business plan for obtaining a loan

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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

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

with step-by-step Guidance & AI Assistance.

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

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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

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, faqs about how to create 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 .

Do you need a business plan to get a loan?

No, you do not always need a business plan to get a loan. Most traditional business lenders, including banks and SBA lenders, do require a business plan. However, a lot of online business lenders (such as OnDeck ) do not ask for a business plan.

How do you write a business plan for a bank loan?

To write a business plan for a bank loan, you first need to lay the groundwork by analyzing your business’s finances, strategies, and market conditions. Alternatively, you can hire someone to do this research for you. Once you have all this information, you can use a guide, template, or software to help you organize it into a business plan.

How do you write a business plan for an SBA loan?

To get an SBA loan, you will usually need a comprehensive business plan, including a detailed plan for how you intend to use the funds. On the SBA website, you can find general information about what to include in a business plan, or you can download a free business plan template. Some online SBA loan services, such as SmartBiz , do not require a business plan.

How long should a business plan be?

There is no set length for a business plan. A typical business plan used to secure financing might be 20-40 pages. A so-called “lean business plan” that serves as an internal company document for a small business may only be one or two pages.

Who writes business plans?

Business plans are often written by the business owners themselves, but you can also hire a freelance writer or consultant to write a business plan. A business plan writer will still need the business owner’s input (and access to the business’s financial documents or accounting software ) in order to prepare the plan.

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How To Check SBA Loan Status - April 25, 2023

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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 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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Updated On : September 3, 2023

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How to Write an SBA Business Plan + Template

Noah Parsons

10 min. read

Updated August 1, 2024

Download Now: Free Business Plan Template →

Applying for a Small Business Administration loan typically requires a business plan.

Unfortunately, there’s no SBA loan business plan format that guarantees approval. The SBA even states you should “pick a business plan format that works for you.”

While I agree with this sentiment, I’ve found that entrepreneurs who explain how funds will be used and how they will repay the loan tend to be more successful.

Luckily, these details can be covered using our SBA-lender-approved business plan format . I’ll go over that structure in this article, and focus on the sections that the SBA prioritizes, so you can maximize your chances of getting funded .

You can even download a free SBA-lender-approved business plan template to fill out as you read.

Let’s get started.

Why you need a business plan for SBA loans

SBA loans require good documentation of your business and personal finances. You’ll need to pull together your past tax returns, bank statements, and various application forms depending on the type of SBA loan you apply for.

The bank issuing the loan will also want to know about the future of your business.

They’ll want to see how the loan will be used and if future cash flow projections are realistic and indicate you can afford loan payments.

That’s where writing an SBA business plan comes in.

Not only will your business plan describe your business to the lender, but it will include the financial projections the bank will use to determine if you qualify for the loan .

What your business plan should include, according to the SBA

Business plans for SBA loans follow a fairly standard structure, but that doesn’t mean you need to follow it exactly.

The SBA even recommends adjusting the plan outline to serve your needs. If a section does not apply to your business, it’s fine just to remove it.

Here’s the successful business plan structure I recommend for SBA loans:

1. Executive summary

A great executive summary is a short, simple overview of your business. It should be easy for a loan officer to read and clearly understand what your business does.

When applying for an SBA loan, highlight your:

Business opportunity
Financial forecast
How much money you want to borrow and how it will be used

Remember, an executive summary should be short and to the point. The rest of your business plan will provide additional details.

[Dig deeper: How to write an executive summary ]

2. Company description

Some people call this section “Products and Services.” Either option is fine. The important thing is that you use this section to explain what your business opportunity is.

You need to cover:

The problem you solve
Who you’re solving it for
What your solution is and why it’s better

Be specific and tell the story of your business and your customers. Focus on your strengths and what sets you apart from competitors.

If your company is developing a product, include information on:

What the product life cycle looks like
Intellectual property filings
Current research and development

If these topics don’t apply to your product, that’s fine. Just be sure that the description of what you sell is clear.

3. Market analysis

The market analysis chapter explains who your customers are. It provides an overview of your target market, competition, and industry.

Your target market is essentially a description of your ideal customers. Be sure to include specific demographic information (like age, gender, location, income) and psychographic information (hobbies, purchasing behaviors).

This data should reinforce that your target market needs your solution .

It’s helpful to also include information on the size of your target market . Lenders will want to see evidence of enough potential customers to drive growth.

While your target market information describes your customers, an industry overview discusses the type of business you’re in and its potential for growth.

For example: If you’re starting a fast-casual restaurant, your industry overview might discuss the increased interest in fast-casual dining and how more people are eating in these types of restaurants every year.

Finally, you’ll need to include a competitive analysis . This is a list of current competitors and alternatives, with explanations of why your business is a better option.

Your goal is to show how your business is unique, what opportunities and threats there are, and how you plan to address the competition.

4. Organization and management

Also known as your company overview, this section is where you describe your legal structure, history, and team .

For your SBA loan application, you should focus on describing who is managing the business as clearly as possible.

You may want to include an organizational chart. You should provide detailed resumes for everyone in leadership positions. Each team member’s experience, skills and professional qualifications can mitigate risk in the eyes of a lender .

To show you’re thinking ahead, it’s also helpful to include key positions you plan to fill as you grow.

5. Sales and marketing plan

Your goal in this section is to summarize how you will attract, retain, and sell to your customers.

The marketing strategies and sales methods you describe should always have the customer top of mind, and demonstrate that you know how to connect with them.

To help a loan officer visualize this, you can provide examples of marketing messaging, visuals, and promotions. If you have any research or results to show that your strategy has merit, include those as well.

6. Financial projections

SBA lenders typically require 5 years of financial projections — including profit and loss statements , balance sheets , and cash flow statements .

Be sure to include the SBA loan in your projections in the following areas:

A liability on your balance sheet.
Payments on your cash flow.
Interest expenses on your profit and loss statement.

I’ll dive into specific details of what you should focus on in the “how to improve your chances” section.

Your first year of financial projections should include monthly details. After that, annual summaries are usually sufficient for most SBA lenders. Occasionally, a lender might require 24 months of monthly projections, so check with your bank before submitting your business plan.

If your business is up and running, you must also provide historical financial reports for the past 12-24 months of operations—including income statements and a current balance sheet.

Typically, you will also need to provide reports on your personal finances , including any assets you have, such as a home or car.

Finally, include a section explaining your use of funds—what exactly you plan to use the loan for.

7. Appendix

The appendix is your chance to provide additional documents that support sections of your business plan.

When applying for a loan, these may include:

Employee resumes
Licenses and permits
Patents and other legal documents
Historical financial statements
Credit histories

Don’t worry about stuffing your appendix full of additional documentation. Only include information if you believe it will strengthen your approval chances, or if your lender specifically asks for it.

How to improve your chances of being approved for an SBA loan

Your SBA business plan needs to focus on the loan you are applying for and how that will impact your business financially.

Make sure to include the following information in your financial plan to increase your chances of success with your lender:

Funding request

In your executive summary, document how much money you are asking for. It’s best to put your number where it can be clearly read, instead of trying to bury it deep within your business plan.

Remember, there are limitations to how much you can borrow through SBA-backed loans. Most have a maximum loan amount of $5 million, while SBA Express loans have a maximum loan amount of $350,000.

Use of funds

You should also describe how you plan to use the loan and which aspects of the business you want to invest in.

Some SBA loans are designed specifically for expanding export businesses or funding real estate transactions. So, make sure your use of funds description is appropriate for the loan you are applying for.

Cash flow forecast

Be sure to include the loan in your cash flow statements and projections . You want to demonstrate that you’ve planned how you will use and repay the loan.

You need to show:

When you anticipate receiving the loan.
How the loan will impact your finances.
Loan payments for the life of the loan.

Having this prepared won’t just increase the chances of your application being approved—It will make it much easier to manage the loan after you receive funding .

Balance sheet

You’ll also want to put the loan on your projected balance sheet , and show how the loan will get paid down over time.

The money you owe will show up on your balance sheet as a liability, while the cash you receive from the loan will be an asset. Over time, your forecasted balance sheet will show that the loan is getting paid back.

Your lender will want to see that you have forecasted this repayment properly.

Profit & Loss forecast

Your P&L should include the interest expenses for the loan, and show how the interest will impact your profitability in the coming months and years.

How long does an SBA business plan need to be?

The SBA doesn’t have an official recommended or required business plan length . As a general rule of thumb, you should make your business plan as short and concise as possible.

Your business plan is going to be reviewed by a bank loan officer, and they will be less than excited about the prospect of reading a 50-page business plan.

If possible, keep the written portion of your business plan between 10-15 pages. Your financial forecasts will take up several additional pages.

If you’re struggling to keep it short, try a one-page plan

A great way to start your business plan is with a simple, one-page business plan that provides a brief and compelling overview of your business.

A good one-page plan is easy to read and visually appealing. Once you have your one-page plan, you can expand on the ideas to develop your complete written business plan, and use the one-page plan as your executive summary.

Loan officers will appreciate a concise overview of your business that provides the summary they need before they start looking at your complete business plan and financial plan .

Resources and tools for writing an SBA business plan

Remember, you can download a free SBA-lender-approved business plan template . It includes detailed instructions to help you write each section, expert guidance and tips, and is formatted as lenders and investors expect.

If you’re looking for a more powerful plan writing tool, one that can also help you create financial forecasts for the use of your loan, I recommend you check out LivePlan .

With LivePlan, you get:

AI-powered recommendations: Generate and rewrite sections of your plan to be more professional and persuasive.
Step-by-step instructions: In-app examples, tutorials, and tips to help you write an impressive business plan.
Automatic financials: Skip the spreadsheets and complex formulas, and quickly create accurate financial forecasts with everything a lender needs.
A built-in pitch presentation: Print or share your full business plan, one-page pitch, and financial reports—all with a professional and polished look.

Whether you use the template, LivePlan, or try writing a business plan yourself, following the structure and tips from this article will improve your chances of getting an SBA-backed loan.

And for additional SBA-focused resources, check out our guide on how to get an SBA loan .

Not sure how much money you need to raise?

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

Table of Contents

What to do when you need an SBA disaster loan

6 Min. Read

What to Do When You Need a Disaster Loan

What types of loans does the SBA loan program offer?

4 Min. Read

The Different SBA Loan Programs Explained

Reasons why you don’t qualify for an SBA disaster loan

12 Min. Read

10 Reasons You Don’t Qualify for an SBA Disaster Loan

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How to Write a Business Plan for a Loan

writing a business plan for small business loans

Business plans are often required when applying for funds from venture capitalists or other private investors, but even if you are seeking a bank loan for your company it is very helpful to prepare one since the lender wants to be confident that he is taking on an investment with growth potential so that you can repay the loan.

In this article, you will learn about the types of business loans, the importance of the business plan in your application for a loan, and how to write a business plan that will help you get the funding you need for your company.

Download our Ultimate Business Plan Template here

What Is a Business Loan?

A business loan is funding that is provided by a financial institution to a company for it to carry out its day-to-day operational activities. It also supports the purchase of equipment, refinancing of debt, and other purposes. Small businesses might need these loans because they may not have enough funds to buy equipment, refinance debt, or because they encounter financial difficulties.

Your Loan Application

You can apply for a commercial loan with your local bank, credit union, Small Business Administration (SBA) lender, or community development financial institution like Capital Impact. You should expect that the lender will ask you detailed questions about all aspects of your business to ensure that he or she is lending you money that will be repaid.

In addition, if you are looking to purchase a business or commercial real estate, the lender may ask for additional information and documentation to assess your qualifications and ability to repay the loan.

Before applying for a business loan it can be helpful to research different types of loans so you understand what is available and what you will need to pay attention to in your loan proposal.

Common Types of Business Loans

There are many types of loans for small businesses, including:

lines of credit
commercial mortgages
equipment financing

Contact different lenders in your area to see what kind of loan terms they offer and if their interest rates are within your budget.

What is a Business Plan?

A traditional business plan is a document that provides an analysis of the present situation and future financial projections for a company. It includes details about the owners, management team, customers, location of the business, finances, marketing plan, and other information.

A comprehensive and well-researched business plan will help lenders make informed decisions about providing a loan for your business.

To help you get started, you can download our sample business plan for bank loan pdf .

Why Do You Need a Business Plan to Get a Business Loan?

A loan proposal business plan is your opportunity to show the lender you understand your business, its capabilities, and how it operates within the industry in which it competes. By putting together a clear and concise document that outlines all of this information, the lender should have a much easier time understanding how you have arrived at your numbers and where you are going in the future.

A business plan is also helpful to the lender because it provides an opportunity for him or her to ask you questions, further clarifying details that might not be clear from your application materials alone. This way the lender can walk away from the meeting with a good understanding of what he or she is loaning money to and how likely it is he or she will see the loan repaid.

How to Write a Business Plan to Get Approved for a Loan

Different lenders may ask for different sections of your business plan, but most require some combination of the following key elements.

1. Executive Summary

The Executive Summary is the first section of your business plan that a lender will read, but typically the last section written. It is very important because it acts as a snapshot of your business plan and allows the person reading to get an overview of what you are proposing.

The summary should include:

A statement about why you need the business loan
Details on how much money you want to borrow, when you will repay it, and interest rates
A description of how the proceeds from the loan will be used
Your business’s historical and projected financial information (again)
The expected impact on your company and the industry as a whole if you are successful.

2. Company Description

In the Company Description, you should include basic facts about your company such as:

What is the business structure (corporation, partnership, limited liability company (LLC), etc.)?
How long has your company been in operation?
What is the size of your workforce?
What accomplishments or milestones have you achieved within the last year?

This section should also include information about your future business plans.

How do you plan to expand, if at all?
Who are your main competitors and how is your company different from them?
What changes will you make to excel against these competitors?

3. Industry Analysis

In the Industry or Market Analysis, you should include information about your industry in general.

What are the strengths and weaknesses of your industry?
How will your company compete in it?
What trends within the industry affect its future success or potential struggles?

You may also include information about your specific niche in the market. If your company operates in a very specific area of the industry, be sure to highlight it.

4. Customer Analysis

The Customer Analysis section of your business plan helps a lender understand who your customers are and why they will buy from you.

In this section, you should include information on the following:

Your target audience and the individual customer segments
How many potential customers you have within your target market
How much your customers typically spend, and how much you expect them to spend in the future
What has caused these changes or trends to occur and how they will impact your business

5. Competitive Analysis

This section should show the competitive landscape and how you plan to compete against your competitors.

What are their strengths?
Where do they fall short?
What changes will you implement to get ahead of them?
What are your company’s competitive advantages over these competitors?

6. Marketing Plan

This section should include a detailed description of the marketing strategy you plan to implement.

What is your customer acquisition cost? How much will it cost you to bring in one new customer?
How will you reach these potential customers? Be specific about your marketing strategy, advertising methods and costs.
Who is responsible for implementing each part of the marketing plan and how much it is expected to cost?

7. Operations Plan

Your Operations Analysis should describe the way your company currently operates and how it will operate with the help of the loan.

What are your company’s strengths? Weaknesses?
What have you implemented in the past 12 months that has led to increased revenue, decreased costs, or improved efficiency?
How will you continue to operate efficiently with the proceeds?

8. Management Team

In the management section, you should describe your business in terms of its personnel structure.

What are the responsibilities of each person on your team?
Who are they? What are their qualifications?
How will their roles change when you receive the loan proceeds?

9. Financial Plan

This section should include your company’s financial statements include the projected income statements, projected balance sheet, and cash flow statements for the next 3 – 5 years.

You can assume that you will receive loan proceeds in 20XX, so plan accordingly.

Include a five-year break-even analysis and an explanation of how you arrived at your income statement and cash flow projections. Don’t forget to include interest and loan payments in your financial projections.

10. Appendix

In this section, you will include the supporting documents for the claims within your business plan. This section should include:

A loan agreement
A list of all applicable business licenses, permits, etc. that your company holds or has applied for

You may also include:

An organizational chart for your company
The resumes of the members of your management team
The resumes of any employees who will be making a significant impact on your business with the loan money
Copies of contracts, leases, and other agreements that are relevant to your business plan
Complete financial statements and projections if you only include a summary in the Financial Plan section

These documents should be attached to your business plan in a separate file if they are not included and may need to be submitted with the final small business loan application.

Tips for Writing a Business Plan for a Loan

To have a successful business plan and loan application, you need to know exactly what information your loan officer is looking for and how to find it.

Before you submit your application, be sure to carefully edit and proofread it for errors. Errors in a business plan may lead a lender to question your attention to detail, so make sure it is polished and error-free.
Always be sure to include an executive summary of the main points of your plan at the beginning, as some loan officers may not read all of the details.
Be sure to keep your tone professional and business-like.
Include detailed financials, market analysis, and other crucial information.
Remember that any omission or inaccuracies will be carefully scrutinized by a lending officer, so be sure you have all of the necessary documents before submission.
Finally, remember that lenders often appreciate creativity and outside-the-box thinking when it comes to business plans, but don’t let it distract from the necessary information for your application.

Writing a good business plan is one of the most important and necessary steps toward securing a loan or other source of capital.

Use our proven business plan template provided below, and you’ll be able to give your lender all of the information they need to make an informed decision.

The key is to do it right. By following the steps outlined above and including all of the necessary documents (and editing/proofing your application), you should significantly improve your chance of securing a loan for your business.

How to Finish Your Business Plan in 1 Day!

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With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!

How to write a business plan for a loan

Your business plan is a living document – it's something you'll revisit to check that you're reaching your goals and making the most of your venture. You may also need one if you're looking for funders to support and invest in your idea. Here's how it works.

What to include in the business plan

Applying for funding.

Your business plan is essentially an outline of your business and the market. It explains how you intend to make a profit and why your venture is destined for success. It includes key objectives, sales and marketing strategies, financial forecasts and more.

Writing your business plan should allow you to:

Clarify your idea

Identify potential problems

Establish your goals

Measure progress

Map out sales, marketing and operations

Identify issues and how to overcome them

Set out your expected financial return

Convince others to back your business

Figure out what funding you need

When using Funding Options to find finance, lenders typically require your accounts, bank statements and management accounts, if available. You won't usually have to provide your business plan (although you might be asked if you're a new business).

The Prince's Trust website can download a free business plan template and other related resources. Although templates are undoubtedly helpful, don't forget to tailor your business plan to the target audience. Check in with the recipient to see if there are any details they want your business plan to address.

Keep it concise

Begin with an executive summary

There's no need to include every single detail – you can elaborate elsewhere

Proofread the document before sending it out

If appropriate, use charts for clarity

1. Executive summary

Like many other business documents, business plans begin with an executive summary. (This might be easier to write after you've written everything else.) The executive summary should hook the reader.

It should provide an overview of your business plan and include details of what makes you different and how much money you intend to make/spend.

2. Your idea/business

Next, it's time to elaborate on your idea.

Identify the problem you're trying to solve or the opportunity you're tapping into. Why will people want to buy your product or service? Talk about your industry experience and business structure, i.e. who owns it and its legal structure.

3. Market information

In this section, include details of the market research you've conducted; ideally, this will comprise quantitative and qualitative research.

Outline whom you're selling to (your customer personas) and how you intend to get your idea noticed. Include an analysis of market trends, details of competitors and how you think your business stands out from the crowd.

4. SWOT analysis

Your SWOT – strengths, weaknesses, opportunities and threats – will enable you to go into more detail about how to make the most of your options. Ideally, your SWOT analysis should take up no more than a single page, and you can format it as a grid with one square dedicated to each section.

5. Strategy

This is where you go more in-depth about how you'll run the business. Dedicate sections to marketing and sales (e.g. your pricing strategy and promotional approaches), operations (e.g. your business premises) and your team (e.g. how you'll structure it).

6. Financials

Your financials are essential to your business plan, particularly if you're looking for investment. You need to make sure they're accurate and realistic. You may want to consider getting expert, qualified advice regarding your forecasts.

Your information will also depend on how long you've been trading. This could be an excellent place to include visual representations like graphs and charts.

Include the following:

Sales forecasts

Profit and loss forecast

Cash flow statement

Balance sheet

7. Appendices

Because your business plan should be concise, you could include an appendix at the end with additional information about each section, details that the reader should know about but that you don't want to have in the body of the business plan.

If you're looking for additional finance to get your venture off the ground, or if you need to fund your established business' growth plans, Funding Options can help you find out what you could be eligible for. Just tell us how much you need, how quickly and what it's for and our Funding Cloud technology will compare 120+ lenders.

Chief Commercial Officer

Stuart is Chief Commercial Officer at Funding Options where he plays a key role in driving the growth of the business and its relationships with more than 120 partners. A finance industry veteran, he has a strong background in alternative finance, corporate and commercial banking, as well as global transaction banking.

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Disclaimer: Funding Options helps UK firms access business finance, working directly with businesses and their trusted advisors. We are a credit broker and do not provide loans ourselves. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. We are also able to make insurance introductions. Funding Options may receive a commission or finder’s fee for effecting such finance and insurance introductions. *Eligibility criteria apply - see Tide website for full details. Funding Options Ltd is incorporated and registered in England and Wales with company number 07739337 and registered office at 4th Floor The Featherstone Building, 66 City Road, London, EC1Y 2AL. © Funding Options Ltd · Authorised and Regulated by the Financial Conduct Authority · Reference Number 727867

Home > Finance > Loans

How to Get a Small Business Loan in 7 Simple Steps

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Sooner or later, many small-business owners consider taking out a loan to supplement their business's growth. But small-business loans can be tricky lines of capital to obtain, especially if you don't know much about the application process. And with the broader banking system still reeling from the collapse of Silicon Valley Bank and Signature Bank, you’ll need a rock-solid plan and squeaky-clean paperwork before you even approach a bank.

That preparation begins here with these seven crucial steps for nailing down a business loan.

Establish your reason for the loan
Learn how lenders assess you
Determine which type of loan you need
Decide on a lender
Gather the right financial documents
Apply for the loan
Keep building your financial profile

Lendio partners with over 75 lenders, which improves your odds and efficiency to get the funding you need.

Qualifications:

$50k in revenue

6 mos. in business

560 credit score

1. Establish your reason for the loan

The lender is going to hand over a significant amount of money to your business, and they’re going to want to know how and why it’s being spent. It’s a valid concern: how you invest the loan will affect your business’s income and ability to pay it back. Stocking up inventory or covering payroll are valid reasons banks and other traditional lenders would consider your loan application. (Purchasing a recreational 3D printer for the breakroom . . . not so much.)

General rationales for small businesses seeking loans include managing daily expenses, expanding or purchasing equipment, building a cash buffer against possible future shortfalls, or just starting a business. Also, determine exactly how much money you’ll need to borrow—don’t ballpark it and end up with too much to pay back or too little to cover expenses. A loan calculator can help you determine how much you can afford to take out, interest rates and all.

2. Learn how lenders assess you

Banks and lenders have their own formulas to determine if a loan will likely be paid back. In the case of small businesses, the formula usually involves—but isn’t limited to—five factors for consideration. Since small businesses also tend to be newer operations, they’re probably not going to excel in every area, but if they’re strong in at least three of the five, that can help level the bank’s assessment. Factors to pay attention to include the following:

Credit score and history. If you’ve repaid loans responsibly in the past, the potential lender will find out—and they’ll also find out if you haven’t. Banks can assess business and personal financial histories through a variety of avenues, but most loan processes begin with a credit review .
Collateral. What do you own that could cover the loan in case of default? Most banks and lenders will require something of value to shield the lender. Typical business items that qualify as collateral include real estate, buildings, vehicles, equipment, inventory, and accounts receivable.
Cash flow. The more money your business is currently making, the less of a loan risk it’ll be to the lender. Banks and lenders will not only look at the amount of profit you’re bringing in but also examine how you’re managing it.
Time in business. If you’ve been functioning as a business for several years, you’re probably doing something right. Startups and newer businesses won’t have time on their side, but a solid, executable business plan for reaching milestones will go a long way toward evening the odds in the lenders’ eyes.
Industry. What’s the forecast for your line of business? For instance, if you had a successful local brewery last year but six more are fermenting in the area this year, your competitors might start to cut into your business's profits. Lenders might take current industry trends into consideration when deciding whether or not to approval your loan request.

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3. Determine which type of loan you need

Most traditional small-business lenders have strict requirements about your business's time in business and revenue. If you’re just launching your business and haven't started earning revenue, you'll have an easier time qualifying for a personal loan over a traditional small-business loan.

But there are multiple types of loans beyond traditional personal and business loans. Here are some of the most popular options.

Common loan types overview


3.50%–30+%	560+	Lengthy	A few months to several years
6%–12.25%	Mid 600s+	Lengthy	Up to 25 years
4.5%–30.2%	560+	Quick	N/A
11.82%–31+%	560+	Quick	N/A
4.78%–6.32%	600+ (680+ for SBA)	Lengthy	Up to 30 years
1.1–5 factor rate	No requirement	Quick	Until your customers pay their overdue invoices
2-20%	560+	Quick	Up to several years
0%–20%	620+	Moderate	Varies
1.09–1.5 factor rate	500+	Instant	Near-instant

We've overviewed the main types of loans—now let's look at a few more details.

Term loans. With term loans , business owners receive a lump sum of money from their lender, which they’ll repay over an agreed-upon time. Along with repaying the principal loan amount, borrowers will repay interest accrued on the loan. Term loans are best for established businesses with solid credit that need expansion cash quickly.
SBA loans. The U.S. Small Business Administration backs bank loans that meet strict borrower guidelines. This backing instills the confidence in banks and lenders to take chances on applicants who’ve previously been turned down. SBA loan interest rates are typically low, but the approval process can take months.
Business lines of credit. Less rigid than a bank loan, a business line of credit gives you access to as much capital as your credit limit will allow, but you pay interest only on the cash drawn. Business lines of credit work well for covering short-term expenses or annual downtime for seasonal businesses.
Business credit cards . Like business lines of credit, business credit cards give business owners near-instant access to a revolving line of credit. Business credit cards often come with rewards and even sign-up bonuses, which you won't get with lines of credit, but the repayment terms are typically stricter and the APR much higher.
Commercial real estate loans. As the name implies, commercial real estate loans are for the purchase, development, and construction of business structures—offices, storefronts, hotels, etc.—typically for lease or rent to other businesses. Terms for these loans range from less than five years up to twenty.
Invoice factoring and financing. With invoice factoring , you sell your business’s as-yet unpaid invoices to a factoring company, which then becomes responsible for collection from your customers. Conversely, invoice financing uses those invoices as collateral for a loan. Both generate cash fast.
Equipment financing. When you take out a loan to buy business-related equipment , the equipment itself becomes the collateral, and the terms of the loan are determined by the expected lifespan and value of the equipment. As long as it doesn’t become outdated, owning it is good for building equity.
Microfinancing. Microloans , or short-term loans under $50,000, can help business owners build their credit score as well as their cash flow.
Merchant cash advances. If your business makes considerable and consistent credit card sales, a merchant cash advance can be a quick source of capital. After the lump-sum loan is made, it’s paid back through a daily withholding of your credit and debit card sales or weekly bank account withdrawals. Merchant cash advances are quite risky, and the repayment terms and interest rates are brutal if you miss a payment. Typically, we recommend merchant cash advances only as a last resort, and only if you're sure you can pay them back immediately.

4. Decide on a lender

After settling on which type of loan you need, it's time to choose a lender. Not all business financing venues, or even traditional lenders, are the same. If you're not sure where to start looking for lenders, here are a few of our favorites.

Recommended lenders


	Multiple (lending marketplace with 75 lenders)	Most small businesses
4.8% interest	Business line of credit	Quick access to revolving credit
	Term loans, business lines of credit	Repeat borrowing
9.95% APR	Personal loans	Business owners who don't qualify for small-business loans
4.75% interest	SBA loans	Business that qualify for SBA loans

Data as of 2/8/23. Offers and availability may vary by location and are subject to change. *Does not represent the typical rate for every borrower, and other fees may apply.

Main types of lenders

Banks are typically seen as the traditional place to get a loan—but as you can tell from the table above, you have quite a few options to get a loan apart from going directly to a bank. Here are some of the main types of lenders you can choose from as you consider loan applications.

Direct lenders usually include banks, wealthy investors, asset-management firms, credit unions, and other traditional lenders. These types of lenders deal one-to-one with borrowers—you don't go through a third party to acquire a direct loan.

At Business.org, we recommend direct lenders Kabbage , OnDeck , and Accion for small businesses in dealing with financial institutions.

A lending marketplace collects loan options from networks of business funders, including traditional banks. Online lenders typically have a fast turnaround but require decent credit scores. Business.org's favorite lending marketplace is Lendio , which partners with 75 or so lenders and matches you with the best loan offers after you submit your application.

Peer-to-peer lending is a form of direct lending that lives almost exclusively online. Investors browse borrower profiles and choose businesses they’d take a chance on. (You've probably funded a few small businesses, projects, or individuals on platforms like Kickstarter and GoFundMe.) A peer-to-peer loan can come from one or several investors.

If you're interested in finding a peer-to-peer loan, we recommend looking at Lending Club and Funding Circle .

5. Gather the right financial documents

Whichever type of lender you go with or type of loan you apply for, you’ll need to present financial documents that explain where your business stands financially.

Of course, lenders will typically look at your credit score (including your FICO score, if you're taking out a personal loan to fund your business). But your credit score isn't enough information for lenders to determine whether or not you're loan-worthy ("lendable"), which is why lenders typically require an assortment of the following documents:

Financial statements, such as profit and loss statements , cash flow statements, and balance sheets
Business and personal credit reports
Business and personal tax returns for at least the last year
Business plan
Business forecast
State registrations and licenses
Legal documentation, such as articles of incorporation, commercial leases, franchise agreements, etc.

6. Apply for the loan

If you’re applying for a substantial amount of money, you’ll want to allow your business plan plenty of lead time. Depending on the loan and lender, the loan application process can take months. Using some avenues, like lending marketplaces, can speed up the application and approval course, but in most cases, actually getting the money isn’t an overnight proposition for startup business loans.

Beyond the loan amount itself, tacked-on fees can take you by surprise if you’re not paying attention. Keep an eye on loan application fees, SBA loan guarantee fees, early repayment fees, and late repayment fees, as they’ll eventually affect your annual percentage rate (APR). By the time you apply, you should have a reasonable level of comfort with your ability to repay the loan on time and with the payment schedule, the APR, and the included fees.

Remember, you want to know how much the loan will ultimately cost, interest and all. As you're getting your documents in order and starting the application process, use a loan calculator to ensure you're taking out the right amount of money.

7. Keep building your financial profile

Improving personal credit, establishing business credit , paying down existing debts, maximizing income, expanding assets—these are all ways to build up your financial profile for future growth. It may seem backward, but banks prefer lending to businesses that don’t desperately need the money. It’s in your best interest to negotiate from a position of capital power.

While running your own operation doesn’t necessarily get easier, your future small-business loan processes will become more painless going forward, now that you’ve begun building your financial profile. Establish and build your business credit, and then you’ll be able to rely upon yourself instead of playing the economic odds.

Alternatives to business loans

Personal loans.

Newer businesses may not qualify for many small business loans — that’s where personal loans come in. Personal loans are authorized based primarily on your personal credit score .

Some personal lenders, like Upstart , will approve loans to individuals whose credit scores are as low as 300. But most personal loan providers require at least a 580 credit score.

Personal loans can range from $1,000 to $100,000 with an interest rate span of 5.99% to 35.95%. In order to qualify for higher amounts, you’ll likely need to secure the loan with some kind of collateral .

Your personal credit and assets are liable in the event of defaulting on a personal loan. With many business loans, only business assets will be at stake. But, as long as you’re comfortable with the risks, a personal loan can be another way to secure financing.

Personal credit cards

Personal credit cards are a great way to build credit in pursuit of a wider variety of lending options. Credit card APR ranges from 15.16% to 24%+ depending on your credit score.

If you have a credit score below 579, your lender may only offer a secured credit card where you make a cash deposit as collateral. You won’t have as much borrowing power because your credit limit will be a percentage of your collateral. Still, a secured credit card can help you build credit.

Your lender will decide your credit limit, but the average limit is around $13,000. The key to building credit — no matter your limit — is to consistently make your payments on time. Keep up with that and you’ll be able to apply for better lending products in no time.

The takeaway

Depending on if you have an established business or are just starting out, there are many attainable ways to get funding via small-business loans, including personal loans for first-time small-business owners.

Take a look at your financial wellbeing, documentation, and consider applying for a loan through your local bank, the SBA, or the multitude of online lenders—keeping in mind their specific fees and borrowing terms.

Wherever you’re at in your business journey, there are multiple options available for a first-time business loan.

Want to learn more about small business loans and financing? Check out our ultimate guide to small-business loans.

Small Business Loan FAQs

Some business lenders require around $10,000 of revenue per month while many require $30,000 or more per month. Your business revenue requirements depend on where you apply and what kind of loan you’re applying for. Be sure to check your lender requirements before you apply.

Yes. There are a few ways to approach securing a loan with bad credit . You can apply for a secure or collateralized loan or apply for a lending product that isn’t related to your credit score — something like an invoice factoring loan .

You can also apply for microloans , some of which have no minimum requirements. Additionally, there are lending marketplaces like Lendio that send your application to multiple lenders.

No. Many small businesses loans are easy to obtain. Take Lendio’s small business loans , for example. You fill out a 15-minute loan application and Lendio sends your request to a marketplace of lenders who will make you offers. Just like that, you have business loans available to you.

That said, there are some factors that may make securing a loan for your business more difficult. If you have poor business credit or your business is relatively new, for example, it may be difficult to get approved for a loan.

You may still be able to apply for a personal loan if your business credentials aren’t solid yet.

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How to get a business loan in 6 steps

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Key takeaways

The type of business loan you choose depends largely on why you need the loan and what you’ll be using it for.
Lenders set their own qualifications for business loans, including time in business, personal and business credit score, annual revenue and collateral.
The application process may vary depending on the lender and type of loan, and the funding time can range from a few days to 90 days or more.

Getting a business loan requires careful research and consideration to make sure you’re choosing the best funding option for you. Different loans serve different purposes, so researching loan options is a good starting point.

You’ll also need to make sure that you meet the lender’s requirements for credit score, time in business and cash flow, ensuring that your business can easily handle loan repayments. Let’s walk through the process of choosing and applying for a business loan step by step.

1. Choose a type of loan

The type of business loan you choose depends largely on why you need the loan and what you’ll be using it for. You might need a business loan to:

Purchase equipment, assets or real estate
Restock inventory
Fund the development of a product
Pay for an emergency expense
Keep payroll and accounts payable up to date despite gaps or delays in revenue
Draw from as needed for small- or medium-sized purchases

You’ll see many types of business loans on the market, and each comes with its own advantages and disadvantages. Take a look at some of the most common business loans and what they’re best used for.

Loan type	Best for	Pros	Cons
	Large purchases and businesses with strong credit
	Fast funding for small- to medium-sized purchases
	Long-term affordable loans
	Accessing funds as needed
	Purchasing or upgrading equipment
	Paying for small expenses
	Using outstanding client invoices to secure funding
	Using future sales to secure funding

2. Decide how much you can afford to borrow

At the end of the day, how much you can afford to borrow depends on the wiggle room in your business finances. You want to use business profits to make repayments on the loan.

To find out whether your business can afford a loan, many lenders will use something called a debt service coverage ratio (DSCR). The ratio essentially figures your business’s yearly cash flow divided by the cost of the loan.

DSCR = annual net operating income / total annual debt, including principal and interest

Many lenders won’t consider any business with a DSCR below 1.25, and the higher the number, the stronger you look.

For example, let’s calculate your DSCR if your annual net operating income is $500,000 and your loan’s yearly principal and interest is $225,000.

Step 1. Find your annual net operating income. Calculate your business revenue minus operating expenses.

Step 2. Calculate the yearly cost of your loan , including principal and interest. Use our business loan calculator to help you.

Step 3. Divide the annual net operating income by the annual loan cost.

$500,000 / $225,000 = 2.2222222

Here, your DSCR is 2.2, a number that shows a strong ability to repay the loan you’re vying for.

3. Check your eligibility

Requirements across lenders vary widely because lenders set their own qualifications for business loans . Brick-and-mortar banks tend to work with businesses that have a strong financial profile. Alternatives like online lenders may lower their qualifications, helping startups and business owners with subprime credit get a business loan.

Lenders may set requirements for:

Time in business

Traditional banks may require one to two years of business under your belt to qualify. Alternative and online lenders may fund businesses as young as six months old. Taking time to get your business on solid financial ground will help when making loan repayments.

Personal and business credit score

Since many small businesses don’t have established credit, lenders often use your personal FICO score to get a picture of your creditworthiness. For the best interest rates, most banks will look for a score of 680 or higher. Online lenders may drop to the 500s to approve businesses with bad credit for a loan.

Once you’ve built up your business’s credit profile, lenders may rely on your business credit score to approve a loan. Your business credit score will range from 0 to 100 (or 0 to 300 with the FICO Small Business Scoring Service). The score factors in your company’s size, payment history, industry and other debts. A strong business credit score could mean that you don’t need to guarantee the loan with your personal assets.

Annual revenue

Most lenders require you to meet a minimum amount of revenue to prove you have enough cash flow for a loan. Requirements are different based on the lender and type of loan. Some lenders go as low as $40,000, while others set the annual revenue at $100,000 or more.

Collateral or personal guarantee

Since small businesses pose a higher risk to lenders, many lenders require you to secure the loan with assets like business equipment. Another way to secure the loan is to sign a personal guarantee , which allows the lender to seize your personal assets if you default on the loan. Some lenders require both.

Bank relationship

Relationships can make a big difference in managing your business finances and getting a loan. If your business finances are in a gray area, having an established bank relationship can help your business get approved for a loan.

And if you find yourself in a tight spot with repayments, your lender may be willing to work with you to defer payments or restructure the loan. You can start your banking relationship by opening a business bank account at your preferred bank.

4. Compare small business lenders

Once you’ve narrowed down the type of loan you need, you can compare lenders side by side to find the best small business loan for you. Take a look at the following types of lenders that offer small business loans.

Both traditional banks and online lenders offer wide-ranging loan amounts, anywhere from $5,000 to $600,000 or more. However, the interest rates are where you’ll see a real difference. Maximum interest rates for online lenders can range from 30 percent to 100 percent — much higher than you’ll see with banks.

Banks and credit unions

Banks and credit unions can offer APRs between 5.5 to 12 percent for conventional loans and lines of credit, though the exact rate varies based on your business’s financial standing.

Many banks also offer loans backed by the U.S. Small Business Administration. As of April 2024, SBA loans have interest rates between 11.50 to 16.50 percent, and you can secure loan amounts up to $5 million. Repayment terms may also stretch out longer than conventional loans, ranging from five to 25 years.

Community Development Financial Institutions

Community Development Financial Institutions (CDFIs) are a network of organizations that offer financial services and educational support to underserved communities. Each CDFI serves a specific target group for the purpose of building up the community, and they often accept customers with poor or no credit history.

If you’re part of an underserved community, working with a CDFI could help you build a sustainable business through funding, mentorship and additional resources.

Minority Depository Institutions

Minority Depository Institutions (MDIs) are financial institutions in which minority individuals own most of the stock or the board of directors are mostly minority individuals. Many MDIs focus on serving minority communities, providing business loans to entrepreneurs who are historically underserved in the banking industry.

5. Gather required documents

Lenders not only need to know your business’s financial standing and legal status, but they also want documentation on how you plan to use the loan and its expected effect on your business. When you apply for a business loan, your lender should have a full list of required documents . Some of the documents you should have ready to go include:

Personal documentation. Your lender may request information about your finances, background, other sources of income and resume. If you have a business partner or co-owner, you must include their information too.
Business plan. While not every lender will require a business plan, having one is beneficial. Your business plan should outline how you intend to use your loan funds and how additional financing will benefit your business. You should also include how the funds will improve revenue and your ability to repay the loan.
Business financial statements. Most lenders require two years of income tax returns, balance sheets, profit and loss statements, bank statements and cash flow projections to determine if your business can repay a loan.
Legal documents. To prove ownership and your business’s status, you’ll need to provide business insurance, a business license and any other legal documents pertaining to your business.

6. Apply for a business loan

Most lenders — both banks and online lenders — offer online applications that require minimal initial paperwork. With some banks, you’ll go in person to apply for the loan. In this case, you may want to contact the bank for a list of required documents ahead of time.

Once your application is received, the lender should be in contact within a few days to discuss your business’s eligibility and any additional paperwork required. But, the exact amount of time until you get the funding can vary depending on the lender and type of loan.

Every lender is different. Some may take only a few days to review your application. Others may take weeks. Many online lenders boast funding in as little as one to two business days. An SBA loan can take 30 to 90 days or more to fully process.

However, since the average application requires basic documentation, you can have a Small Business Development Center review it. They can give you tips, advice and strategies on improving your application — and thus your chances for approval.

Bottom line

If you’re considering applying for a business loan, you first need to decide what type of loan your business needs, how much you can afford and if your business meets the minimum qualifications.

Reach out to lenders you have worked with in the past or banks you already have a relationship with to discuss the process. You could also meet with a business advisor or a member of a Small Business Development Center in your area to learn more about what your business may qualify for.

Frequently asked questions

How hard is it to get a business loan, what disqualifies you from a small business loan, how long does a business loan take to get.

How to get a fast business loan

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How to get a startup business loan: 5 steps

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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.

Bank of America. “ What Is the Difference Between Secured and Unsecured Business Loans? ”

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 .”

First State Community Bank. “ Factors That Influence Business Credit .”

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

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

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A millennial dentist with $231,000 in student debt is worried he'll have to sell his home or get a second job if Biden's new repayment plan is axed

David, 30, got affordable student-loan payments through the SAVE plan.
But the 8th Circuit blocked the plan, leaving 8 million SAVE borrowers in limbo until the court issues a final ruling.
If SAVE is permanently blocked, David said he might have to sell his house or get a second job.

David had no problem making his student-loan payments over the past year. That could soon change.

After graduating from dental school in 2019, David — who requested to use a pseudonym to protect his privacy but whose identity is known to Business Insider — said he had over $260,000 in student loans , even after receiving partial scholarships to fund his education.

David, 30, said he aggressively started paying off his student loans during the pandemic payment pause to take advantage of the interest-free payments, and he got his balance down to just over $231,000, according to documents reviewed by BI. However, the pause ended in September 2023 when interest started accruing again, and at that point, he was in the process of paying off the dental practice he purchased in 2021.

His wife also has student-loan payments, and he said he pays his dental staff more than he pays himself, so his finances are strained. That's where President Joe Biden's new SAVE income-driven repayment plan comes in — the plan lowered David's monthly payments to $280 a month from over $1,000, giving him and his wife the financial freedom to invest in other areas of their lives, like purchasing a home.

"Practicing the way I do at my office, I'll never be the type of dentist that owns a lake home, but I don't want to be that type of dentist," he said. "I just want to be able to go to work to help my patients and go home without having to worry about whether or not I'm going to be able to make a house payment."

That house payment is now a concern. The 8th Circuit Court of Appeals blocked the SAVE plan in its entirety on July 18 as the legal process progresses, in response to two lawsuits groups of GOP state attorneys general filed earlier this year to block parts of the plan . This means that for now, the fate of SAVE is up in the air, and 8 million enrolled borrowers are on forbearance until a court issues a final decision. It's unclear when exactly that could be.

'It's almost too scary to even think about'

Even with the financial strain of the student-loan payments, David made clear he's not asking for any loan forgiveness.

"I made my bed, and I got to sleep in it," he said. "So you'll never hear me say that I think that my student loan should be absolved."

But he's highly concerned about his fate with the SAVE plan up in the air. Along with potentially having to sell his home and get a second job, David also said he and his wife want to start a family, but doing so will not be possible if they both have to contend with high monthly student-loan payments.

"I would love to be saving for my 401(k) and retirement, and I'd love to start a family, but really, this is going to be a deciding factor as to whether or not we're financially secure enough to have a child," David said. "It's going to cause instability at home and instability with our jobs. And ultimately, that's what causes me the most stress as a human being: instability."

The Education Department has warned that permanently blocking SAVE would be a significant administrative burden, requiring the department to recalculate every borrower's payments while servicers have to inform borrowers of the changes.

However, the GOP attorneys general who filed the lawsuits said the plan is an overreach of Biden's authority and comes with a cost to taxpayers. They cited an estimate from the Wharton School of the University of Pennsylvania that found the SAVE plan could cost $475 billion over 10 years.

For now, all David can do is wait for the final court decision, and he's not feeling optimistic.

"There's just so much uncertainty. It's almost too scary to even think about," he said. "So I've kind of resigned myself to the fact that SAVE won't go through. I can't depend on it."

Are you enrolled in the SAVE plan and concerned about student-loan payments? Will student loans influence how you vote in the election? Share your story with this reporter at [email protected] .

Watch: Supreme Court strikes down Biden's student-debt relief plan

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More From Forbes

Five loans to know about when starting a new business.

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Phil has been in corporate finance for 37 years. CEO of Global Financial Svc, Global Financial Training Program , Global Church Financing.

Starting a new business in any industry can be scary and challenging. Where do you start? Who do you call? How do you take an idea and make it reality? A lot of these questions are what new business owners ask themselves and may struggle to answer. However, I believe the best thing you could do is start—start somewhere and see where it takes you.

While a lot of things are important when you are first venturing out to start this new business, one of the key components to keeping a small business afloat is money. Every company, no matter how small or big, needs some amount of capital to help fuel and build the business. The funds may not always be so accessible and on hand, so this is when loans can become the best option for small businesses looking to grow.

In the past, asking for a loan was seen as weak or an indication that a company was not financially stable enough to operate and continue as a business. However, in the age of startups, I believe loans are one of the things helping companies get off the ground and succeed. So yes, it’s okay to ask for help. Sometimes, it may even be better to get financing for a new or small business.

Here are some loan types that can help you.

A term loan sounds exactly like it is—a lump sum of cash given to a business that must be paid back with interest over a predetermined amount of time. I believe this is the simplest type of loan and great because the business can use the money how they see fit. However, getting a term loan can make it hard to get a second loan because the first loan must be repaid first. These loans are generally given through the banks or institutional lenders.

An SBA loan is a loan for small businesses that is partially backed by the government through the Small Business Administration. Many times, traditional banks will not lend to small businesses, so an SBA loan is a good alternative for businesses looking to get a loan for their business. These loans are given by banks or large private lenders, with the government guaranteeing 75% of the loan, making it less risky for lenders. Although the application process can be long, between 1 to 3 months, it requires a lot of documentation and can be easy to qualify for due to government backing.

Lines Of Credit

Lines of credit can help finance a business on a need-by-need basis. This loan gives a business access to capital, up to a certain limit, with interest payments required on the money drawn. This can be a good option for businesses that are more seasonal and need flexibility when it comes to loans. Lines of credit can be unsecured or secured by collateral, which may limit how much money the business can borrow. One drawback of this type of loan is that lenders generally want your time-in-business to be a minimum of 2 to 3 years, making it not ideal for a brand-new business.

Equipment Leasing

No matter what industry you are starting in, equipment leasing can help businesses buy new equipment or used equipment necessary to operate. Equipment can be very expensive, so I find leasing them with no down payment is a great solution. Through leasing, businesses can also decide whether they want to keep or return the equipment at the end of the term. The type of equipment ranges from anything like heavy machinery to office computers and copiers. In addition, the government gives tax incentives to lease equipment. But with equipment leasing, there are no early prepayments. The business is responsible for paying for the full term and cannot pay it off early to get a benefit.

Invoice Factoring

Invoice factoring can help get financing and is probably the most requested type of financing. In my experience, this type of loan is ideal for businesses that are waiting to get payment on invoices, which can sometimes take up to 90 days to get paid, causing a large cash crunch in the company. Lenders will advance between 80% to 90% of the invoice value to the company, and the remainder will be paid when the invoice is paid less the interest. This is ideal for businesses that need cash on hand to pay for day-to-day operations, salary, rent, etc., and cannot wait until the invoices are paid. This type of loan is ideal for a business owner shipping out merchandise or providing a service because as soon as they invoice, cash can be made available for business needs. Although invoice factoring is quicker to set up and has fewer credit restrictions, this type of loan is higher priced than accounts receivables, making it not ideal for businesses tight on cash.

These are just five of the many different loans you can get for your business. Depending on what industry you’re in or what stage of growth you’re in, the type of financing you need or want will vary. Some loans make more sense than others, it all comes down to what your business needs.

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U.S. Department of the Treasury

U.s. department of the treasury announces up to $83 million in american rescue plan small business support to drive economic growth for 125 alaska tribes.

Unprecedented collaboration between Tribes has generated the largest small business financing consortium in the country.

WASHINGTON – Today, the U.S. Department of the Treasury announced the approval of up to $83 million in State Small Business Credit Initiative (SSBCI) funds for a consortium of 125 Alaska Tribes. Funded by the Biden-Harris Administration’s American Rescue Plan (ARP), this investment supports the nation’s largest Tribal SSBCI consortium and is part of the most expansive investment in small business financing for Tribal governments in history. The launch of intertribal SSBCI consortia has been critical to enabling small, remote, and capacity-constrained Tribes to access federal funding. Through the consortium, 125 Tribes will access critical economic development resources for Alaska’s Tribal economy.

The funds are anticipated to catalyze as much as $830 million in additional private sector investment across the state and in Native-owned businesses. The funding will be administered on behalf of the Tribal consortium by the Alaska Small Business Development Center (Alaska SBDC) within the University of Alaska Anchorage (UAA) Business Enterprise Institute (BEI).

For the first time ever, the ARP included dedicated SSBCI funding for Tribal governments. With today's announcement, Treasury has now approved SSBCI applications for up to $415 million to support more than 220 Tribes through the SSBCI Capital Program for small businesses and Tribal enterprises.

“Today’s announcement reflects success that is only possible when federal agencies listen to Tribal Nations to understand their unique needs and incorporate their feedback in developing program policy and guidance. Through the flexibility of the consortium model, these Tribes will benefit from the historic opportunity that these resources for small businesses presents to Indian Country. These funds will serve some of the most rural populations in the United States, creating jobs and expanding capital access for Tribes across Alaska. We look forward to following this announcement with Treasury’s first official visit to an Alaska Native Village at Chickaloon Village,” said U.S. Treasurer Chief Lynn Malerba.

“Our Tribe is looking forward to the transformational impact this funding can have on the Tribal economy of Alaska. Rural Alaska is entrepreneurial. Our SSBCI consortium will address capital access barriers and unlock private financing for all of our small businesses that are ready to grow,” said Rena Greene, Deputy Director and Acting Executive Director of Nome Eskimo Community, one of the 125 consortium member Tribes.

“Alaska’s tribes are the backbone of our rural economies. The Alaska SBDC is proud to have worked with the Alaska Federation of Natives to bring 125 Alaskan tribes together in the largest tribal consortium in the nation. This collaborative effort over the last two years will result in hundreds of millions of dollars in private sector loans and equity investments flowing into rural and Alaska Native-owned businesses, drastically changing the economic landscape of some of the most remote communities in the nation,” says Alaska SBDC State Director Jon Bittner.

“When the American Rescue Plan Act was signed by President Biden, AFN set out to make sure that Alaska Tribes accessed as much of the funding as possible. Our Navigators worked closely with UAA to help over 100 Tribes access SSBCI, an unprecedented program for Tribal nations. We are proud of that work and proud of the over $80 million in small business funding that we are bringing to Native Alaska,” said Executive Vice President and General Counsel for the Alaska Federation of Natives Nicole Borromeo.

"Our local and Alaska-Native centric economies thrive and rely on homegrown small businesses—from coffee shops to electricians. This funding invests in what’s already working here in our state and helps us grow our economies the Alaska way, not the Lower 48 way,” said Congresswoman Mary Sattler Peltola.

Reauthorized and expanded as part of the ARP, SSBCI is a nearly $10 billion program to support small businesses and entrepreneurship in communities across the United States by providing capital and technical assistance to promote small business stability, growth, and success. SSBCI represents a transformational investment in American small businesses and is expected to catalyze at least $10 of private investment for every $1 of SSBCI Capital Program funding to increase access to capital to small businesses and entrepreneurs, including those in underserved communities.

The Alaska SSBCI Tribal Consortium offers four programs, approved for up to $83.1 million. The programs include a Loan Participation Program, a Loan Guarantee Program, a Collateral Support Program, and an Equity/Venture Capital Funds Program.

The Loan Participation and Loan Guarantee Programs, allocated $10.3 and $37.9 million respectively, are designed to reduce interest rates or risks associated with critical small business investments in Alaska and Native-owned businesses. The Collateral Support program, allocated $12.0 million, will provide collateral for small business lending. The program will incentivize loans to underserved borrowers across Alaska. Rural Tribal communities in Alaska depend on small businesses like fishing operations and tourism enterprises, and collateral support is expected to incentivize lenders to support those businesses. The equity/venture capital program, allocated $22.9 million, provides equity capital support to small businesses through a new venture capital program implementing a fund investment strategy, targeting Tribal member-owned businesses, mostly located in rural areas of Alaska.

The Treasury Department has worked across the Biden-Harris Administration to deploy historic support from the American Rescue Plan to Indian Country, including over $500 million in Tribal SSBCI funding and $20 billion allocated through the State and Local Fiscal Recovery Fund program to nearly 600 Tribal governments, the largest-ever single infusion of federal funding into Indian Country. The Biden-Harris Administration has also delivered the largest-ever infusion of federal capital to Native-serving CDFIs through the Emergency Capital Investment Program, Rapid Response Program and Equitable Recovery Program. Treasury invested $234 million in Native-owned and Native-majority shareholder depository institutions through the Emergency Capital Investment Program (ECIP), and Treasury projects that the investments across the ECIP portfolio could increase lending in Native communities by up to nearly $7 billion over the next decade based on preliminary analysis.

Lenders and small businesses who are interested in receiving more information about the consortium’s SSBCI programs can contact: [email protected] or [email protected] .

COMMENTS

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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

Executive Summary

Company Description

Market Analysis

Marketing and Sales Strategy

Operations Plan

Financial Plan

Recent Posts

How to Write a Professional Business Plan for a Loan

How business plans help in loan applications?

It helps you showcase your vision

It helps you prove your financial feasibility

It helps you mitigate potential risks

It helps you demonstrate your preparedness

Key components of a successful business plan for a loan

2. Company Overview

3. Market Analysis

4. Product or Service Offerings

5. Sales and Marketing Strategies

6. Operations Plan

7. Management Team

8. Financial Plan

9. Appendix

What factors do lenders look for in a business plan

Character of your management team

Your capability to repay loans

The capital amount you’re seeking

Collateral or personal guarantees

Business plan examples for a loan

Start preparing your business plan

Frequently Asked Questions

Can I write a business plan myself?

How long should my business plan be?

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

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How To Write A Business Plan For A Loan

What Is A Business Plan For A Loan?

Executive Summary

Company Description

Products & Services

Market Analysis

Marketing & Sales Plan

Organization & Management

Operational Strategy

Financial Outlook

Funding Request

The 5 Cs Of Credit

5 Business Plan Tips For Loan Approval

SBA Business Plan Resources (Free)

Business Plan Software ($)

Business Plan Writer/Consultant ($$$)

Do you need a business plan to get a loan?

How do you write a business plan for a bank loan?

How do you write a business plan for an SBA loan?

How long should a business plan be?

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