ability to manage finances, make informed decisions, and, ultimately, repay the loan.

Key elements to include in your financial plan:

Revenue projections: Estimate your future sales, breaking them down by product or service category and showing growth rates over time.

Expense projections: Forecast your expenses, including fixed costs (e.g., rent, utilities) and variable costs (e.g., marketing, salaries).

Cash flow statement: Provide a detailed cash flow statement, showing how cash will flow in and out of your business over a specified period (typically 12 months).

Profit and loss statement: Create a profit and loss statement that projects your business's profitability over time.

Balance sheet: Prepare a balance sheet that showcases your business's assets, liabilities, and equity.

Break-even analysis: Calculate the point at which your business will break even, meaning your revenues equal your expenses.

Loan repayment schedule: Detail your proposed loan repayment schedule, including the loan amount, interest rate, repayment terms, and projected date of full repayment.

The appendices section is where you can include any additional documents or supporting materials that are relevant to your business plan. These documents may provide further evidence of your company's viability and help strengthen your case for securing a loan.

Examples of items to include in the appendices:

Resumes of key team members

Product samples or prototypes

Market research data or surveys

Letters of intent or contracts with suppliers, partners, or customers

Intellectual property documentation, such as patents, trademarks, or copyrights

Relevant licenses, permits, or certifications

Writing a comprehensive business plan for a loan can seem like a daunting task, but with the right approach and guidance, it's an achievable goal. By following the step-by-step instructions outlined in this article, you can create a well-structured, persuasive business plan that will greatly improve your chances of securing the funding you need. Remember to:

Pay close attention to your executive summary, as it sets the tone for the entire plan.

Be thorough and detailed in your market analysis, showing a deep understanding of your industry and target audience.

Develop a solid marketing and sales strategy to demonstrate your ability to attract and retain customers.

Address the operational aspects of your business, including staffing, facilities, and supply chain management.

Present a robust financial plan, complete with projections and a loan repayment schedule.

By doing so, you'll showcase your expertise, commitment, and preparedness to potential lenders, significantly increasing the likelihood of obtaining the loan your business needs to grow and succeed.

In addition to following the steps outlined in this guide, consider seeking professional assistance from a business plan consultant or specialist to review and refine your plan. Their expertise can help you identify any areas that may need improvement and ensure that your business plan is optimized for success.

Finally, remember to continuously update your business plan as your business evolves. Regular updates will ensure that your plan remains relevant and accurate, providing you with a valuable roadmap for your business's future growth and development.

With dedication, persistence, and a well-crafted business plan, you can secure the funding you need to bring your business vision to life. Good luck, and here's to your success!

• Writing Your Business Plan
• Funding Your Business

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Applying for a bank loan or for a Small Business Association (SBA) funding option usually means you need a well-written business plan. This article will review what the bank is usually looking for and what to include in your business plan to improve your funding odds. It will teach you what else you need besides a great business plan and will then offer some advice I've found most entrepreneurs tend to overlook when they're applying for a bank loan.

What The Bank Is Really Looking For

In my experience, your business plan is a requirement for many bank loans and SBA-underwritten loans. Many entrepreneurs I work with think the bank is looking for a certain level of perfection. They assume the business plan is like a final exam that you either pass or fail. However, I've found the bank is really looking for three things:

• Did you put in enough effort to show you’re serious?

• Does it seem like you know your space and competitors thoroughly?

• Do you have clear projections based on strategy?

The bank isn't looking for these things to judge your business acumen or to see how smart and business-savvy you are. They are doing it to mitigate their risk.

One 2016 study  (purchase required) suggested that when you finish a business plan,  your odds of achieving viability improve (paywall) . The bank requires you to submit a business plan as a way to lower your risk of failure — and to lower their risk of not getting their money back. The more effort you put into your plan, the more knowledge you have about your industry, and the more clarity you show on how to achieve your financial goals, the more likely you are to be a success. This means it’s more likely you'll be able to repay their loan.

Getting a loan from a financial institution is a form of partnership — they want you to succeed in your business because if your business is profitable, then you are less likely to default on your loan. So requiring that you finish a business plan is an easy way for them to lower their own risk.

Now, that’s not to say the bank doesn’t care about the quality of your business plan. The underwriting team will read and review it, will dig into the financials and will try to get a clear understanding of what you're trying to do. This is where you need to be really careful about developing your business plan.

What To Include In The Business Plan

Your business plan should include some core components for the underwriters to evaluate. Beyond the typical market research, executive team overview and operations plan sections, there are specific pieces that need to be included in the financial section, too. As a professional business plan writer, commonly missed elements I see often include:

• A loan amortization schedule

• A use-of-funds table

• Cash flow projections with loan repayment

These can help the underwriters understand how you plan to utilize the loan. It also shows that you have a clear understanding of how repayment will impact your business's cash flow and that you are fully prepared to manage the loan requirements. Having these components will help the underwriters approve your business plan, but you should also be prepared for the other factors involved in the final loan approval decision.

Factors Beyond The Business Plan

Beyond your business plan, the bank will likely ask for a few other things. Even though you are looking for a business loan, your bank will likely need to have you personally back it with your own income and assets (unless you have a healthy, thriving business that has been operational for a while). They will usually determine your final loan offer based on factors like your tax returns, income history and credit score.

You should be prepared to submit your tax returns from the last one to three years. Your tax returns will be used to understand your income and gauge whether you will be able to support the future repayment of the loan based on past income. This is why it's so important to report all revenues and profits to the IRS every year for your business without "watering down" profits or taxable income. Underreporting earnings or profits to avoid taxes can hurt your odds of qualifying for bank funding in the future.

Also, be prepared to have your personal credit checked. Many banks have a minimum credit score they need to approve a loan. I recommend aiming for a score no lower than 630 to avoid being disqualified. As you might expect, the higher your score, the better your interest rate may be for the loan.

Accepting Or Rejecting A Loan Offer

The advice I find is the most underdelivered is to shop your business plan. Getting a bank offer doesn't mean that it's a fair offer for your business. When your bank finally makes you a loan offer, you now need to decide whether it's the right offer to accept. I recommend taking your business plan to at least three different banks, credit unions or other financial institutions. Just like with any other loan, you'll find that different providers offer different rates and terms and have different approval criteria. This means your situation may yield a great offer from one bank but a total rejection from another bank. Never let one loan offer or one loan rejection be the end of your search. Keep looking, and make sure you have the best deal possible for your business before you move forward on any offer.

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How to Write a Business Plan for a Loan

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Reading Time : 9 Min

Business plan 101.

Introduction

Securing a loan for your business can be a game-changer, providing the capital needed to start, expand, or stabilize operations. But to get that loan, you’ll need a compelling business plan that convinces lenders of your business’s potential and reliability. In this comprehensive guide, we’ll walk you through the process of crafting a winning business plan tailored for loan approval. Whether you’re a startup seeking initial fund raising or an established business in need of financial support, these steps will help you create a roadmap for success.

Understanding Your Business Needs

Determining the Purpose of the Loan

Before diving into the intricacies of your business plan, you must first understand the purpose of the loan. Be specific about why you need financing. Is it for startup capital, expansion, working capital, or a particular project? Identifying the exact purpose sets the foundation for the rest of your plan.

Assessing How Much Capital Is Required

Once you’ve pinpointed the purpose, assess how much capital is needed to achieve your goals. This calculation should include both the immediate requirements and any contingencies. Accurate financial projections play a crucial role in this step.

Identifying the Specific Uses of the Loan Funds

In your business plan, clearly outline how the loan funds will be used. Break down the allocation of funds, whether it’s for equipment purchase, hiring staff, marketing efforts, or debt consolidation. Providing this level of detail demonstrates your financial prudence.

Executive Summary

The executive summary is your opportunity to make a powerful first impression on lenders. This concise section should encapsulate your business’s essence and your loan request.

Crafting a Concise Overview

Begin with a succinct overview of your business, including its mission and a brief description. Clearly state the loan amount you’re seeking and the purpose of the loan. Remember, lenders often use the executive summary as a screening tool, so make it engaging and compelling.

Key Components of an Effective Executive Summary

A well-crafted executive summary includes vital information, such as your business’s history, its growth potential, financial highlights, and the qualifications of your management team. Each sentence should serve the purpose of convincing lenders to read further.

Capturing the Lender’s Attention

Your executive summary should be compelling enough to make lenders want to learn more about your business. Craft it carefully, as it’s the first thing they’ll see. Make sure it hooks them right from the start.

Business Description

In this section, provide an in-depth look at your business.

Providing an In-Depth Look at Your Business

Start by offering insights into your business’s history, its legal structure, location, and ownership. Highlight any unique achievements, milestones, or recognition your business has received.

Discussing Your Industry, Market, and Target Audience

Delve into your industry and market. Share your market research findings, including industry trends, market size, and demographics of your target audience. Showcase your understanding of the competitive landscape.

Explaining Your Business’s Unique Value Proposition

Clearly articulate what sets your business apart from competitors. Explain how your products or services fulfill a specific need or solve a problem for your target customers. Emphasize your unique value proposition.

Market Analysis

This section requires thorough market research and analysis.

Conducting Thorough Market Research

Explain the methods and sources you used to gather market data. This could include surveys, industry reports, or competitor analysis. Cite relevant statistics and sources to support your claims.

Analyzing Industry Trends and Competition

Interpret the data you’ve collected. Identify opportunities, threats, and gaps in the market. Discuss how your business plans to capitalize on these insights. Provide a detailed analysis of your competitors, highlighting their strengths and weaknesses.

Demonstrating a Solid Understanding of Your Market

Summarize your market analysis by showcasing key insights. Discuss the growth potential of your industry, significant challenges, and your business’s positioning within this landscape. Use data and statistics to support your arguments.

Organization and Management

This section introduces your business’s structure and team.

Detailing Your Company’s Structure

Provide an organizational chart or a description of how your business is structured. Explain the hierarchy, roles, and reporting relationships within your organization.

Introducing Key Team Members and Their Roles

Highlight the qualifications, experiences, and contributions of your management team. Explain why they are well-equipped to drive the business forward. Include resumes or profiles as appendices.

Highlighting Your Team’s Qualifications

Emphasize the educational backgrounds, relevant industry experience, and any notable achievements of your team members. This builds credibility and trust with lenders.

Products or Services

This section focuses on what your business offers.

Describing Your Offerings

Provide a detailed description of your products or services. Explain their features, benefits, and pricing structures. Use clear and concise language to ensure lenders understand what you offer.

Emphasizing the Benefits to Customers

Articulate how your offerings solve problems or fulfill needs for your customers. Highlight the unique selling points that make your products or services attractive.

Discussing Product/Service Development and Innovation

If applicable, discuss your plans for product or service development and innovation. Show that you’re forward-thinking and prepared to adapt to changing market demands.

Marketing and Sales Strategy

This section outlines your approach to reaching and retaining customers.

Outlining Your Marketing Plan

Explain your marketing strategies, including digital marketing, traditional advertising, public relations, and social media. Discuss how you plan to raise brand awareness and attract potential customers.

Defining Your Sales Strategy and Channels

Detail your sales strategy. Describe the channels you’ll use to reach your target audience. Discuss your sales team’s role if you have one. Explain how you intend to convert leads into customers.

Demonstrating How You’ll Attract and Retain Customers

Elaborate on your customer acquisition strategies and retention efforts. Discuss loyalty programs, customer relationship management, or any other initiatives aimed at ensuring customer satisfaction and repeat business.

Funding Request

In this section, specify the loan amount you’re seeking and how you plan to use it.

Specifying the Loan Amount You’re Seeking

Clearly state the exact amount of funding you’re requesting. Explain why this amount is necessary to achieve your business objectives.

Explaining How the Funds Will Be Used

Provide a breakdown of how the loan funds will be allocated. Be specific about which aspects of your business will benefit from this investment. This level of transparency demonstrates responsible financial planning.

Providing a Clear Repayment Plan

Discuss the terms of loan repayment, including interest rates, repayment periods, and any collateral you’re offering as security. Lenders want assurance that their investment will be repaid on schedule.

Financial Projections

This section focuses on creating realistic financial forecasts.

Creating Realistic Financial Forecasts

Explain the process of developing financial projections. This includes sales forecasts, income statements, balance sheets, and cash flow projections. Stress the importance of basing these projections on thorough research and realistic assumptions.

Including Income Statements, Balance Sheets, and Cash Flow Projections

Provide samples of these financial statements, highlighting key metrics such as revenue, expenses, assets, liabilities, and cash flow. Explain the significance of each statement in assessing your business’s financial health.

Discussing Your Assumptions and Methodology

Transparently present the assumptions that underlie your financial projections. Discuss the methodology you used to arrive at these numbers. Lenders need to trust the accuracy and reliability of your financial data.

Risk Assessment

Identify potential risks and demonstrate your strategies for mitigating them.

Identifying Potential Risks and Challenges

Discuss the major risks your business may face, whether they’re industry-specific, economic, or internal. Lenders appreciate your candid assessment of potential pitfalls.

Demonstrating Your Risk Mitigation Strategies

Outline concrete steps you’ll take to mitigate the identified risks. This reassures lenders that their investment is protected and that you have contingency plans in place.

Reassuring Lenders of Your Ability to Handle Adversity

Emphasize your business’s resilience by sharing past experiences of successfully navigating challenges. Highlight your ability to adapt and thrive even in adverse conditions.

Include supplementary documents and data to support your business plan.

Including Supplementary Documents and Data

List the additional documents that support your business plan. These might include resumes of key team members, market research data, legal documents, or letters of recommendation. Provide context for why each document is included.

Examples Might Include Resumes, Market Research, or Additional Financial Information

Offer examples of what these supplementary documents might look like and how they strengthen your case. Show that you’ve done your due diligence in preparing a comprehensive plan.

Tips for a Successful Loan Application

In this section, offer practical advice on presenting your plan.

Offering Practical Advice on Presenting Your Plan

Share tips on creating a visually appealing and well-organized document. Discuss formatting and design considerations, ensuring that your business plan is easy to navigate.

Discussing Common Mistakes to Avoid

Highlight common pitfalls that applicants should steer clear of, such as overestimating sales projections or downplaying risks. Addressing these mistakes proactively can enhance your credibility.

Highlighting the Importance of Preparation

Stress the value of meticulous preparation. Encourage applicants to double-check financial data, rehearse their presentations, and seek feedback from mentors or advisors.

In conclusion, crafting a business plan for a loan is a strategic endeavor that can significantly impact your business’s future. It’s not merely a document; it’s your roadmap to success and a testament to your commitment to financial prudence. By following the steps outlined in this guide, backed by thorough research, realistic financial projections, and a clear vision, you can present a compelling case to lenders. Remember, a well-structured business plan not only increases your chances of securing a loan but also sets the stage for your business’s growth and prosperity.

At Stellar Business , we understand the importance of a strong business plan in obtaining financing. Our team of experts can provide personalized guidance and support to help you create a business plan that stands out to lenders. Contact us today to learn more about how we can assist you in achieving your business goals.

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How to Write a Professional Business Plan for a Loan

Business Plan Template

• March 27, 2024

11 Min Read

So, are you thinking of getting a loan or funding to start an exciting business journey?

That’s great! But before you go any further, it’s very important to have a solid business plan in place.

Well, we understand that creating a successful plan for a loan can be a daunting task. That’s why we’re here to help you!

This investment-ready business plan template for loans will help you include all the essential elements in your plan, from summarizing your business concept to projecting the financial data. It not only impresses business loan lenders but also sets the stage for success.

Ready to get started? Let’s first understand how business plans will help you with loan proposals.

How business plans help in loan applications?

A business plan is a professional document that serves as a written loan proposal if you want to secure a loan for capital investment. It details every aspect of your business, including its concept, goals, market opportunity, and financial data.

Whether you’re a new entrepreneur or a small business owner, you’ll need a well-prepared business plan. It helps you persuade potential investors or lenders of its viability and potential for success.

Here are a few primary reasons why business plans are necessary in loan applications:

It helps you showcase your vision

A well-written business plan communicates your business vision effectively and allows you to demonstrate your clarity of purpose and strategic direction. It offers lenders a compelling narrative of what your business is aimed for and how it will achieve its goals.

It helps you prove your financial feasibility

Well, lenders need assurance that they’re making a wise investment. A detailed business plan presents them with realistic financial projections, along with how your business will earn money and repay the loan. This infuses confidence in lenders and convinces them that your business is a safe bet.

It helps you mitigate potential risks

Once you start your business, it naturally involves fair enough risks. However, a good business plan clarifies that you’re aware of those challenges and have backup plans or strategies to mitigate them. This shows lenders that you’ve considered different situations and keep contingency plans in place.

It helps you demonstrate your preparedness

A business plan shows lenders that you’ve carefully outlined every aspect of your business—from conducting market analysis to predicting finances. It assures that you’re serious about your business and well-prepared to manage the ups and downs of starting a business.

In short, having a solid business plan can be the cornerstone of a successful loan application that explains your business idea and how you plan to utilize the loan money to get started.

Now that you know how business plans help in a loan application, it’s time to check out and understand the key elements of a business plan for a loan template.

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Key components of a successful business plan for a loan

1. executive summary.

An executive summary is the first section of the plan, providing a concise overview of the entire business plan.

Generally, it is written in the last, as it summarizes the most important components you mentioned in your plan.

Since the potential investors or lenders would read this section first, make sure that you keep it simple, crisp, and compelling to build their confidence in your business. Also, it should not be more than 1 or 2 pages.

You may write your executive summary with a precise explanation of your business concept, the type of business you operate, and its status.

Here are a few primary elements you must add to your summary:

• Your company’s mission statement
• The product or service you intend to offer
• Market Opportunity
• Management team’s background and experience
• Growth plans or long-term objectives
• Financial projections and funding needs

2. Company Overview

As you’ll give a brief introduction in the executive summary, this chapter will expand on it, providing an in-depth understanding of your business.

Company description includes all the business-related facts, such as the startup concept, vision-mission statements, company location, etc. Also, it explains the problems or challenges you aim to solve.

In addition to that, consider answering a few questions that would help lenders to grasp the significance of your business:

• What is the legal structure of your business?
• Who is the business owner?
• Do you have any business partners?
• Why did you start this business, and when it was founded?
• What are your business accomplishments to date?
• Who will get benefits from your company’s product or service?

Note that the company overview section can be regarded as your extended elevator pitch.

So, it’s a good opportunity to present your business’s specific details and structural aspects that the financing partner needs to know.

3. Market Analysis

The market analysis section provides readers with a deep understanding of the specific industry or market in which you plan to serve.

This seems unnecessary but serves different purposes. Those who are looking to fund a franchise business should do some serious work for this section, as lenders will review it very closely.

To carefully draft this section, you should conduct thorough market research and industry analysis to define your target customers, industry trends, market demand, and competitors.

This will demonstrate that you understand the market dynamics and validate the demand for your products or services.

Here are a few elements you should include in your market analysis section:

• Ideal target market
• Market size and growth potential
• Customer segments
• Competitive analysis
• Emerging trends
• Applicable government regulations

4. Product or Service Offerings

In this section, you may provide a detailed description of your products and service offerings, along with their features, benefits, and pricing structure.

It helps you highlight what your business offers to its ideal customers, how your offerings will satisfy their needs and explains the value proposition of your products or services.

You may consider including these points in the product or service section:

• A brief description of your product & service
• Pricing details
• Intellectual property, copyright, and patent filings
• Quality measures
• Any additional offerings

5. Sales and Marketing Strategies

Your marketing and sales plan elucidates how you intend to market your products or services in greater detail. It helps you outline the marketing and sales strategies you’ll use to attract and retain potential customers.

The primary goal is to give a flexible and practical marketing and sales strategy that persuades the lenders you know how to advertise or develop a public relations campaign to reach the company’s revenue goals.

For a well-crafted marketing plan, you might consider adding the following details in your plan:

• Your target audience and brand positioning
• Detailed marketing strategy
• Sales and marketing goals and KPIs
• Sales and marketing budgets
• Customer retention plan

While reviewing your loan application, lenders would like to know how you plan to make money and how you overcome marketing and sales challenges, so ensure that this strategy is always relevant.

6. Operations Plan

The operations plan section provides a clear picture of your company’s day-to-day operations and activities. It is a detailed-oriented section that outlines how you’ll manage to run your business smoothly.

Also, operational excellence is necessary to achieve your goals, satisfy client commitments, and maximize results. So, try to mention your operational intricacies and showcase efficient systems and processes.

Here are a list of details you must include in your operations plan:

• Staffing & training
• Operational processes
• Inventory needs and supplies
• facilities & technology
• Regulatory compliance

By offering insights into these operational aspects, this section helps you instill confidence in lenders about your ability to effectively handle and grow your company.

7. Management Team

Your management team section introduces the key individuals who are responsible for driving your business ahead.

It helps lenders easily understand your team’s roles & responsibilities, educational qualifications, industry experience, and how you plan to compensate your leadership team.

Even this will assure lenders that your team is capable enough to navigate challenges, make informed decisions, and reach strategic objectives. Also, they feel confident giving you a loan—even if it’s your startup.

So, you may consider including the below information:

• Company owner profile
• Resume-styled summary of key executives
• Organizational chart
• Compensation plan
• Details of advisory board members(if any)

8. Financial Plan

A well-written and comprehensive financial plan is one of the most crucial sections of your plan, as it helps you prove to lenders your business’s financial health, growth potential, and ability to repay the business loan.

So, your financial analysis must include the projected financial statements for three years or more. The following are the key financial projections that you should add:

• Income statements
• Cash flow statements
• Capital expenditure budgets
• Balance sheet
• Break-even analysis
• Funding requirements

As well as you should also list hard or soft collateral if you possess it so that you can put it up to get a loan. Even lenders may request to add more granular data(such as cost of sales or cost per product/service).

Note that if you’re a startup and don’t carry enough data to highlight, consider including estimated costs, revenue streams, and other strategic future projections you may have.

9. Appendix

The appendix is the last section of a professional business plan that typically provides supplementary information and other supporting documents the lender may need for better understanding.

You may include the following details in an appendix:

• Business licenses and permits
• Contractual agreements or other legal documents
• Letters of reference
• Credit histories and tax returns
• Key managers’ resumes and certificates
• Product photos

By adding these details, you offer more detailed explanations or validation for your business plan, strengthening your discussions and claims.

What factors do lenders look for in a business plan

When you submit a business plan to secure funding, lenders will analyze it to evaluate the viability and creditworthiness of your loan application. Here are several key factors they look for:

Character of your management team

Lenders will assess a business’ character that includes subjective or intangible qualities like whether its owners or key executives are perceived as honest, competent, or committed. Also, they consider educational background, industry experience, skills, leadership capabilities, and credit histories. This can be critical for evaluating prospects as most lenders don’t wish to lend to whom they don’t feel trustworthy.

Your capability to repay loans

Loan officers also spend a lot of time analyzing the borrower’s ability to repay the loan. They will thoroughly examine the financial statements such as projected revenue, expenses, cash flows, growth plans, and loan payments. Further, lenders analyze the financial history to see how much revenue you have generated or how much profit you have made in the past.

The capital amount you’re seeking

While reviewing loan applications, lenders will go through your financial information that highlights how much funding you’re seeking, how much cash you carry on hand, and how much debt you have. Also, they assess your personal financial investments as a sign of commitment and seriousness. So, make sure your business plan clearly outlines your investment amount and funding needs.

Collateral or personal guarantees

In some cases, lenders may request collateral or personal guarantees to secure the loan. Thus, you should document any assets or valuable items you can offer as collateral or additional security. Even lenders may still approve your loan without collateral if you have a good credit history and a reliable business plan.

By understanding these key considerations, you can prepare a business plan that resonates with the lender’s interests and concerns. Now, let’s move to a few business plan examples for a loan.

Business plan examples for a loan

When you’re just venturing into your entrepreneurship journey, crafting a comprehensive business plan for a loan application can be overwhelming.

So, try to consider some sample business plan templates or resources to get started on the first draft of your plan. Here are a few business plan examples that you may find helpful:

• Sample business plan outline
• Small business plan template
• Comprehensive business plan writing
• Business Plan Workbook for Loan Applications

Start preparing your business plan

Finally, you understand the importance and key elements of drafting a business plan for securing a loan or funding. But it requires some extra effort to find success down the road.

If you’re still confused about where to start, Upmetrics could be a great choice. It’s a modern business plan app that helps entrepreneurs or small business owners create an actionable plan quickly.

With Upmetrics, you’ll get easy-to-follow guides, a library of business plan templates , AI support, a financial forecasting tool, and other valuable resources to streamline your entire business planning approach.

So, don’t wait and start preparing your business plan for a loan!

Build your Business Plan Faster

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Frequently Asked Questions

Do i need a business plan to get a loan.

Of course, most lenders or financial institutes require a solid business plan, even if you are a well-established business. A well-crafted business plan helps you highlight every essential information about your business and demonstrate to lenders that you have a realistic plan in place to generate income and repay the loan.

Can I write a business plan myself?

Definitely, you can write a business plan by yourself. Also, you can get help from various resources available, including business plan templates and guides, to create a comprehensive plan. But, if you’re unsure or need assistance, you may consider having a business plan software or hiring a professional writer.

How long should my business plan be?

The length of your business plan should be concise and focused, typically depending on its purpose. A one-page business plan is a single-page document, a lean or mini business plan comprises 1–10 pages, while a comprehensive business plan can range from 15 to 35 pages and beyond.

What's the most important element of a loan-seeking business plan?

The financial plan is the most crucial element of a loan-seeking business plan, as lenders want to check realistic and well-structured financial forecasts that present your ability to repay the loan. Also, this section can make or break a lender’s confidence and willingness to raise capital.

What format should I use?

It’s essential to select a format that can effectively convey your business idea, strategy, and financial projections to the lenders. Following are a few common options to consider:

• Traditional text-based document
• PowerPoint or Keynote presentation deck
• Executive summary or a pitch deck

So, whatever format you choose, it should align with your preferences, the lender requirements, and the complexity of your business.

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

Reach Your Goals with Accurate Planning

How to Write a Business Plan For a Loan

Securing a business loan is a critical step for many entrepreneurs aiming to start or expand their operations. Lenders and investors require a business plan before they will consider financing a business. A well-written business plan can improve your chances of getting funding and give you a competitive edge in a sea of entrepreneurs. 

In this guide, we will explore the steps involved in crafting an effective business plan tailored to secure a loan, offering essential tools, resources, and practical examples to help you succeed.

What is a Loan Business Plan?

A loan business plan is a comprehensive document that details your business’s objectives, strategies, financial health, and future projections. This type of business plan differs from others in that it specifically caters to the interests of financial lenders. 

Key elements such as profitability forecasts, risk management, and financial stability are emphasized to assure lenders of your ability to manage and repay the loan. Essentially, this plan serves as both a roadmap for your business’s future and a persuasive tool for securing financial backing.

Do You Need a Business Plan to Get a Loan?

Whether or not you need a business plan for financing depends on several factors, including the type of loan, the lender, and the amount of money you’re requesting. However, in many cases, having a well-prepared business plan is essential, particularly for small businesses and startups seeking significant funding. Here’s a closer look at when and why writing a business plan for a loan may be required for securing financing.

Importance of a Business Plan in Securing a Loan

Risk Assessment: Lenders use business plans to assess the risk involved in lending to a business. A comprehensive business plan to get a loan provides a detailed overview of your business’s structure, strategy, market, and financial health, which helps lenders make informed decisions.

Demonstrating Commitment and Preparation: A business plan for bank loan shows that you have put significant thought and effort into planning your business. This commitment is often viewed favorably by lenders, as it suggests that you are serious about your business’s success and are likely to be diligent in repaying the loan.

Clarifying Loan Utilization: Lenders require business owners to identify the purpose of the loan. A business plan that clearly outlines how the loan will be utilized (for expansion, equipment, inventory, etc.) can help assure lenders that the funds will be used responsibly and will contribute to the business’s growth.

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Essential Components of a Loan Business Plan

To effectively communicate your business’s potential and stability to lenders, it’s crucial to know how to make a business plan for a loan. Your business plan should include the following critical components:

Executive Summary

The executive summary acts as the introduction in creating business plan for a loan, providing a concise overview of the most important aspects. It should include your business name, location, a brief description of your business operations, and your mission statement. Crucially, this section should also detail the loan amount you are requesting and its purpose. This part sets the stage for the detailed explanation that follows in the rest of the document.

Company Description

In this section, dive into what your business does, the market needs it meets, and the customers it serves. Include details about your company’s legal structure, ownership, significant achievements, and the competitive edge your business possesses. This background information is essential to establishing the context for your business plan funding request.

Market Analysis

Conducting a thorough market analysis is a key component of business loan analysis. It shows lenders your deep understanding of the industry and your business’s positioning. Include details like demographic and psychographic data, market size, expected growth, and how your offerings meet market needs. Additionally, a competitive analysis of your rivals’ strengths and weaknesses highlights your business’s advantages in the marketplace.

Organization and Management

This section should outline your business’s organizational structure and introduce your management team, detailing their roles, backgrounds, and unique qualifications. Demonstrating the strength and expertise of your management team can reassure lenders that your business is under competent leadership.

Service or Product Line

Describe in detail the products or services your business offers. Explain how these offerings are produced, their benefits to customers, and their life cycle. Discuss any new products or services you plan to introduce and how they will contribute to your business’s growth.

Marketing and Sales Strategy

Articulate your strategies for attracting and retaining customers. This section should detail your marketing plans, sales tactics, and the channels you intend to use to reach your target audience. Clearly outlining how you will generate customer demand and convert it into sales is crucial for convincing lenders of your business’s revenue potential.

Funding Request

In your funding request, clearly state the amount you need and provide a brief explanation of why you are asking for the loan and what you plan to do with the money. Specify the type of loan you are seeking, the desired terms, and your preferred repayment plan. This detail helps lenders assess the feasibility of your request and understand how the funds will be used, enhancing the transparency and credibility of your business plan.

Financial Projections

Provide comprehensive financial projections to support your business plan funding request. Describe how you plan to use these funds, including projected income statements, balance sheets, cash flow statements, and capital expenditure budgets for the next three to five years. Ensure these projections are realistic and data-driven to demonstrate your business’s ability to repay the loan effectively.

What Lenders Look for in a Business Plan?

When writing a business proposal for funding, it’s crucial to understand the criteria lenders use to evaluate your application. Often referred to as the “Five Cs of Credit,” these criteria help lenders assess the risk associated with your business and determine your ability to repay the loan. Addressing each of these factors thoroughly in your bank loan proposal can greatly improve your chances of securing funding.

Character refers to the trustworthiness and reliability of the business owner and management team. Lenders assess character by looking at your personal credit history, industry experience, and references. This aspect of your business plan should highlight your professional background, achievements, and the expertise of your management team, underscoring your commitment to the business’s success.

Capacity is your business’s ability to repay the loan, which is primarily evaluated through your cash flow. Lenders will examine your past financial statements and your projected financials to ensure that your business generates enough cash flow to cover your existing expenses plus the new loan payments. This section should include detailed, realistic financial forecasts and a solid explanation of how these projections align with your business’s operational plans.

Capital pertains to the money you have invested in your business. Lenders want to see that you have skin in the game. The more of your own money that is invested in the business, the less likely you are to walk away from it. Include information about your personal investment and the equity within the business. This demonstrates your commitment to the business and reduces the risk for the lender.

Conditions refer to both the internal and external factors that might affect your business. Internally, this could include your business’s organization, product line, and marketing strategy. Externally, it encompasses market conditions, industry trends, and the economic environment. Your business plan should discuss how these conditions impact your business and what steps you will take to mitigate risks associated with unfavorable conditions.

Collateral is any asset that you can offer to secure the loan, which the lender can seize if you fail to repay the debt. While not all business loans require collateral, providing it can help secure better terms or a larger loan amount. Detail any assets that could serve as collateral in your business plan, including real estate, equipment, or inventory.

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How to Present a Business Plan to a Bank?

Presentation is key when approaching a bank with your business plan for loan application. Prepare thoroughly, understanding every detail of your plan and being ready to answer in-depth questions. Present your business loan proposal neatly and professionally, and maintain a confident, concise delivery. This professionalism shows that you are serious and well-prepared, which can be just as important as the content of your business plan.

Tools and Resources for Crafting a Business Plan

Creating a compelling bank loan business plan is essential, especially when applying for startup loans or presenting to a lender. To streamline the process and enhance the quality of your business plan, consider leveraging the following tools and resources:

Software Solutions

Software solutions like LivePlan , Bizplan , and Enloop are designed to simplify the process of creating a detailed business plan. These tools offer:

• Guided Instructions: Step-by-step guides that help you build each section of your business plan, ensuring all critical elements are covered.
• Financial Projections Tools: Automated tools to help calculate financial forecasts, which are crucial for start up loans and bank loans.
• Customizable Templates: Specific templates that can be tailored to the needs of different industries and funding scenarios, such as a business plan for a bank loan example or a startup loan application.

These software options are especially beneficial for those who are new to writing business plans, as they help draft a business plan, structure your thoughts, and ensure your document meets lender expectations.

Websites like SCORE , GrowThink and Bplans provide a wealth of free resources that can be particularly useful when crafting your business plan for loan:

• Sample Business Plan For Bank Loan PDF : This PDF is designed to cater to the unique requirements of different sectors, providing a solid starting point that you can adapt to your specific business scenario.
• Business Plan for Bank Loan Example: Access to sample business plans that succeeded in securing bank loans can give you insights into what banks are particularly attentive to.
• Business Plan Template for Bank Loan: Specific templates designed to meet the criteria and expectations of banks, which can be incredibly helpful in structuring your document properly.

Utilizing these templates can save time and ensure your plan aligns with industry standards, enhancing your credibility with potential lenders.

Professional Consultants

For those who prefer a more personalized approach or need expert advice, hiring a professional business plan writer or consultant can be a wise investment:

• Tailored Expertise: Consultants bring specific knowledge of what lenders look for in a business plan, especially important when applying for startup loans where there is no business history to leverage.
• Critical Review and Feedback: An experienced consultant can provide critical feedback, helping refine your plan’s messaging to ensure it resonates with bank officers and loan committees.
• Industry Insights: Consultants often bring deep industry insights that can enrich your market analysis and competitive landscape sections, strengthening the overall persuasive power of your business plan for a bank loan. 

Whether you’re drafting your first funding business plan or refining one for a crucial bank loan, these tools and resources can dramatically increase your efficiency and effectiveness. By carefully selecting the right aids, you ensure your business plan is not only comprehensive but also compelling enough to secure the needed funding.

A well-crafted business plan is crucial for securing a business loan. It not only demonstrates your commitment and understanding of the market but also reassures lenders of your ability to manage financial responsibilities. Incorporating essential components like a detailed executive summary, comprehensive market analysis, and robust financial projections, alongside addressing the “Five Cs of Credit,” significantly strengthens your loan application.

Presenting your business plan with confidence and professionalism is equally important. Leveraging tools such as business plan software, templates, or engaging professional consultants can enhance your plan’s effectiveness. With thorough preparation and a strategic approach, you can increase your chances of obtaining the necessary funding to advance your business goals.

Crafting Winning Business Plans for Your Loan Success

To enhance your prospects of successfully securing a business loan , consider utilizing the professional business plan services offered by BSBCON . Our skilled consultants are adept at asking the right questions to ensure that the information collected from you is consistently represented throughout your plan. We conduct thorough external research to substantiate your assumptions and financial projections. 

Our team is committed to ensuring that your business plan for funding adheres to all the criteria set forth by banks. Moreover, we deliver your tailored business plan in a professional and visually appealing format, reinforcing the strong and successful image you wish to portray for your business.

For a detailed quote on a professionally crafted, winning business plan that can help you secure your bank loan, contact us today.

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How to Write a Business Plan for Loan with Free Template

A business plan for bank loan is instrumental in getting a loan and funding for your business. When you approach the lenders or investors with a proper business plan , you increase your chances of getting a loan for your business plan. 

Wondering how to write a business plan for a loan that could get you approved? Read our guide on the topic, check the business plan sample for bank loan, and use our business plan for loan template to make a killer business plan.

Get our affordable business plan writing services now!

Why do you need business plan for bank loan.

A business plan clears your mind about business, helps you prepare for it, and makes you a good candidate for loans, funding, and investments. In short, writing a business plan for a loan is worth it. 

For Later: To learn more about how to write a business plan specifically for a bank loan, check out our bank ready business plan .

A Business Plan Helps You Get Loans and Funding 

When you present your business idea before investors and lenders (or anyone else you are looking to for funding), you look serious with a business plan. 

You may not need a book in the name of a business plan but you need to present your business idea in a convincing way.

When they know your business idea is sound and you can return the loan, they will be inclined to give you a loan. 

A Business Plan Increases Your Chances of Business Success

A research on the impact of business planning shows that the businesses that start with proper planning have more chances of success. 

A business plan helps both the new firms and the established firms. 

A Business Plan Helps you Grow Strategically 

A business plan is a road-map for your business growth, whether you use it as a roadmap or not. When you put effort into making a business plan, you set priorities, establish goals, create a strategy for achieving those goals, and set a time frame for achieving those goals. 

A Business Plan Helps You Measure Business Growth 

The market conditions will never be exactly the same as you had expected in the business plan. 

Here, your business plan will help you compare planning against actual developments. You can see if you are going in the right direction as you planned or you need to change course.

Maybe you need to make a new business plan as your business might take a different shape than you expected.

What is included business plan for bank loan?

A business plan starts with an executive summary that briefly describes the business idea and ends with the appendix that includes lengthy financial documents or other reference materials. 

These are the parts of a business plan. 

• Executive Summary
• Business Overview 
• Business Objectives and Goals
• Competitor Analysis 
• Market Analysis  
• Product and Services
• Operational Plan 
• Business Structure and Management
• Financial Analysis
• Marketing and Sales

Process of Writing a Business Plan for a Bank Loan

Let’s see what you will write in each of the above-listed sections of the business plan for loan.

Executive Summary: Write this section after you have completed the business plan. Briefly discuss your business idea and its parts. 

Business Overview: Include basic details about your business like business name, address, year established, etc. 

Business Objectives and Goals: Discuss what are the short-term and long-term business goals and how do you plan to achieve them. 

Competitor Analysis: Conduct an analysis of your direct and indirect competitors. A SWOT analysis of your competitors can help you identify opportunities for creating your competitive advantage. 

Market Analysis: Discuss market conditions in your industry. Is your target industry seeing a growth trend or a decline? What are the driving factors for growth in your industry?

Product and Services: Introduce the products and services of your business, how your product or service works, how you will price them, and what is your sales and distribution strategy for your products or services. 

Operational Plan: Explain your operation plan and discuss how you plan to run your business. The operation plan will discuss organizational structure, team working, and almost all aspects of business operations. 

Business Structure and Management: Introduce business managers and key employees here. Also briefly discuss the legal structure of your business like if you are C-corp, S-corp, LLC , etc. 

Financial Analysis: Discuss initial business costs, running cost, business break even cost, the amount of funding you need and how you will spend that funding. Also create a financial forecast for your business. 

Marketing and Sales: This section will include the marketing and sales plan for your products or services.

Try to make it detailed so that the bank or your lender can understand how you will make your business profitable and if you will have solid capacity to pay back the loans. 

Appendix: Anything you didn’t or couldn’t mention in the previous business plan sections will go here. For example, you can include extended financial reports, research about your industry, detailed CVs of your team and management, etc. 

Download Free Example Business Plan for Loan

Make business plan for loan quick and easy, use this business plan template for loan. 

How to create a business plan for a loan with a Free Template?

A template is an easy and straightforward way to write a business plan. A template gives you step by step instructions on what each business section is about and how to write it. 

Wisebusinessplans offers business plan for bank loan template that guides you with questions in every section of the business. Simply answer the questions in each section and your business plan will be ready in no time. 

These are the steps to writing a business plan for small business loan with a template: 

Collection Business Information : Make business information available, keep business documentation at hand as you will need to use data from these documents. 

Write Business Plan : Proceed with writing the business plan. You will not stop until you reach financial analysis. 

Prepare Financial Projections : When you are applying for a debt, the lender will most closely look at your financial projections. Take your time to write financial projections. Make sure you sound convincing.

Also, don’t bury information in the spreadsheets or too much data. State inference you draw from the data first, include necessary financial projections in the business plan and put the rest of them into the business plan appendix. 

Proofread and Revise : Business plan is a thorough document. It is highly likely to leave some holes in the first draft. Proofread your business plan at least once to check for language and factual mistakes. You also come up with a new and better way of saying something. 

Get Second Opinion : Engage a trusted friend, or family member, or an advisor and get their opinion on your business plan. Their unique perspective will force you to improve it,

Sample Of Business Plan For Loan And Funding 

Want to see a sample on the quest of ‘how to make a business plan for a loan’, check the link below.This  business plan for bank loan example will help you see how an actual business plan for a bank looks like and what is the end-product you are working towards. 

Business Plan for Loan

Get this simple business plan template and make better business plan

 A business plan is essential when applying for a loan as it provides lenders with a comprehensive understanding of your business, including its objectives, financial projections, market analysis, and operational strategies. It demonstrates your preparedness and increases the likelihood of securing funding.

To write a business plan for a loan, start by outlining your executive summary, company description, market analysis, products or services, marketing and sales strategies, organizational structure, financial projections, and appendices. Utilizing a free business plan template can help guide you through the process.

 Free business plan templates are widely available online. You can search for reputable websites or organizations that offer templates specifically designed for writing business plans for loans. These templates typically provide a structured format and guidance to ensure you include all the necessary components.

The financial projections section of your business plan should include a sales forecast, cash flow statement, profit and loss statement, and balance sheet. It is important to provide realistic estimates based on thorough market research and a detailed understanding of your business’s financial performance.

Absolutely. Seeking assistance or feedback when writing your business plan for a loan is highly recommended. You can consult with business advisors, mentors, or industry experts who can provide valuable insights and help ensure your business plan is comprehensive, well-structured, and compelling to potential lenders.

Want to write a business plan?

Hire our professional business plan writers now!

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How to Simply Write a Business Plan for a Loan

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What Are the Main Purposes of a Business Plan?

How to write a comprehensive business plan, how to use facebook notes for your business page.

• Importance of Following a Business Plan
• What Does Writing Paragraphs in Business Format Mean?

When you are a small business owner heading off to ask the bank for a small business loan, one of the first documents the loan officer typically asks for is the business plan. Therefore, it is important to know how to simply write a business plan for a loan. A viable business plan illustrates to the loan officer that you have organized your thoughts and gone through the process of thinking the business out. You can write a business plan simply and quickly if you gather your information and assemble it in a logical manner.

Company Description and Strategy

Explain how you started your business and any evolutions the business has gone through since it began. Typically, the business description is about one page and describes where your business started, the reason it exists and gives a glimpse of which direction you want to move in.

Organization and Management

List out each of the managers involved in the business. Provide a professional biography for each manager and fully describe their role in your business. Also, mention any positive contributions the experience and knowledge of each manager has brought to starting and growing your business.

Service or Product Line

Describe the products or services you are selling. Include a full description of each product or service you offer your customers and prospective customers.

Marketing Strategies

Describe the marketing strategies you intend to implement to bring awareness of your products or services to your target audience. Include online and offline strategies, such as employing a public relations campaign for your monthly business events and placing banners on the websites of professional groups that your target audience belongs to.

Financial Sales and Expense Projections

Once you paint a picture of what business you are in and who the company serves, it is time to show the loan officer the financial picture. Provide financial sales projections and expenses for at least three to five years. Be conservative and truthful when making these projections.

Executive Summary and Overview

Even though the executive summary is the first part of a business plan and one of the most important parts, you may want to write it last because it is an overview of everything the business plan contains. Since you may not have the full picture until after you have compiled the plan, it is usually best to write this page last. The executive summary contains a description of your business goals and the strategies you intend to employ to achieve your goals and should be compelling enough to interest a bank loan officer into wanting to read the rest of the plan and consider giving you the loan.

Create a Cover Page

After you place the executive summary as the first page, create a cover page that includes the title “Business Plan” centered in the middle of the page and the contact information for the business in block format in the bottom left corner of the page. Include the business name, address, phone number, website and email address.

• BPlans.com: Sample Business Plans

Kristie Lorette started writing professionally in 1996. She earned her Bachelor of Science degree in marketing and multinational business from Florida State University and a Master of Business Administration from Nova Southeastern University. Her work has appeared online at Bill Savings, Money Smart Life and Mortgage Loan.

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How To Write a Business Plan for a Loan: A Guide

This article contains general information and is not intended to provide information that is specific to American Express, or its products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.

Many small business owners know that it can take money to grow. But what does it take to secure that funding? A strong business plan is often a part of the answer. That’s why learning how to write a business plan for a loan may be an important part of setting up a small business for success.

A good business plan helps a lender assess a business’ prospects. There is a standard format that owners may wish to follow. Keep in mind that applying for a loan is an important step that has legal consequences. As you put together your business plan, consult your professional advisers to make sure that you understand the importance of providing accurate information.

Here are some pointers on writing a business plan for a loan to help grow your business .

Why is a business plan important when you’re applying for a loan?

The Small Business Administration (SBA) describes a business plan as a “roadmap to small business success.” Given all the challenges of keeping a small business thriving, a roadmap is a handy thing to have. A business plan helps an owner visualize the future, take the actions needed to get there, and understand when to change strategies.

A business plan is also often required when applying for a business loan. Lenders often use an applicant’s business plan as part of the loan application and approval process. It helps the lender evaluate the likelihood of the small business being profitable.

Knowing how to write a business plan can also be helpful for other purposes. Commercial real estate landlords may ask for a business plan before leasing a space. A thorough business plan may also help with finding investors.

What lenders look for in a business plan

A lender typically evaluates several factors to decide if a small business is likely to repay requested financing. The various sections of the plan will help the lender decide if a market opportunity for the company exists, if the business has access to the organizational and managerial resources it needs, if the product or service appears viable, if a marketing plan exists, and if the small business’ finances are healthy. Simply put, the plan helps the lender review all aspects of the business on paper, so that the lender can make a more informed decision about making a loan.

In addition to the business plan, the lender will likely assess the company’s accompanying business credit reports and business credit scores to determine its creditworthiness.

What does a formal business plan include?

Many business owners have informal business plans from when their small business was just a side hustle. Business ideas written on the back of a napkin are a cliche for a reason: it’s a common way for a small business to take shape.

A formal business plan, however, can’t fit on a napkin. When a growing small business needs a sizable business loan or line of credit , they will likely need to provide something quite detailed to a lender. The need for a formal document doesn’t necessarily mean it will be difficult to secure the loan , however. It just means the lender needs a clear picture of the business.

Small business owners can think of a business plan for a loan application like a resumé when seeking a job. It helps a lender decide if the small business is a good candidate for a loan in an easy-to-read document. Similar to a resumé, the business plan should be professional looking and free of spelling, grammatical, and typographical errors.

The list below follows the naming conventions and structure of how to write a business plan for a loan application according to the SBA . It includes:

• Executive summary
• Company profile
• Market analysis
• Organization and management
• Service or product line
• Marketing and sales
• Funding request
• Financial projections

1. Executive summary: Spark interest in your business

The executive summary may be the first thing a lender will read, but small business owners may be best served by writing it last. Learning how to write a business plan for a loan may help owners understand their own business better. The executive summary will likely be most accurate after the owner has thought through, and learned from, all the sections to follow.

What is the executive summary?

The executive summary is a brief overview of the business plan. It should give readers a high-level description of the business, as well as the high points of the business plan.

What to include in an executive summary

An executive summary should include the following:

• Business name, contact information, and social media profiles : This will help the reader find the business in the real world.
• Mission statement : A mission statement should directly reflect the values of the business to help readers understand why the business exists.
• Product or service description : This highlights what customers can expect from the business.
• Demographic, economic, and financial factors affecting the business : Readers should understand the general environment in which the business operates.
• An analysis of competitors and the primary market : This previews the market analysis section and clarifies the business’ market position.
• Marketing, public relations, and sales plan : Readers should understand how the business plans to attract and retain customers.
• Future revenue and cash flow projections : Financial forecasts help readers understand the business’ potential for growth and profitability.
• Any current assets or capital : Lenders will want to know what potential collateral the business has.

2. Company profile: Define the business

A company profile is a business owner’s opportunity to briefly explain what their business is all about and why it exists. The profile should be heavy on facts, including what the products and services are, the target audience, and what needs the business fulfills. It should be written in a formal tone and explain what, if anything, makes the business unique.

3. Market analysis: Competitors and customers

A market analysis explains the business environment in which the company will operate. Lenders may look at this section to determine if the business has a good understanding of its competition and potential customers. You may want to consider hiring a market research firm to help you prepare a market analysis.

Market analysis elements include:

• An industry analysis : This describes the outlook for the industry to which the business belongs.
• Knowing your competition : A competitor analysis highlights the strengths and weaknesses of similar businesses in the same market to identify challenges and opportunities.
• Know your niche : Explain how the product or service addresses an unmet If your business has a significant social media following, that may help to show how your business is reaching your customers.

4. Organization and management: Talent and experience

Who will run the business? This section is meant to help lenders understand the experience and skills of those operating the business. It’s not uncommon for lenders to ask if the talent that has made a business successful so far will stay with the business as it grows. Including a description of the current and future business structure over the next three to five years may demonstrate room for growth for valuable staff members.

5. Service or product line: What makes the business special?

A description of the small business’ service or products helps highlight what makes the business unique. The nuts and bolts of these offerings are critical, but their intangible qualities are valuable as well. This could include the recent hiring of an up-and-coming chef, the development of a new, patented product, or an innovative production method. This section is an opportunity to drill down on what makes the business unique.

6. Marketing and sales: How do you get the word out?

A great product or service is only valuable if enough potential customers hear about it. A lender will want to know how the business plans to get the word out about its offerings and increase its share of the target market. The plan might include social media platforms, established business partners, and how the company will generate and nurture sales leads.

7. Funding request: How much does the business need?

A business plan is all about clarity. Small business owners may use this opportunity to clarify how much money they need and why they need it. Lenders value a detailed explanation of how the business will use the loan and why it will increase their revenue or net profits.

8. Financial projections: Dollars and cents

Naturally, lenders will want to know about a business loan applicant’s finances. When learning how to write a business plan for a bank loan, business owners should understand the critical role of financial reports.

When preparing financial projections, it may be wise to consult a professional to best help your business prepare your documents accurately. Financial projections may include the following documentation:

• Startup expenses
• Payroll costs
• Sales forecast
• Operating expenses
• Cash flow statements
• Income statements for the first three years of business
• Balance sheet
• Break-even analysis
• Financial ratios
• Cost of goods sold (COGS)
• Amortization and depreciation for your business

9. Appendix: Show instead of tell

The appendix is where a business owner can show their work. The appendix includes supporting documentation, including resumés, financial statements, media clips indicating buzz around a product or brand, or anything else that verifies the information shared in the previous eight sections.

A formal business plan can be important when applying for a business loan

Seeking financing for business growth is a great opportunity to move from an informal business plan to something more structured. Having a business plan ready for lenders is a great first step in securing the funding your business may need to grow or sustain operations.

The material made available for you on this website is for informational purposes only and is not intended to provide legal, tax or financial advice. If you have questions, please consult your own professional legal, tax and financial advisors.

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3 Tips For Writing a Standout Business Plan for a Bank Loan Application

Updated: May 22, 2020

We all know the saying: ‘Failure to plan is planning to fail.’ But hands up who’s actually written a business plan for their business? If you didn’t put your hand up, don’t worry, you’re not alone. In fact, according to research only around 33% of small businesses complete a business plan for their business.

The first time that many business owners even consider writing a business plan is when they’re told they need a business plan for a bank loan application. At this time, many businesses don’t know where to start, don’t know what the banks are looking for, or are so busy managing their business that they simply don’t have time to sit down and write a business plan.

So, to help you get started, we’ve put together our top 3 tips for writing a business plan for small business loan applications:

1. Know your audience.

2. Provide proof.

3. Keep it simple.

1. Know your audience – Write a business plan for the bank, not for you.

There is an avalanche of information out there on how to write a business plan. But the main problem is that they are written as a one-size-fits-all approach for any situation. The most important place to start when writing a business plan is to consider your audience.

This is especially the case when your audience is a bank. Why? Because banks are a process-driven bunch and they are looking for specific things before deciding whether to give you the big stamp of approval.

So, what are the banks looking for? Banks are in the business of lending you money in return for interest. They lose if you don’t pay them back. There are four key things a bank looks for in a business loan application, all of which are aimed at detecting any risk of you not paying them back.

4 key things banks assess in a small business loan application.

2. Provide Proof - Proof, the whole proof and nothing but the proof.

So, we’ve talked about risk in the previous section, but just how important is it in a bank's decision? Research suggests that the primary focus of a bank’s loan decision is how much risk it represents for the bank. So, how can you set their mind at ease that you're not a risky investment? Proof.

For an existing business , this means providing financial statements to prove the history of success that the business has been able to achieve.

For a new business , the biggest hurdle is the lack of a track record. So how can you provide proof when there is no financial history? The answer is with a business plan. In order to cover the bank’s need for proof, your business plan should include three key things:

1. A cash flow forecast.

2. A plan for how you will achieve the cash flow forecast.

3. Evidence that your plan and your forecast are based on solid footing. This can take the form of research, links to sources, reference to specific customer feedback, showing management sales records, or proof of physical documents or formal contracts. Aim to back up any key assertions that you make with some form of proof.

3. Keep It Simple and Structured – There is beauty in simplicity.

Providing proof doesn’t mean that you need to write a thesis. The banks have hundreds of applications to review every week. They don’t have time to pore over a lengthy 100-page document. Keep it concise and follow a clear structure.

Our recommended structure focuses on the 6 most important areas that a bank considers in a plan:

6 key sections of a business plan for a small business loan application

Aside from seeking finance, there are many other benefits of a business plan, including increasing your chance of success, helping you set a laser-focused direction and/or gaining clarity on what makes your business hum. Just make sure you consider who the audience is before you start your plan.

If you need any assistance in writing a professional business plan, we’re here to help. Head to our website for more details.

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How to Write a Business Plan Banks Can't Resist Here's what your business plan needs if you want startup capital from a bank.

By Teresa Ciulla Nov 13, 2014

Opinions expressed by Entrepreneur contributors are their own.

In the book, Write Your Business Plan , the staff of Entrepreneur Media offer an in-depth understanding of what's essential to any business plan, what's appropriate for your venture and what it takes to ensure success. In this edited excerpt, the authors discuss the ABCs of getting a bank loan for your business.

Many of the most successful businesses are financed by banks, which can provide small to moderate amounts of capital at market costs. They don't want control—at least beyond the control exerted in the covenants of a loan document. And they don't want ownership. Bankers make loans, not investments, and as a general rule, they don't want to wind up owning your company.

Bankers primarily provide debt financing. You take out a loan and pay it back, perhaps in installments consisting of principal and interest, perhaps in payments of interest only, followed by a balloon payment of the principal. One of the nice things about debt financing is that the entrepreneur doesn't have to give up ownership of his company to get it.

Bankers can usually be counted on to want minimal, if any, input into how the business is run. Get behind on the payment schedule, however, and you're likely to find a host of covenants buried in your loan documentation. Loan covenants may require you to do all sorts of things, from setting a minimum amount of working capital you must maintain to prohibiting you from making certain purchases or signing leases without bank approval. Be sure to have your accountant, financial advisor or attorney review your loan documents and spell out everything for you very carefully before you sign.

A banker's first concern is getting the bank's money back plus a reasonable return. To increase their odds, bankers look for certain things, including everything from a solid explanation of why you need the money and what you're going to use it for to details about other borrowing or leasing deals you've entered into.

Bank loan applications can be almost as long and complete as a full-fledged business plan. Plans and loan applications aren't interchangeable, however. A banker may not be interested in your rosy projections of future growth. In fact, when confronted with the kind of growth projection required to interest a venture capitalist, a banker may be turned off. On the other hand, a banker is likely to be quite interested in seeing a contingency plan that will let you pay back the loan, even in the event of a worst-case scenario.

The five things a banker will look for you to address are:

1. Cash flow. One of the most convincing things you can show a banker is the existence of a strong, well-documented flow of cash that will be more than adequate to repay a loan's scheduled principal and interest. You'll need more than a projection of future cash flow, by the way. Most bankers will want to see cash flow statements as well as balance sheets and income statements for the past three or so years. And don't forget your tax returns for the same period.

2. Collateral. If you're just starting out in business or dealing with a banker you don't know well, you're unlikely to be able to borrow from a bank without collateral. Collateral is just something the bank can seize and sell to get back some or all of the money you've borrowed in the event that everything goes wrong and you can't pay it back with profits from operations. It may consist of machinery, equipment, inventory or, all too often, the equity you own in your home.

Why do bankers seek collateral? They have no desire to own second-hand equipment or your house. Experience has taught them that entrepreneurs who have their own assets at risk are more likely to stick to a business than those who have none of their own assets at risk.

3. Co-signers. They provide an added layer of protection for lenders. If your own capacity for taking on additional debt is shaky, a co-signer (who's essentially lending you their creditworthiness) may make the difference.

4. Marketing plans. More than ever before, bankers are taking a closer look at the marketing plans embedded in business plans. Strong competitors, price wars, me-too products, the fickle habits of the buying public and other market-related risks must be addressed. Your banker (and most other investors) have to know that you recognize these risks and have well-thought-out ways to deal with them. Besides, it's the cash flow from operations that pays off bank loans.

5. Management. Bankers like to stress the personal aspect of their services. Many state that they're interested in making loans based on a borrower's character as well as their financial strength. In fact, the borrower's track record and management ability are concerns for bankers evaluating a loan application. If you can show you've run one or more other companies successfully, it will increase your chances of landing a loan to get a startup going.

Bank financing is most appropriate for up-and-running enterprises that can show adequate cash flow and collateral to service and secure the loan. Bankers are less likely to provide startup money to turn a concept into a business, and they're even less likely to put up seed money to prove a concept unless you have a track record of launching previous businesses with successful results.

The old saying about bankers lending only to people who don't need to borrow is almost true. Bankers prefer to lend to companies that are almost, but not quite, financially robust enough to pursue their objective without the loan. Their natural tendency is to be conservative.

This is important to understand because it affects how and when you will borrow. You should try to foresee times you'll need to borrow money and arrange a line of credit or other loan before you need it. That will make it easier and, in many cases, cheaper in terms of interest rates than if you wait until you're a needier and, in bankers' eyes, less-attractive borrower.

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How to write a Business Plan for a Loan

You’ve got big ideas for your business. When you’re seeking funding to make them happen, how you communicate your vision and plan to a lender could make a big difference. That’s why it’s important to understand how to structure it and what lenders will be looking for. If you aren’t sure about either, this article should help.

How to structure your business plan for a loan

The first step in creating a business plan that clearly defines your goals and objectives is to structure it correctly. Most business plans fall into one of two categories, traditional business plans and lean startup plans. When you’re seeking a loan, it’s best to go with the traditional business plan since it’s more detailed and provides a lender with all the information they need. Below are the sections and short description of what you will need to include. If you’d like to read more about what to include in each of these sections, check out our article - What Goes Into a Business Plan:

Executive Summary - A clear and concise summary of your business and the information within the rest of the plan.

Business Description - A high-level overview of your business. Includes who you are, how you operate, what you offer, where you’re headed, and who your target market is.

Product/Service Description - Detailed description of what you offer.

Market Analysis - Stats and projections about your industry, including a competitive analysis.

Marketing Plan - Your strategy for how to grow your business.

Financial Plan - Create a clear financial picture for your business.

Attachments/Appendix - Important paperwork alluded to in the rest of the plan.

What lenders look for in a business plan

While the structure lays the groundwork for how to organize your plan, there are certain things that lenders will be looking for. Here are 4 P’s you should focus on when writing it.

• Potential One of the key factors in deciding on approval is the team that will be running the business. A lender will want to know about your education, as well as the skills and experience you have for running the business. This will also include your credit score and credit history. Make sure to create a clear picture of your potential while writing the Executive Summary and Business Description.
• Projections This information may be the most critical to a lender and should include a pro forma, which is a projection of revenues based on all products that the business is offering as well as expenses. The key here is creating a clear picture of what you are expecting as a business and why. The financial projections for your business will be included in your Market Analysis and Financial Plan.
• Purpose Another thing lenders will look for is the reason you are going into business and why you expect to do well - this is your purpose. What you want to show is how your product or service offers something different or is better in some way. Create a clear difference between what you plan to do and what others in your industry are already doing. Convince a lender that your product or service is needed by focusing on purpose within your Product/Service Description, Market Analysis, and Marketing Plan.
• Principal Lastly, you need to express your initial investment as well as how much is needed to get started. This will show how much you’ve already bought into your own idea. If you have a large principal investment into your own business, this will show that you are serious about it - which may bode well with a lender. This will also include a funding request with the principal amount that you need to borrow. Break down your investment and make your funding request in your Financial Plan.

You’ve got plans for your business, and we have tools to help make them happen – Southern Bank Business Services.

Tips for writing a commercial loan business plan

Now that you know what to focus on within your plan, here are a few tips to keep in mind as you write it.

• Start Strong - While your executive summary may be the last part you write, it will be the first thing lenders read. Make sure to spend some time making it interesting and engaging. After you’ve written it, read through it and ask yourself, “Would I be interested in hearing more about this business?” That’s likely what a lender will ask as well.
• Do your research - Make sure that your numbers make sense, as lenders will already have an idea of the markets they lend in. If you come across as unrealistic, it could prevent you from being approved. Spend time researching trends within your local market and industry. Don’t just say how well you expect to do, show it with solid numbers.
• Make it readable - A business plan that goes on for 100 pages may turn some lenders off. Keep it 5 to 10 pages and be sure to proofread it for any grammatical errors.
• Brag on your team - Most lenders understand that one person can’t carry a business alone. If you have high aspirations that take skilled work, make sure you highlight the members of your team that will make it happen. This will inspire confidence in the success of your business.

Resources for writing a business plan

If you’re looking for ways to get started, there are several resources available to you.

The Small Business Association (SBA) has a section on their website all about writing a business plan, as well as a step-by-step course on how to write one here.

If you need help getting things organized with your team, you can also check out this template on Miro, which helps you work online with others to get the right information in each category.

Lastly, you can find a number of free business plan templates online - here’s a good one from SCORE, a resource partner of the SBA.

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How Do Business Loans Work?

• Common Uses

Business Loans vs. Personal Loans

• Factors Considered
• Types of Loans

Business Loans vs. Business Line of Credit

Business loan fees, the bottom line.

• Small Business

Business loans provide short- and long-term financing for companies

Matt Webber is an experienced personal finance writer, researcher, and editor. He has published widely on personal finance, marketing, and the impact of technology on contemporary arts and culture.

Katie Miller is a consumer financial services expert. She worked for almost two decades as an executive, leading multi-billion dollar mortgage, credit card, and savings portfolios with operations worldwide and a unique focus on the consumer. Her mortgage expertise was honed post-2008 crisis as she implemented the significant changes resulting from Dodd-Frank required regulations.

A business loan is a type of financing that is used by businesses. Companies can get business loans from a bank, an online lender, or a credit union. The borrowed funds are made available as either a lump-sum payment or a line of credit. Businesses must then repay their lender according to the terms of the loan, which dictate the length of the repayment term and the interest rate charged.

Key Takeaways

• A business loan is a loan taken out by a business to pay for business expenses such as equipment purchases, to cover operating expenses, or to expand into new markets.
• There are different types of business loans, each suitable for a different purpose and a different type of company.
• Business loans often have lower interest rates and more generous repayment terms than personal loans.
• Almost any business can apply for a business loan, but a lender may require extensive documentation during the application process.

A business loan works similarly to a personal loan, though there are important differences between these two loan types.

The first step in applying for a business loan is to find and meet with a lender . A lender will assess what scale of financing it can offer, as well as the other terms of the loan. Any business can apply for a business loan, and for this reason, the terms of business loans vary widely.

Negotiating Power

Bigger, more established companies have more negotiating power and can typically get the most favorable borrowing rates. Small businesses operating in volatile markets have less bargaining power. So they might not be offered as favorable a deal on a business loan.

Secured and Unsecured Loans

Some business loans are secured loans , which require a company to provide collateral (an asset) that can be repossessed if it fails to repay the loan. Real estate, equipment, cash, or investments can be used as collateral.

Secured loans can have lower interest rates. They can provide smaller businesses that have less credit history access to needed capital.

Other business loans are unsecured , meaning that they don’t require collateral. Getting an unsecured loan depends on the size and age of the business, relationship history with the lender, and other underwriting factors.

Once a loan's terms are agreed upon, the lender makes funds available, either as a lump-sum payment or a line of credit. The loan terms define how much you have to repay, how frequently you must make repayments , and how much interest you must pay. If you make all payments on time, the loan is then closed. If you do not, financial penalties may apply.

Common Uses for a Business Loan

When you apply for a business loan, typically you'll have to disclose what you plan to use the money for and how you plan to repay it.

You can use a business loan for almost any kind of business expense. However, you can’t use it for personal expenses. For instance, you can’t use your business loan to buy residential property or a personal vehicle. Doing so will break the terms of your loan agreement.

Business loans are frequently used for:

• Startup costs
• Commercial real estate purchases and/or remodeling
• Cash flow for everyday expenses
• Debt consolidation or refinancing
• Equipment purchases
• Inventory purchases
• Business acquisitions
• Business expansion
• Business franchising
• Marketing and advertising
• Refinancing 

You can sometimes use one business loan to pay off another business loan. This may make financial sense if by refinancing, you get a better interest rate than that charged for your original loan.

While business loans and personal loans are similar in many ways, there are several important differences between them:

• Personal loans are usually unsecured, whereas a business loan often requires collateral and may require you to spend the funds in a particular way.
• Business loans generally offer longer repayment terms (up to 25 years for a U.S. Small Business Administration (SBA) loan), and you can generally borrow more than on a personal loan.
• Business loans also typically have lower interest rates than personal loans. As of May 2024, the average rate on a personal loan is around 12%. Traditional banks can offer business loans with single-digit interest rates.
• Business loans can be more difficult to qualify for because your lender will check your business credit score and credit history. If that alone doesn't qualify you, you might have to provide a personal guarantee , as well. That means that if your company can't repay the loan, you'll be obligated to do so.
• Personal loans generally have a faster application process than business loans. Most personal loan lenders now offer a pre-qualification process, which allows you to see if you’re eligible without completing a full application. If you want a business loan, it might take weeks before you have your funds.

Factors Considered for a Business Loan

Almost any business can apply for a business loan but each must meet specific criteria to be approved. Most lenders will consider several key factors such as:

• Credit score : Lenders may consider your personal credit score , your business credit score, or both. The higher your score, the more likely you are to be approved, and the better the loan terms you are offered.
• Cash flow : Lenders will want to see how much money your business takes and how you spend it.
• Time in business : Lenders prefer to lend to businesses with a proven track record, and most won’t lend to businesses that are less than two years old.
• Debt : If you already have business debts , you may find it more difficult to get a business loan.
• Industry : Lenders want to minimize risk, so they are hesitant to lend to businesses that operate in volatile markets. Many lenders will also refuse to lend to businesses related to gambling, weapons, cryptocurrency, and marijuana.

Business loans are used for a wide variety of purposes. Depending on the lender, your business, and what the loan is for, you may be asked for additional documentation.

Types of Business Loans

There are various types of business loans, each suitable for a different purpose. The most common types of business loans are:

• Term loans : These are the simplest type of business loan, where you will receive a lump sum and pay it back over several years.
• SBA loans : These are loans from the SBA that generally have low rates and long repayment periods.
• Working capital loans : These loans are used to pay for operating expenses to keep businesses solvent.
• Equipment loans : These loans are used to purchase specific equipment that a business needs to operate.

In addition, there are more unusual business loan types:

• Invoice factoring or invoice financing loans : These involve selling unpaid invoices to a third party in exchange for a fee.
• Real estate business loans : These are used to buy real estate for a company; generally, the real estate becomes collateral for the loan.
• Microloans : These are loans designed for small businesses that involve an amount of less than $50,000. They typically require a personal guarantee.
• Merchant cash advance : This is a lump-sum loan that is repaid with a percentage of future credit card sales.
• Franchise loans : These are loans specifically to buy a franchise .

A business line of credit is a more flexible financing option that functions similarly to a credit card. A lender extends a predetermined credit limit to the business, and the business can draw from this limit as needed, only paying interest on the amount borrowed. As the business repays the borrowed funds, the credit line is replenished, allowing the business to borrow again up to the limit.

One difference between a business loan and a line of credit is how they impact a business's financial planning. With a business loan, the fixed repayment schedule provides predictability, enabling businesses to budget accordingly. However, this also means that businesses are committed to the repayment terms, even if their financial situation changes. On the other hand, a line of credit offers more flexibility since businesses can borrow only what they need when they need it.

You may also see different qualification criteria and usage for these two financing options can differ. Business loans often require a more extensive application process since you get a lump sum of cash upfront. With a line of credit, you may have more lenient qualification requirements though it might come with higher interest rates.

As you secure business loans, you may come across different types of fees. You may not be charged all of these fees, but more common types in the industry are:

• Origination Fee : An origination fee is a one-time charge that lenders impose for processing a new loan application. This fee typically covers the administrative costs of underwriting the loan and is usually calculated as a percentage of the total loan amount.
• Application Fee : Some lenders charge an application fee to cover the costs associated with processing a loan application. This fee is typically non-refundable, even if your loan application is denied.
• Late Payment Fee : If you miss a payment or make a payment after the due date, your lender may charge a late payment fee . This fee is typically a flat amount or a percentage of the missed payment and is designed to encourage timely payments.
• Servicing Fee : Some lenders charge an ongoing servicing fee, which covers the cost of managing and administering the loan over its lifetime. This fee might be a flat monthly charge or a small percentage of the outstanding loan balance.
• Collateral Appraisal Fee : If your business loan requires collateral, the lender may require an appraisal to determine the value of the asset. The cost of this appraisal is typically passed on to the borrower as a collateral appraisal fee.
• Draw Fee : For business lines of credit, some lenders charge a draw fee each time you withdraw funds from your credit line. This fee is typically a small percentage of the amount drawn, and it’s in addition to the interest you’ll pay on the borrowed funds.
• Annual Fee : Certain business loans, particularly revolving lines of credit, may come with an annual fee. This fee is charged yearly and is meant to cover the cost of maintaining your account.

Can I Use a Personal Loan for My Business?

Some personal loans can be used to fund a new or existing business. However, you should check to be sure that a lender doesn’t impose any restrictions on business use.

Can You Have More Than One Business Loan?

Yes, you can, as long as you meet the criteria for an additional business loan. However, having multiple loans can get expensive and complicated.

What Happens If My Business Cannot Pay Back a Loan?

Each loan has different repayment terms, but late repayments generally lead to financial penalties. If you continue to miss payments, then your lender may seize your collateral.

Are Business Loans Regulated?

Historically, business loans have been less regulated than personal loans. This may be changing as some U.S. states take a greater interest in implementing stricter disclosure rules for business loans.

A business loan is a type of financing used by businesses. Typically, a bank or other financial institution will lend money to a business. That money must be paid back over a defined term with interest.

There are different types of business loans, and they can be used for a wide range of business purposes.

If you're thinking about a business loan, bear in mind that practicing good financial management over time can help your business establish a favorable business credit score . That can help you when it's time to get a loan.

U.S. Small Business Administration. “ Terms, Conditions, and Eligibility .”

Board of Governors of the Federal Reserve System. “ Consumer Credit—G.19 .”

Bank of America. “ Small Business Loans & Financing .”

U.S. Small Business Administration. “ Microloans .”

Bloomberg Law. " State Regulatory Landscape Shifts for Commercial Loan Lenders. "

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How to start a small business

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If you're launching your own business, you have a ton of questions that need to be answered: How do you name your business? How do you register it? Will people think your product is good enough to purchase? And how will you afford to get it off the ground when you still have bills to pay? 

With the help of experts and entrepreneurs, we've created this guide to help you figure out the solutions to the above questions and more. Read on and find out what you need to do to successfully launch your small business.

Already have your business plan ready and just need help legally forming it? These companies can help .

Research your market

Formulate a business plan, the different types of business models, fund your business, pick a business name, create a website for your business, legally form your business, apply for a business license (if you need one), apply for an employer identification number (ein), consider business insurance, open a business bank account, launch your business.

It's great that you have a dream and ambition, but you need to make sure there's a market for whatever product you want to create.

"It's important to do that market research prior to spending any kind of money so you can make sure you have something," says Abby Mercado, a former venture capitalist and founder of Rescripted , a women's health media company.

When done right, market research can reveal your ideal customer's specific needs, as well as the solutions they've tried before, your competitors, the price your customers are willing to pay, and more.

How to use social media and real-life feedback for your market research

Social media can give you an idea of what your potential customers are talking about online. If you're planning to launch a dog food company, for example, searching Reddit or going through the comments on competitors' TikTok and Instagram accounts can yield valuable information about what your customer wants. This approach is often referred to as "social media listening."

But it's also important that you don't limit your research to just searching around online and social media. For example, when Mercado was doing market research for what would eventually become Rescripted, a media company focused on women's reproductive health, she reached out to a fertility clinic she was familiar with and got feedback from a doctor there. According to Mercado, the doctor loved her idea and introduced her to potential customers who gave her even more feedback.

Questions to ask for good feedback

Here are some thought starters around the types of questions that would be useful to ask your target customer: 

• Which brands (in your targeted market) have you purchased from in the last 3 months?
• How satisfied are you with the products/solutions that already exist for this market? 
• What was your reasoning for purchasing from a competitor? 
• Which features are most useful to you? 
• How do you prefer to shop for this product/service? 
• At what price would you be unwilling to purchase this product? 

You can also get more useful feedback if you're able to give people an example of your product. For instance, if you want to open up a bakery, maybe whip up a small batch of cookies and hand them out in your neighborhood in exchange for people answering some questions.

Friends and family can sometimes be a good place to start looking for feedback about your offerings, but make sure you're surveying your ideal customer. This is the person who will most likely compare your business to competitors before deciding to buy. So if you're opening a butcher shop but your mom's a vegan, consider getting feedback from someone else. 

A business plan is a document that includes your business's goals and the framework you'll follow to achieve them. It can be a helpful document regardless of your business's size and whether this is your first business or your tenth. 

One of the most useful functions of a business plan is that it keeps you and your team organized and on the same page. If you're launching your business with a partner or are hiring a senior leader, having a written document everyone agrees on can help smooth over arguments about strategy.

A business plan also provides a roadmap for how you need to market your business and earn revenue during different stages of its growth. By identifying certain milestones in your plan, you can get a general sense of whether your business is on track or if you need to make adjustments. 

Finally, when you're applying for a business loan, grant or other types of funding, people may want to see your business plan before they give you money. 

The Small Business Administration (SBA) suggests your business plan include the following:

• An executive summary that provides basic information about your company and team, including what your product is and your company's mission. 
• A company description with more specific details about the market you serve and the advantages you believe you have that will give you an edge over the competition. 
• Trends or themes you're seeing in your target market.
• The legal structure of your business and who will be on your team (also mention if you're flying solo).
• An in-depth description of your product or service (including any patent filings and copyrights) as well as your marketing plan. 
• A declaration that you're seeking funding (if applicable). It can also be a good idea to include your financial projections with your funding request if you're approaching investors for your business. 

The business model is the part of your business plan that breaks down how you'll make money.

There are many business models and plenty of examples of companies that have obtained success with each one. Picking the right one depends on the nature of your business (among other things), since what works for a tech start-up might not fly for a food truck.  

Service (Fee-for-service)

As the name may suggest, a service-based business model involves carrying out a task or service in exchange for a fee. The fee may be paid as a fixed sum or an hourly rate. Common small business examples using a fee-for-service model include consulting, coaching or freelance work. 

Subscription

A subscription business model involves charging a fixed fee on a recurring basis in exchange for a product or service. This is a common model among online service providers, but it can also be used to sell physical products, such as subscription boxes.

This business model involves introducing customers to a free, basic version of the service in the hopes that they'll upgrade to a paid premium version with more features. Because this business model makes it possible for some customers to simply stick with the free version, it isn't ideal for product-based businesses. One example of a freemium business model is an app with free basic features and premium features that are unlocked when you pay to upgrade your plan.  

This type of business model involves selling a physical item in exchange for money. Products can either be sold in-person (think: bakery, ice cream shop, stationery store, etc.) or online as an e-commerce brand. It can be costly to produce a product so the goal is to make the item for a low cost and sell it at a higher price. 

You're going to need some type of funding to get your business up and running. Those costs can range from the equivalent of a night out to the price of a midsize sedan (and more) depending on your business, but you have plenty of options to secure your seed money. 

These are the most common ways to finance your small business idea.

Bootstrapping 

Best for: Businesses with low startup costs; founders with enough personal savings

Bootstrapping is perhaps the simplest way to fund your business because it involves spending your own money to get started. You don't have to apply for funding or worry about paying back a lender. 

Bootstrapping works best when you have low start-up costs (or if you have a high amount of personal wealth). The biggest risk with bootstrapping is sinking too much money in the business and then coming up short in your personal life when you need cash for an emergency or to cover the essentials.

If you aren't in a place where you feel comfortable assuming the risk of bootstrapping, there are other options to consider. 

Crowdfunding 

Best for: Raising small amounts

Crowdfunding involves asking multiple people to provide small amounts of money to help you reach a larger funding goal for a business idea. So if you need $5,000, you might have 200 people giving you small amounts of money to help you reach that goal. 

With crowdfunding, you typically don't have to pay back the people who gave you money (though some crowdfunding platforms make you give the cash back if you don't reach your funding goal within a certain amount of time). 

When Dr. Jenny Woo was working to launch Mind Brain Emotion , a deck of skill-building cards, she used a combination of bootstrapping with a small amount of money and crowdfunding through Kickstarter. 

"For me personally, Kickstarter was the lowest risk," she explains. "The worst risk is you don't get funded. It's also less time-consuming than if you were to pitch [to investors] or try to get a loan."

Crowdfunding can be a good way to close small funding gaps that you can't afford to fill with your personal savings. However, keep in mind that many campaigns may only last 30 to 60 days on the platform so you have to be realistic about how much money you can raise in that time. 

Some crowdfunding platforms charge a platform fee. The fee is charged as a percentage of the total funds you raise and it can range from 5% to 12%. This obviously eats into the money you can walk away with.

Best for: Businesses that don't need urgent funding; businesses that can meet any usage rules

A grant is a lump sum of money awarded to a business or organization that doesn't need to be paid back. Business grants are commonly provided by government organizations, nonprofits and corporations. 

You'll need to fill out an application to be considered. Some grant application processes may have lengthy approval and disbursement timelines so even if you qualify it may take some time to receive the funds. This is why grants may not be for everyone. If you need money more urgently to fund product development, you may need to look at other options.

While it can take a while to be awarded grant money, it can be well worth it if you don't need to dip into your savings or take on debt for your business. 

Also keep in mind that some grants have strict rules on how you can use the funding. For instance, some grants may only be used to fund research and development while others can only be used for purchasing equipment. 

Small business loans 

Best for: Founders who need a large lump sum of money upfront and can afford to make small, incremental repayments

Unlike a grant, a small business loan is money that's provided by a lender that must be paid back within a certain amount of time. The terms of your small business loan can depend on your credit score, the type of business you're running and how much money you need. 

You'll also need to pay interest in addition to the principal amount. So before you decide to take on a small business loan, make sure you can afford to pay it back without defaulting on your balance. 

CNBC Select ranks OnDeck as one of the best small business loan lenders for its same-day funding service, and Kiva for its 0% interest crowdfunded microloans.

Types of loans

Better business bureau (bbb) rating, loan amounts.

$5,000 to $250,000

Up to 24 months

Minimum credit score needed

Minimum requirements.

In business at least 1 year, $100,000 annual revenue, business bank account

Terms apply.

• Potential for same-day cash disbursement (only available in certain states, for term loans up to $100,000)
• Top-tier A+ rating with the BBB
• Low minimum credit score
• Fixed monthly payments
• 100% Prepayment Benefit option, so you can pay your loan off early without any penalty or fee
• Doesn't lend to businesses in Nevada, North Dakota or South Dakota
• Early prepayment fee if you don't qualify for the 100% Prepayment Benefit

Peer-to-peer crowdfunded loan

$1,000 to $15,000

Up to 3 years

No minimum credit score required

You must be 18, live in the U.S., use this loan for business purposes, not currently in foreclosure, bankruptcy or have any liens, and have a small number of your friends and family willing to make a loan to you (Nevada and North Dakota residents are not ineligible)

• Ability to borrow with no interest
• Loans are geared toward borrowers who are unbanked and have trouble qualifying for financial products
• Ability to market your product to 1.6 million lenders on Kiva
• You need to prove your creditworthiness by inviting friends and family to lend to you
• It can take a while to receive your loan since investors need to raise money
• No BBB rating

Small business credit card 

Best for: Founders who want access to a line of credit for small expenses over time

A small business credit card also involves taking on debt to finance your business costs. Unlike a loan, a business credit card is a form of revolving credit that you can use repeatedly (so long as you make good on your payments). This can make it more flexible than a loan, where you need to apply for a lump sum upfront, requiring you to know exactly how much money you'll need from the very beginning. 

The Blue Business® Plus Credit Card from American Express is a strong option for business credit because it offers a 0% intro APR period of 12 months on purchases from the date of account opening (18.49% - 26.49% variable APR after that; APR will not exceed 29.99%). ( See rates and fees ).

The Blue Business® Plus Credit Card from American Express

Earn 2X Membership Rewards® points on everyday business purchases up to $50,000 per year, then 1X point per dollar

Welcome bonus

Earn 15,000 Membership Rewards® points after you spend $3,000 in eligible purchases on the Card within your first 3 months of Card Membership.

0% for 12 months on purchases from date of account opening

Regular APR

18.49% - 26.49% variable; APRs will not exceed 29.99%

Balance transfer fee

Foreign transaction fee, credit needed.

See rates and fees , terms apply.

• No annual fee
• Straightforward rewards program
• 2.7% foreign transaction fee

The Ink Business Unlimited® Credit Card is also a solid contender since it doesn't charge an annual fee and you'll earn 1.5% cash back on purchases for your business.

Ink Business Unlimited® Credit Card

Earn 1.5% cash back on every purchase made for your business

Earn $750 bonus cash back after you spend $6,000 on purchases in the first 3 months from account opening

0% for the first 12 months from account opening on purchases; N/A for balance transfers

18.49% - 24.49% variable

Either $5 or 5% of the amount of each transfer, whichever is greater

Good/Excellent

• Free employee cards
• Simple cash-back program
• Special financing offer for purchases
• 3% fee charged on purchases made outside the U.S.

Which funding method is right for you?

When deciding which funding route to take, you probably want to spend as little of your own money as possible. In this case, you might first consider crowdfunding and applying for grants since you don't need to pay back this money. In the best-case scenario, you'll raise all the money you need for start-up costs without spending a dime of your savings. 

But it's more likely that crowdfunding or grants will cover some of your expenses, but not everything. If you need to save some money to bridge that funding gap, consider a high-yield savings account . An FDIC-insured account is one of the safest places to put your cash, and your funds will earn interest while remaining easily accessible. The Marcus by Goldman Sachs High Yield Online Savings account, for example, doesn't charge any monthly fees, overdraft fees, or excessive transaction fees. LendingClub High-Yield Savings also has no monthly fees, and doesn't require a minimum balance to earn its high APY.

Marcus by Goldman Sachs High Yield Online Savings

Annual percentage yield (apy), minimum balance, monthly fee, maximum transactions.

At this time, there is no limit to the number of withdrawals or transfers you can make from your online savings account

Excessive transactions fee

Overdraft fee, offer checking account, offer atm card.

• No minimum balance or deposit
• No monthly fees
• No limit on withdrawals or transfers
• Easy-to-use mobile banking app
• Offers no-fee personal loans
• Higher APYs offered elsewhere
• No option to add a checking account
• No ATM access

LendingClub High-Yield Savings

No minimum balance requirement after $100.00 to open the account

Overdraft fees

Taking on debt to start your business should be a last resort and only used after careful consideration. You must be confident that you can pay back in full any money you borrow for your business. 

Your business's name communicates to the world who you are and what you can do — so it's important to pick a name that lets you put your best foot forward. 

But there are also some legal considerations to make when picking the right business name. For instance, you must avoid selecting a name that sounds too similar to your competitors' names. You can use the Trademark Search tool from the United States Patent and Trademark Office to see if your desired business name has already been trademarked by another business. 

Additionally, you may also need to double-check any laws around naming a business for your state. Some states may require you to add certain "identifiers" to the end of your business name if you're a registered legal entity. Identifiers could include words like "Inc," or "Corp." 

If you're confused about where to start, services like LegalZoom can help you get started in the right direction. LegalZoom lets you set up your business legally and will check that your desired business name is available for you to use.

From $35 to $279+

App available?

Standout features.

LegalZoom offers all sorts of legal document templates online so users can avoid having to hire an outside lawyer. Its downloadable wills, living wills and financial power of attorney documents make it easy to estate plan. LegalZoom also has its own network of attorneys that customers can utilize to ask questions, etc.

Your business needs a website to let potential customers know where to find you online and how to contact you. Your website's complexity will often depend on the type of business you're running. If you have a coaching or consulting business, a simple website where you can talk about who you are and what services you offer works perfectly.

Creating a simple website on your own is relatively straightforward, especially when you use a service like Squarespace or Wix that lets you use premade templates without having to learn to code.  

Squarespace

Plans start at $16/month when you pay annually

Free trial available?

14-day free trial

Squarespace offers several features for building yourself a website, including a wide variety of templates to choose from, support from a Squarespace web designer, marketing tools, a logo maker and more. Its offerings cater to several industries and website uses including blogs, portfolios, fitness, beauty, restaurants, artists, photographers and weddings to name a few.

Plans start at $17/month

No free trial but Wix offers a 14-day money back guarantee

Squarespace offers over 900 website templates, and a website building tool that leverages AI to design a site based on your desired customizations.

However, if you're selling goods and your website is your online storefront, you'll need more functions such as accepting (and processing) customer payments, collecting contact information, displaying your goods in an easy-to-navigate user interface and more. You can still use services to build a more complicated e-commerce website on your own, but it may be worth hiring an expert depending on your skill, time and patience.

Here are some signs that you may want to hire a website designer instead of creating the website yourself:

• You need advanced features to help you sell products online. 
• You need a long-term relationship with a designer to help your site evolve as your business grows.
• You're too busy to do it yourself and are comfortable spending the money to have someone else do it.

One key decision to make that will have far-reaching consequences with taxes and more is your business's legal structure. The three most common legal structures that pertain to small businesses are a sole proprietorship, a limited liability company (LLC) and an S Corporation (S-Corp for short). 

Each structure outlines its own set of distinctions and protections for operating your business. 

Sole proprietorship

A sole proprietorship is probably the simplest structure to understand and use. A sole proprietorship is owned by one individual (the sole proprietor). You don't need to file any paperwork to "incorporate" your business as a sole proprietorship. If you begin operating a business and don't file as any business structure, you'll be automatically considered a sole proprietorship, according to the Small Business Administration (SBA) . 

However, because a sole proprietorship doesn't create a separate entity for your business, you are liable for your business's debts.

"I rarely recommend a sole proprietorship because it's the default structure and you aren't taking advantage of the legal rights you can have with other business structures," says Shaliz Sadig Romano, the Co-Managing Partner at Romano Law , a law firm that represents entrepreneurs. "If something goes wrong, we want to make sure the assets of the company are what's on the line, not your house, car or other personal assets." 

Limited liability corporation (LLC)

Next down the line is an LLC. As the name suggests, an LLC limits the liability you may take on from your business activities. With this type of legal structure, your business becomes an entity that's separate from you and will have its own bank account and taxpayer ID. 

This creates a huge advantage for you as the business owner since you'll be able to protect your personal assets from liabilities, debt, lawsuits or bankruptcies incurred by your business. 

According to Romano, filing for an LLC also sets your business up for growth – investors may feel more comfortable getting involved with an LLC, for example, and you also can hire employees under this structure.  

"As the saying goes, an LLC is a lawyer's likely choice because it's great for small businesses and even some bigger ones that want to keep growing," Romano says. 

S Corporation

An S Corp is another legal structure that provides limited liability protection to the business owner, much like an LLC. Both LLC's and S Corps are considered "pass-through" entities because the business itself doesn't pay taxes but rather the tax liability "passes through" to the owner's personal taxes. Both structures allow owners to protect the owner's personal assets. 

One key difference between the two is that an LLC can have an unlimited number of owners (called members or shareholders) while an S Corp can have no more than 100 shareholders.

Which one is right for you?

Begin by thinking about where you see your business heading. This can provide some clues about which structure may be right for you. "What I tell clients before diving in is that it's important to have a vision of where you want to start and what you want to see in the next two to five years," Romano explains. "Are you looking to be a really small solopreneur like a consultant and don't intend on hiring or having office space? Or are you looking for something much bigger?"  

For instance, if you're planning to run an online e-commerce business on a platform like Etsy all by yourself on the weekends, you may feel secure enough to run it as a sole proprietorship. But if you want to open up a storefront and can see yourself seeking assistance from investors one day, an LLC or S Corp may be a better fit for you. 

Another consideration is the scope of your business practices. According to Romano, while an LLC is fine for doing business in the U.S., not all countries recognize an LLC as a legal entity or have different rules around it. So if you plan on doing business overseas, you'll want to read up carefully on that country's practices around legal structures so you can choose the one that's right for you. 

The other thing to consider are requirements for filing an S Corp . To file an S Corp, you must be a U.S. citizen or legal resident and your business must operate domestically. You also can't have more than 100 shareholders — a person or organization that owns stock in the company — and those shareholders must have voting rights. 

This is not the case for filing an LLC. You don't need to be a U.S. citizen or legal resident to file an LLC. 

Understanding the requirements and do's and don'ts of each of the legal structures can give you a sense of which one best suits your needs. LegalZoom also offers tools to help you figure out which type of legal structure is best for your business.

These companies help you legally form your business

LegalZoom is a well-known service in this space. According to its website, LegalZoom helps users through three steps for getting their business started: Choosing a name and business structure, compliance information and paperwork filing for the business structure. Once you're off the ground, you can also use other LegalZoom features — like getting the right business licenses and getting operating agreements — to manage your business. Pricing can depend on the type of business you're forming, the formation state and any other business management features you might need.

For a more bare-bones service, Tailor Brands is a standout option. At the most basic tier, you can file an LLC application in your state and get it processed within 14 days. For this, you'll only pay your state's filing fee. Other tiers are more costly but offer services beyond just LLC application filing.

The highest pricing tier for Tailor Brands — the Elite package — comes with LLC formation, expedited LLC filing (processed within two days), legal compliance, a domain name and website plus a $50 Amazon gift card all for $249 per year plus your state's fee. You'll also get access to a host of additional business tools with this tier, like digital business cards, eight free logos and more.

Tailor Brands

From $0 to $249/year + state fee

Tailor Brands offers a basic LLC filing service for new business owners that costs $0 (you'll just pay your state's filing fee). It also offers a more comprehensive suite of business management services for a yearly subscription fee, including a website, domain, compliance services, business cards, logos and more.

Another service, Bizee , offers a ton of bang for your buck even at the most basic pricing tier ($0 + your state's filing fee). At this pricing level, you can take advantage of

• unlimited business name searches
• paperwork filing
• access to a Registered Agent (to assist with state compliance for a year)
• compliance alerts
• banking offers
• business tax consulting
• unlimited phone and email support.

There are also several add-ons for an additional charge that you can pick and choose from.

From $0 to $299/year + state fee

Bizee offers a slew of features even at the most basic pricing tier. You'll be able to submit your business filing, receive compliance alerts and take advantage of business tax consultations, business banking offers and unlimited phone and email support. There are also several add ons you can pay extra for at any tier.

A business license is an official permit distributed by a state or local government allowing an organization to conduct business. Not all businesses may require a license but there are certain industries where you must have a license to operate.

For instance, if you're opening a business as an esthetician and offering hair and nail services to clients, you'll likely need an esthetics license to perform those services. If you're opening a bakery, you'll also need a license to prepare and sell food. And if you're starting a construction business, you'll want to get licensed as a contractor. 

As you might imagine, there are many consequences for operating a business without a license — especially if your services result in harm.

Always be sure to check with your state or jurisdiction's business license requirements before you begin operating. 

An employer identification number (EIN) allows the IRS to identify your business and track its tax activities. 

While an EIN may not be necessary for every type of business, certain entities are required to have one, including corporations, partnerships and organizations with employees. 

Business owners can visit the IRS website for additional information on who needs an EIN.

It's free to get an EIN. You'll just need to submit IRS Form SS-4 . If you choose to apply and submit your information online, your EIN will be issued immediately, according to the IRS website . If you apply by mail, it'll take approximately four weeks to process your application. 

There's also the option to apply by fax, which will allow you to receive an EIN within four business days. 

Business insurance can protect your business and its physical property, but it can also provide coverage in the event of a lawsuit, harm, theft and more. 

For instance, if a natural disaster wrecks your bakery's storefront or the vehicles you use to make deliveries get broken into, you can file an insurance claim to cover your losses.

Insurance can also help pay for some expenses if your business is facing a lawsuit. Or, if an employee becomes sick or injured while doing their job, an insurance policy that includes worker's compensation will allow your business to provide the medical care they need. 

The type of insurance and the amount of coverage you need will depend on the business you're running and how much risk is involved with that business. 

CNBC Select ranked The Hartford Business Insurance as one of the best providers for small business insurance since this company services many industries at relatively affordable prices. Nationwide also excels at offering a wide variety of plans to business owners.

The Hartford Business Insurance

The best way to estimate your costs is to request a quote

Policy highlights

The Hartford has been offering insurance policies for over 200 years and insures over 1 million small businesses. It offers coverage for a variety of industries and is highly rated for customer satisfaction.

App available

• Quotes available online
• Highly rated for customer satisfaction
• App doesn't support business policy management

Nationwide Business Insurance

Nationwide offers insurance policies for small and large businesses alike in a variety of industries. A number of insurance types also help business owners to tailor their coverage.

Keeping your business finances separate from your personal finances is ideal since it allows you to stay organized and keep better track of your transactions come tax time. Plus, some lenders and grant funders require that you have a business bank account so that you can receive your funds. 

It's fairly simple to open a business bank account, and the process is very similar to opening a personal bank account. 

CNBC Select ranked the Bluevine Business Checking Account as one of the best accounts for small businesses since it doesn't charge a monthly maintenance fee, has no minimum deposit required to open the account and no minimum balance requirements. On top of that, account holders earn interest on their balances and get access to a convenient mobile app.

Bluevine Business Checking

Special offer, monthly maintenance fee.

Standard $0; Bluevine Plus $30/month (with options to waive) ; Premier $95/month (with options to waive)

Minimum deposit to open

Standard: 2.0% APY on balances up to and including $250,000 if you meet a monthly activity goal* Bluevine Plus: 3.0% APY for Plus customers Premier: 4.25% APY without minimum qualifications

Free ATM network

No fees at over 38,000 ATM locations nationwide

ATM fee reimbursement

Small business perks.

Two free checkbooks

Mobile check deposit

Terms apply. Bluevine accounts are FDIC insured up to $3 million per depositor through Coastal Community Bank, Member FDIC

• No monthly fees, monthly or daily balance minimums, ACH payment fees, incoming wire fees or overdraft fees
• Ability to instantly lock and unlock your Bluevine Business Debit Mastercard® for added security
• Connect to business tools like PayPal, Stripe and Expensify
• Unlimited transactions
• Online only (not great if you prefer in-person banking)
• No ATM refunds for out-of-network transactions

*The requirements to earn interest are either:

• Debit Card Spend: Spend $500 per month with Bluevine Business Debit Mastercard® issued by Coastal Community Bank pursuant to a license from Mastercard inc, which can be used everywhere Mastercard® is accepted.
• Incoming Payments: Receive $2,500 per month in customer payments into Bluevine Business Checking account via ACH, wire transfer, mobile check deposit, or directly from merchant payment processing provider

As for savings accounts, one of the strongest options on the market is the Axos Bank Business Premium Savings account. It doesn't charge a monthly maintenance fee, doesn't have a minimum deposit required to open the account and there are no overdraft fees. It offers a very attractive APY for account balances and you can deposit checks into the account through the mobile app.

Axos Bank Business Premium Savings

Minimum deposit.

Up to 6 free withdrawals or transfers per statement cycle

Yes, if the account holder has an Axos business checking account

• Above-average APY
• Deposit checks remotely using your mobile device
• No physical branches for in-person banking

Set up your accounting system

As a business owner, you'll need to prepare for tax events and manage your cash flow to help you reach your business goals year-round. Working with a professional can help you understand the numbers underpinning your business and clarify what decisions you need to make for long-term success.

"Staying organized is key," says Sheneya Wilson, Founder and CEO of Fola Financial. "Work with a professional who's not just interested in giving you services at the end of the year but rather someone who can work with you throughout the year so you can be prepared."

Of course, good professionals can cost a lot of money. If you want to take a more DIY approach to your business's accounting, consider paying a small monthly fee for software like Quickbooks or Xero . These types of programs can often help you track business expenses, pay bills, and accept payments. They can also integrate with payroll services to make paying your employees simple.

Quickbooks® Payroll

Starts at $22.50/month + $6/month per employee (with discount; regular price starts at $75/month + $6/month per employee)

Benefits Administration

401(k) plans, health benefits, workers' compensation administration

Starts at $3.75 per month for three months (with discount; regular pricing starts at $15 per month)

Yes, through a partnership with Gusto

Yes, in partnership with Gusto; When you sign up for Xero you get 30 days of Gusto for free and after that, you must pay Gusto's standard charges

Once you've checked off all the other items on your to-do list, the last thing left is to actually launch your business and begin operating. 

Before you launch, it can be helpful to set up social media profiles for yourself so you can spread the word before your business is even running. You may be able to get your early clients and customers through friends and family. 

This is also where you can refer back to your business plan for steps on how you'll market the business and increase sales. 

Keep in mind that running a business means you're constantly learning and adapting. There will always be ups and downs but being able to pivot quickly and learn from what's working (and what's not working) can help you recover quickly and build a sustainable business.

Money matters — so make the most of it. Get expert tips, strategies, news and everything else you need to maximize your money, right to your inbox.  Sign up here .

Meet our experts 

At CNBC Select, we work with experts who have specialized knowledge and authority based on relevant training and/or experience. For this story, we interviewed: 

• Sheneya Wilson, the Founder and CEO of Fola Financial
• Shaliz Sadig Romano, the Co-Managing Partner at Romano Law 
• Dr. Jenny Woo, the Founder and CEO of Mind Brain Emotion 
• Abby Mercado, the Co-Founder and CEO of Rescripted and a former Venture Capital Investor at the Altira Group

Why trust CNBC Select? 

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of small business products. To research the best insurance companies, we compiled over 100 data points on more than a dozen insurance companies. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics. See  our methodology  for more information on how we choose the best commercial auto insurance companies. 

Catch up on CNBC Select's in-depth coverage of  credit cards ,  banking  and  money , and follow us on  TikTok ,  Facebook ,  Instagram  and  Twitter  to stay up to date.

For rates and fees of the Blue Business Plus Credit Card from from American Express, click here

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