Why Has Startup Business Financing Become Harder to Obtain?
It is more difficult to apply for a business start up loan because in reality, these loans pose more risk to the lender. According to Bloomberg, 8 out of 10 entrepreneurs who start businesses fail within the first 18 months. That amounts to 80% of startup businesses FAIL! One big reason is that many of them don’t take the time to plan out their business.
Those who fail to plan….Plan to fail
That is an old adage that truly describes start up businesses exactly.
How can you create a business plan that will win your lender’s approval?
- Its important that you can present your business in such a way that a prospective lender can easily see the merit in providing financing to you.
- Executive Summary. The summary should be the first few pages of your business plan. As an introduction, you’ll want to include the most important details in this part such as the name of your business, location, product and services, and your purpose for submitting the plan. This is like a “mini business plan” It should be able to tell a lender about your business quickly and clearly. At that point the lender can then choose if they want to see the full business plan.
- General Description. Your lender is interested to knowing everything about your business so be sure to include all relevant details in your plan such as the type of business you have, the products or services you sell, your legal business structure, physical address and contact details, licenses and permit numbers, the number of employees you have (if applicable), etc.
- Marketing Details. You must also define your target market, include pricing information of each of your products and services, and discuss the marketing strategies you plan to do to promote your business.
- Management Information. If you are running a Corporation, an S Corporation or a Limited Liability Corporation, you must include the names of the members of your Board of Directors, as well as the background, qualifications and positions of each. Under this section, you must also include the names of professionals that you hired such as your business consultant, attorney, accountant, etc.
- Financial Information. Of course, a potential lender would want to know the present financial status of your business so you must include all accounting-related information in your business plan. As a start-up business, your balance sheet must present your current assets, liabilities and equity.
- Projections. You must show in words and in figures what you expect from your business within the next two or three years. This is a crucial element of your business plan as this is your opportunity to show a potential lender that you are confident that your business will survive the market.Make sure that the facts and figures used here are realistic. Don’t over inflate your projections! This can kill your chances for approval. Be prepared to explain how you reached these numbers. If the numbers are just to “out there” you really do hurt you chances of approval.
If you need help in creating a business plan you should consider either hiring someone to create it for you or contact your local SCORE organization. Score is made up of retired business professionals who are giving back to their communities by mentoring business owners. Find a member who was in the same industry as you and see what they think of it.
Irish Taylor is a business loan consultant with Startup Business Loans and has been providing consumers and business owners with startup business financing since 1992. For years she has helped people with credit and loan problems especially pertaining to business start up, SBA loans and Unsecured loans.