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The experts agree: Business
plan is key to winning a loan
By Ellen
Birkett Morris • Bankrate.com
Loan packagers see lots of business loan applicants. They see lots
of them fail. The No. 1 reason for failure, they agree, is the lack
of a good business plan.
"The first steps in helping to prepare a loan
application is to make a business plan that any lender or investor
can review," says Jim Thomas, executive director of lending, business
assistance and administration for Community Capital Development,
a business development center based in Seattle.
If a business plan is comprehensive enough,
a business owner seeking less than $250,000 may get it on the strength
of the plan alone, says Rod Brechtl, president of Ameriwest
Business Consultants Inc., a for-profit business consulting
firm based in Colorado Springs, Colo.
"I ask 75 percent of my clients to create or
improve their business plan," says Brechtl.
While a business plan has many parts and many
purposes, lenders look closest at the sections that describe:
- How much will it cost to carry out the business
plan;
- How much the owner is investing;
- How long it will take to pay back the loan;
- What the ability of the borrower(s) is to
carry out the business plan;
- What will be pledged for collateral; and
- How the business will pay back the loan.
Catherine Simpson, executive director of the
Fort
Worth Women's Business Center, helps her clients develop a financial
plan that includes a projected profit/loss statement and cash flow
statement for three scenarios -- expected results, worst case and
best case scenario.
"If this is a startup company, research must
be done on what the actual bills will be and if it is an existing
company they need past financial history to prove they are solvent.
Financials must show loan repayment. Bankers want to know one thing
-- how they will get paid. Period," says Simpson.
Ellen Birkett
Morris is a freelance writer based in Kentucky
If you'd like to make a comment on this story,
e-mail bankrate editors.
-- Posted: Aug.
25, 2000
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