Preparing Your Business Plan for Financing

Many facts and figures go into your business plan, but key areas are examined first by lenders or investors before they provide your business financing. If these key areas pass muster, then your secondary information is important. Making sure your business plan covers these key areas well and presenting it in the way lenders are accustomed to receiving the information is critical to your overall success in securing financing. US Business Finance Corp has helped many small businesses obtain funding – both with commercial loans and business cash advances.

Show me the money! At the outset clearly delineate the amount of the financing requested, your past financial history and how projected sales will assure both the continued health of the company and the ability to absorb the additional loan payments.  If you choose and alternative financing, such as a company cash advance, the repayment is built in to the process. Your repayment comes as a percentage of future Visa and MasterCard sales.

Your financial statements are the most important item in your business plan. Financial lenders have seen the financial statements of many companies and are able to tell (with sometimes unnerving accuracy) where your company is strong and where it could use some experienced help. Your cash flow statement can reflect both your successful marketing and your products popularity as well as your company’s thrift.

Among the documentation necessary, the following are the usual benchmarking financial data;

• Three years of tax returns prepared by your accountant;
• Financial statements, both a Balance Sheet and Profit & Loss Statement;
• Collateral itemized with value;
• Accounts receivable – list of 30, 60, 90 days invoices and delinquent (beneficial – many customers, not dependent for most of your income on one or two major accounts);
• Accounts payable – all bills owed by 30, 60, 90 days and delinquent (benefit – several suppliers so you have alternatives if one raises their prices or ceases to carry your items);
• Articles of Incorporation and Bylaws – to prove that there are no restrictions on your ability to sign contracts or if it is necessary to get Board or shareholder approval for loans above a preset amount.

On the other hand, cash advances do not require all the documentation of a loan, only proof of a certain level of income from Visa and MasterCard sales.

The second area, is the management team. This is covered in the Executive Summary and then later in the plan in more detail. Make sure you put all the important data in the Summary – don’t save your best for the detailed reporting. A management team that has experience and success in other fields is a key asset. Lenders know that the business world is a mix of planning, unexpected challenges and recovery. Seasoned management teams have experience addressing core problems and building companies in the face of everyday business challenges.

Also list your outside “team”: your attorney, accountant, insurance agent and any consultants you are using.

These two areas – your financial history and your management line up – are the primary areas that are your major litmus test. Pass these two tests and then the lender will examine your marketing plan in more detail.

The marketing plan must be realistic. Dilbert cartoons parody the worst of marketing, the “the reality of the market is what I say it is” marketing plan. Your marketing presentation needs to deal with a specific market demographics or a potential market that you have researched and proven viable. The over-used “plan to capture X% of a trillion dollar industry” outlook does not persuade seasoned lenders. Also, give a realistic assessment of your competition. Except of the occasional new “disruptive technology” business, new business don’t operate in the luxury of a competitive vacuum.

Last, but not least, explain the business’s and your personal exit strategy. A business’s exit strategy impacts day to day business decisions. The lender wants to know: are you building for a sale three years down the road? Building to create long-term jobs in the community? Putting together a business system that can later be franchised? Assembling a management team that can carry on if you pursue other interests? Often it is hard to envision the exit strategy if you are still trying to create the business, but by defining an exit strategy you help shape decisions and assist management in preparing for different potential business opportunities.

In the end, be your biggest critic. Read through your business plan as a potential investor. Are there areas that are fuzzy? Is the growth potential clear and realistic? Are there timeline benchmarking points prepared to make sure your plan is on target? Do you realistically present the best and worst-case scenarios.

Whether you are searching for business financing for buying a business, starting your own small business, or have plans for expansion or renovation of your current business, call on US Business Finance Corp. Our team of financing experts can assist you in the preparing of your business plan presentation to improve your ability in securing operating capital.

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Filed under: Alternative Capital, Business Cash Advance, MasterCard/VISA, Money Matters - Business