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How to Write a Business Plan, Step by Step

Rosalie Murphy

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money .

1. Write an executive summary

2. describe your company, 3. state your business goals, 4. describe your products and services, 5. do your market research, 6. outline your marketing and sales plan, 7. perform a business financial analysis, 8. make financial projections, 9. add additional information to an appendix, business plan tips and resources.

A business plan is a document that outlines your business’s financial goals and explains how you’ll achieve them. A strong, detailed plan will provide a road map for the business’s next three to five years, and you can share it with potential investors, lenders or other important partners.

Here’s a step-by-step guide to writing your business plan.

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

This is the first page of your business plan. Think of it as your elevator pitch. It should include a mission statement, a brief description of the products or services offered, and a broad summary of your financial growth plans.

Though the executive summary is the first thing your investors will read, it can be easier to write it last. That way, you can highlight information you’ve identified while writing other sections that go into more detail.

» MORE: How to write an executive summary in 6 steps

Next up is your company description, which should contain information like:

Your business’s registered name.

Address of your business location .

Names of key people in the business. Make sure to highlight unique skills or technical expertise among members of your team.

Your company description should also define your business structure — such as a sole proprietorship, partnership or corporation — and include the percent ownership that each owner has and the extent of each owner’s involvement in the company.

Lastly, it should cover the history of your company and the nature of your business now. This prepares the reader to learn about your goals in the next section.

» MORE: How to write a company overview for a business plan

The third part of a business plan is an objective statement. This section spells out exactly what you’d like to accomplish, both in the near term and over the long term.

If you’re looking for a business loan or outside investment, you can use this section to explain why you have a clear need for the funds, how the financing will help your business grow, and how you plan to achieve your growth targets. The key is to provide a clear explanation of the opportunity presented and how the loan or investment will grow your company.

For example, if your business is launching a second product line, you might explain how the loan will help your company launch the new product and how much you think sales will increase over the next three years as a result.

In this section, go into detail about the products or services you offer or plan to offer.

You should include the following:

An explanation of how your product or service works.

The pricing model for your product or service.

The typical customers you serve.

Your supply chain and order fulfillment strategy.

Your sales strategy.

Your distribution strategy.

You can also discuss current or pending trademarks and patents associated with your product or service.

Lenders and investors will want to know what sets your product apart from your competition. In your market analysis section , explain who your competitors are. Discuss what they do well, and point out what you can do better. If you’re serving a different or underserved market, explain that.

Here, you can address how you plan to persuade customers to buy your products or services, or how you will develop customer loyalty that will lead to repeat business.

» MORE: R e a d our complete guide to small business marketing

If you’re a startup, you may not have much information on your business financials yet. However, if you’re an existing business, you’ll want to include income or profit-and-loss statements, a balance sheet that lists your assets and debts, and a cash flow statement that shows how cash comes into and goes out of the company.

You may also include metrics such as:

Net profit margin: the percentage of revenue you keep as net income.

Current ratio: the measurement of your liquidity and ability to repay debts.

Accounts receivable turnover ratio: a measurement of how frequently you collect on receivables per year.

This is a great place to include charts and graphs that make it easy for those reading your plan to understand the financial health of your business.

» NerdWallet’s picks for setting up your business finances:

The best business checking accounts .

The best business credit cards .

The best accounting software .

This is a critical part of your business plan if you’re seeking financing or investors. It outlines how your business will generate enough profit to repay the loan or how you will earn a decent return for investors.

Here, you’ll provide your business’s monthly or quarterly sales, expenses and profit estimates over at least a three-year period — with the future numbers assuming you’ve obtained a new loan.

Accuracy is key, so carefully analyze your past financial statements before giving projections. Your goals may be aggressive, but they should also be realistic.

List any supporting information or additional materials that you couldn’t fit in elsewhere, such as resumes of key employees, licenses, equipment leases, permits, patents, receipts, bank statements, contracts and personal and business credit history. If the appendix is long, you may want to consider adding a table of contents at the beginning of this section.

Here are some tips to help your business plan stand out:

Avoid over-optimism: If you’re applying for a business loan at a local bank, the loan officer likely knows your market pretty well. Providing unreasonable sales estimates can hurt your chances of loan approval.

Proofread: Spelling, punctuation and grammatical errors can jump off the page and turn off lenders and prospective investors, taking their mind off your business and putting it on the mistakes you made. If writing and editing aren't your strong suit, you may want to hire a professional business plan writer, copy editor or proofreader.

Use free resources: SCORE is a nonprofit association that offers a large network of volunteer business mentors and experts who can help you write or edit your business plan. You can search for a mentor or find a local SCORE chapter for more guidance.

The U.S. Small Business Administration’s Small Business Development Centers , which provide free business consulting and help with business plan development, can also be a resource. logo

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:

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.

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:

2. Company Description

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

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

3. Industry Analysis

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

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:

5. Competitive Analysis

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

6. Marketing Plan

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

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.

8. Management Team

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

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:

You may also include:

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.

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!

Don’t you wish there was a faster, easier way to finish your business plan?

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

Other Helpful Business Plan Articles & Templates

Business Plan Template & Guide For Small Businesses

Home » Business Plans » Financial Services

How to Write a Bank Loan Business Plan [Sample Template]

Do you need a loan for your business? If YES, here is a detailed sample bank loan business plan template & proposal for a beverage distribution company.

Loan Proposal for Charlie & Tango Beverage Distribution Company®, LLC.

Table of Content

1. Industry Overview

3. our products and services, 4. our mission and vision statement, modus operandi and source of supply, 6. swot analysis, 8. our target market, 9. sales and marketing strategy, 10. sales forecast, 11. publicity and advertising strategy, 12. our pricing strategy, 14. sustainability and expansion strategy.

Charlie & Tango Beverage Distribution Company®, LLC is seeking to:

(a) Convert existing short-term notes of $165,000 to a long-term note to be repaid at $3,000 per month (plus interest).

(b) Establish a credit line of $300,000 to finance expected seasonal fluctuations in inventory and accounts receivable.

We have structured the business in such a way that repayment on long-term financing will come from continuing net profits that we will generate. So also, the repayment of the seasonal credit line will come from liquidation of inventory and receivables.

Name: Charlie & Tango Beverage Distribution Company®, LLC

Address: 1310 – 23nd Avenue N.W.

Seattle, Washington 98128

Phone: (206) 478-2600

Date Established: January 3, 2005

Form of Organization: Washington Corporation

Incorporated by Irwin and Irene Dickson on March 1, 2005.

Charlie & Tango Distribution Company®, LLC is a family business that is owned by Irwin Dickson and his immediate family members. Irwin Dickson has a B.Sc. in Business Administration, with over 8 years of hands on experience in the retailing and distribution industry, working for some of the leading brands in the united states.

Although the business is launching out by focusing on Trenton – New Jersey, but there is a plan to expand our distribution network all across the state of New – Jersey.

2. Executive Summary

Charlie & Tango Beverage Distribution Company®, LLC is a Seattle-based corporation that distributes different types of beverages to retailers and distributors out of a North Seattle warehouse location. The average customer is a small or medium – sized retailer of beverages, and other related retailers including mom and pop shops and shopping malls.

Estimated sales for fiscal 2005 is $1,250,000. Advertising expense has been low since most advertising is at the retail-level, co-op by the manufacturer of the products we will be distributing.

The primary focus of the business is excellent service and quality product delivery — and the ability to keep beverages in stock. Most accounts are carried on a 2 percent 10/Net 30 basis; few customers take discounts. Third party distributors are generally carried on a Net 10 basis.

Distribution is from a central warehouse in North Seattle, which is connected to a small showroom and also contains the corporate offices. Lead-time on ordering for inventory is quite short and style changes generally occur once per year.

Our major supplier is Nestle. Nestle’s terms are 2% 10/Net 30. Almost all the suppliers offer discounts, some even larger than 2% 10/Net 30. During 2005 there was one major price increase of about 5 percent. Charlie & Tango Beverage Distribution Company®, LLC operates out of leased premises and holds a very favorable lease through 2007.

For a business such as ours, location is not critical, although our current location does provide excellent access for delivery trucks. This is a distribution business and, therefore, depends upon efficient routing and /or shipping. It is important to note that bad debts have recently taken an alarming upturn in our line of business.

Our Business Structure

Below is our management and organization structure please note that this excludes unskilled laborers who we will engage from time to time;

Sales and Marketing Manager

Information Technologist

5. Job Roles and Responsibilities

Chief Executive Officer – CEO:

Admin and HR Manager

Warehouse Manager:

Merchandise  Manager


Client Service Executive

Distribution Truck Drivers

It is the duty of our merchandise manager or marketing manager to help the organization source for beverage manufacturing companies to help distribute their products. We will go out there to source for good wholesale distribution deals and also ensure that we do not only distribute at the right prices that will guarantee the organization good profit margin, but also, we will ensure that we distribute beverages that are in demand.

Once the deal is sealed, the drivers either load their trucks directly from the company or warehouse and then go around distributing it. Once the products are distributed, we will either collect money on delivery or we will go back later to collect our money. Usually there will be a business agreement with the beverage manufacturing companies and we can access credit based on our capacity.

The names of our major suppliers are;

When it comes to available storage facilities, our warehouse is designed based on the requirements of our major suppliers and the zoning regulations of our location.

Professional and Advisory Support

Board of Directors

Management Advisory Board

Attorney – Bar. Felix Leighton (LLB, LLM)

Accountant – Deb Rosen

Insurance agent – Alliance Insurance Group

Banker – Platform™ Investment Bank, Inc.

Our intention of starting out in Trenton and distribute our goods only within Trenton – New Jersey is to test run the business for a period of 2 to 5 years to know if we will invest more money, expand the business and then start distributing all around the state.

We are quite aware that there are several beverage distribution companies all over Trenton and even in the same location where we intend locating ours, which is why we are following the due process of establishing a business. We know that if a proper SWOT analysis is conducted for our business, we will be able to position our business to maximize our strength, leverage on the opportunities that will be available to us, mitigate our risks and be equipped to confront our threats.

Charlie & Tango Distribution Company®, LLC employed the services of an expert HR and Business Analyst with bias in retailing and distribution to help us conduct a thorough SWOT analysis and to help us create a Business model that will help us achieve our business goals and objectives. This is the summary of the SWOT analysis that was conducted for Charlie & Tango Distribution Company®, LLC;

Our location, the business model we will be operating on (robust distribution network), varieties of payment options, wide range of products from top brands and our excellent customer service culture will definitely count as a strong strength for us. Also our management team members are people who have what it takes to grow a business from startup to profitability with a record time.

A major weakness that may count against us is the fact that we are a new beverage and carbonated soft drink distribution business and we don’t have the financial capacity to compete with leaders in the industry for now.

The fact that we are going to be operating our business in Trenton – New Jersey provides us with unlimited opportunities to sell our goods to a large number of retailers and businesses. We have been able to conduct thorough feasibility studies and market survey and we know what our potential clients will be looking for when they patronize our products and services; we are well positioned to take on the opportunities that will come our way.

Just like any other business, one of the major threats that we are likely going to face is economic downturn. It is a fact that economic downturn affects purchasing/spending power. Another threat that may likely confront us is the arrival of a similar business in same location where ours is located.


Distribution of goods as wholesaler to retailers has been in existence for as long as human started trading goods, but one thing is certain, the distribution industry is still evolving. The introduction of technology has indeed helped in reshaping the industry.

Lastly, it is now a common phenomenon for distribution companies to leverage on technology to effectively predict consumer demand patterns and to strategically position their business to meet their needs; in essence, the use of technology helps businesses like ours to maximize supply chain efficiencies. Data collected from customers goes a long way to help beverage and carbonated soft drinks serve them better.

The beverage and carbonated soft drinks industry has a wide range of customers; a good number of people on planet earth consume beverages and carbonated soft drinks and it is difficult to find people around who don’t.

In view of that, we have positioned our company to service businesses in Trenton – New Jersey and every other location. We have conducted our market research and we have ideas of what our target market would be expecting from us.

We are in business to retail (distribute) a wide range of beverages and carbonated soft drinks from different production companies to the following businesses;

Our Competitive Advantage

A close study of the beverage and carbonated soft drinks industry reveals that the market has become much more intensely competitive over the last decade. As a matter of fact, you have to be highly creative, customer centric and proactive if you must survive in this industry. We are aware of the stiff competition and we are prepared to compete favorably with other leading supermarkets and grocery stores in Trenton – New Jersey.

Charlie & Tango Distribution Company®, LLC is launching a standard beverage and carbonated soft drinks distribution business that will indeed become the preferred choice of retailers, hotels, and restaurants et al in Trenton – New Jersey.

One thing is certain; we will ensure that we have a wide range of products available in our warehouse at all times. One of our business goals is to make Charlie & Tango Distribution Company®, LLC is a one stop beverage and carbonated soft drinks distribution company. Our excellent customer service culture, timely and reliable delivery services, online presence, and various payment options will serve as a competitive advantage for us.

Lastly, our employees will be well taken care of, and their welfare package will be among the best within our category in the industry meaning that they will be more than willing to build the business with us and help deliver our set goals and achieve all our objectives. We will also give good working conditions and commissions to freelance sales agents that we will recruit from time to time.

Charlie & Tango Distribution Company®, LLC is in business to retail a wide range of beverages from top beverage production companies to hotels, restaurants and retailers in Trenton – New Jersey. We are in the distribution industry to maximize profits and we are going to ensure that we achieve or business goals and objectives.

Our source of income will be the retailing (distribution) of a wide range of beverages at affordable prices. We will generate income for the business by;

One thing is certain when it comes to the distribution business, if your business is centrally positioned coupled with effective and reliable vans/trucks and distribution network, you will always attract customers cum sales and that will sure translate to increase in revenue generation for the business.

We are positioned to take on the available market in Trenton – New Jersey and we are quite optimistic that we will meet our set target of generating enough income/profits from the first six months of operations and grow the business and our clientele base.

We have been able to examine the beverage and carbonated soft drinks distribution industry and we have analyzed our chances in the industry and we have been able to come up with the following sales forecast. Below are the sales projections for Charlie & Tango Distribution Company®, LLC.

N.B : This projection was done based on what is obtainable in the industry and with the assumption that there won’t be any major economic meltdown and there won’t be any major competitor offering same products, home delivery services and customer care services as we do within same location. Please note that the above projection might be lower and at the same time it might be higher.

Before choosing a location for Charlie & Tango Distribution Company®, LLC, we conducted a thorough market survey and feasibility studies in order for us to penetrate the available market and become the preferred choice for beverage and carbonated soft drinks retailers, hotels, and restaurants in Trenton – New Jersey.

We hired experts who have good understanding of the retailing and distribution industry to help us develop marketing strategies that will help us achieve our business goal of winning a larger percentage of the available market in Trenton – New Jersey.

In summary, Charlie & Tango Distribution Company®, LLC will adopt the following sales and marketing approach to win customers over;

Despite the fact that our beverage and carbonated soft drinks distribution business is well structured and well located, we will still go ahead to intensify publicity for the business. Charlie & Tango Distribution Company®, LLC has a long-term plan of opening distribution channels all around the state of New Jersey which is why we will deliberately build our brand to be well accepted in Trenton before venturing out.

Here are the platforms we intend leveraging on to promote and advertise Charlie & Tango Distribution Company®, LLC;

Pricing is one of the key factors that gives leverage to distribution companies and retailers, it is normal for retailers to purchase products from distribution companies that they can goods at cheaper price. We will work towards ensuring that all our goods are distributed at highly competitive prices compared to what is obtainable in the United States of America.

We also have plans in place to discount our goods once in a while and also to reward our loyal customers from time to time.

The payment policy adopted by Charlie & Tango Distribution Company®, LLC is all inclusive because we are quite aware that different customers prefer different payment options as it suits them but at the same time, we will ensure that we abide by the financial rules and regulation of the United States of America.

Here are the payment options that Charlie & Tango Distribution Company®, LLC will make available to her clients;

In view of the above, we have chosen banking platforms that will enable our clients make payment for farm produces purchase without any stress on their part. Our bank account numbers will be made available on our website and promotional materials.

13. Startup Expenditure (Budget)

This is the key areas where we will spend our start – up capital;

We would need an estimate of $500,000 to successfully set up our beverage and carbonated soft drinks distribution business in Trenton – New Jersey.

Generating Funds/Startup Capital for Charlie & Tango Distribution Company®, LLC

Charlie & Tango Distribution Company®, LLC is a private business that is solely owned and financed by Charlie Tango and his immediate family members. They do not intend to welcome any external business partner which is why he has decided to restrict the sourcing of the startup capital to 3 major sources.

N.B: We have been able to generate about $200,000 (Personal savings $150,000 and soft loan from family members $50,000) and we are at the final stages of obtaining a loan facility of $300,000 from our bank. All the papers and documents have been signed and submitted, the loan has been approved and any moment from now our account will be credited with the amount.

The future of a business lies in the number of loyal customers that they have, the capacity and competence of the employees, their investment strategy and the business structure. If all of these factors are missing from a business (company), then it won’t be too long before the business close shop.

One of our major goals of starting Charlie & Tango Distribution Company®, LLC is to build a business that will survive off its own cash flow without injecting finance from external sources once the business is officially running.

We know that one of the ways of gaining approval and winning customers over is to retail / distribute our beverages and carbonated soft drinks a little bit cheaper than what is obtainable in the market and we are well prepared to survive on lower profit margin for a while.

Charlie & Tango Distribution Company®, LLC will make sure that the right foundation, structures and processes are put in place to ensure that our staff welfare are well taken of. Our company’s corporate culture is designed to drive our business to greater heights and training and re – training of our workforce is at the top burner.

As a matter of fact, profit-sharing arrangement will be made available to all our management staff and it will be based on their performance for a period of three years or more. We know that if that is put in place, we will be able to successfully hire and retain the best hands we can get in the industry; they will be more committed to help us build the business of our dreams.

Attached Documents

Include details and studies used in your business plan; for example:

How to Make a Business Plan for a Loan

Karen Axelton

In this article:

What are the types of business plans, how to write a business plan for a loan.

The Importance of Credit When Applying for Business Loans

Whether you want to buy equipment, expand your business or get working capital to carry you through a slow season, a business loan can make it happen. Many lenders, especially traditional banks and Small Business Administration (SBA) guaranteed lenders, will ask you to submit a business plan as part of your loan application. To make a business plan for a loan, you need to know how much money you're seeking, how you will use it and how you expect it to benefit your business. Here's a closer look at what's involved in writing a business plan that will help you land a loan.

The kind of business plan you need to write when applying for a loan will vary depending on your business and your financing goals. Business plan types include:

Although some lenders won't ask for a business plan, traditional lenders typically do. Think of writing a business plan as the price you pay to access the favorable business loan terms and lower interest rates available from banks and SBA-guaranteed lenders. Before extending credit, these lenders want to be confident that your business or business idea is sound and will generate the profits you need to pay them back.

Your business plan should convey what makes your business unique, how you operate, who your customers are, how you make money, who makes up your leadership team, and how the business fits into the competitive landscape. It should also provide details of your business's finances and financial projections. To cover all these topics, most business plans include the following sections:

You can buy business plan software that walks you through the process of writing a business plan. BPlans is one source of software, free templates and business plan advice. You can also get help writing a business plan from the SBA; their website can connect you with business advisors to guide you.

Where to Get a Business Loan

Where can you get a business loan? Here are some of the best places to look.

How can you find the best business loan for you? Start by determining exactly how much money you need, what you need it for (some loans restrict what the money can be used for), and the loan payments you can afford. This will help you narrow the field to lenders that offer the amounts and terms you need.

Next, shop around. There are lots of business lenders out there, and the more options you investigate, the more likely you are to find a good match. When assessing lenders, compare the loan amount, loan term, annual percentage rate (APR), fees, penalties and total cost of the loan. Last but not least, make sure the monthly payment is manageable—otherwise, you may have trouble paying off the loan.

Keep in mind that you don't have to get all your financing from one place. Particularly when launching a business, it's common to get money from several sources, such as friends, family members, individual investors, loans and a business line of credit .

Putting up collateral isn't the only way to lower the cost of a business loan. Having good personal and business credit scores can also help you qualify for better loan terms.

If you've been in business for a while, your business should have its own business credit score and business credit report, which lenders will review when considering your loan application. Similar to your personal credit history, your business credit history reflects how your business manages debt, and includes information such as on-time payments, collections and bankruptcies. The three major business credit bureaus—Experian, Dun & Bradstreet and Equifax—use data from your vendors, bankers, public records and other sources reported to your business credit history to generate a business credit score .

If your business doesn't have a credit history—for example, if it's a startup or relatively new—or if you're a sole proprietor, lenders will rely on your personal credit history and credit score when evaluating your loan application. Even if you have a business credit score, some lenders will want you to personally guarantee the loan, and they'll examine both your personal and your business credit before agreeing to fund you.

Before you apply for a business loan, ask the lender which credit scores they consider. Then check your personal credit report and credit score , as well as your business credit report and score , to see how you and your business measure up. Less-than-stellar credit scores won't necessarily rule out a business loan, but you may have to settle for higher interest rates, less favorable terms and less money than if your scores were higher.

If you don't need financing immediately , it's worth taking steps to boost your credit scores before you apply for a business loan. You can improve your personal credit score by bringing late accounts current, paying all bills on time, paying down credit card debt and not applying for new credit accounts in the months preceding your application.

To improve your business credit, check to make sure your business credit cards and any trade credit accounts with suppliers report to the business credit bureaus. Pay your business's bills on time and work to pay down high revolving credit balances.

A Business Loan at Last

Business loans can benefit your company in many ways. In addition to the financial jumpstart a loan provides, repaying a business loan can help to build your business's credit history and establish a good business credit score.

What's on Your Credit Report?

Stay up-to-date with your latest credit information — and get your FICO ® Score for free.

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How to Start a Money Lending Business

Last Updated: March 6, 2023 References Approved

This article was co-authored by Clinton M. Sandvick, JD, PhD . Clinton M. Sandvick worked as a civil litigator in California for over 7 years. He received his JD from the University of Wisconsin-Madison in 1998 and his PhD in American History from the University of Oregon in 2013. There are 22 references cited in this article, which can be found at the bottom of the page. wikiHow marks an article as reader-approved once it receives enough positive feedback. In this case, 95% of readers who voted found the article helpful, earning it our reader-approved status. This article has been viewed 266,672 times.

If you want to start a money lending business, you will need to decide what kinds of loans you want to make—payday, mortgage, or installment loans. You may choose to start a lending business using only your own money or money from a group of investors. Starting a money lending business will require that you develop a business plan and gain the necessary government licenses.

Preparing to Start the Business

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About This Article

Clinton M. Sandvick, JD, PhD

To start a money lending business, you’ll need to draft a business plan and obtain the necessary licenses by completing the paperwork required by your state. Your business plan will need to include the types of loans you want to make, such as payday or mortgage, and strategies for how to grow your business. That way, you can attract potential investors, which is typically less risky than using your own savings. You should, however, work with an attorney experienced in securities to ensure you acquire your investments legally. Your lawyer can also help you apply for the needed licenses and register your business as a corporation, sole proprietorship, or whichever type of company you choose to be. For more advice from our Legal co-author, like how to advertise your new business, keep reading! Did this summary help you? Yes No

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How To Get A Business Loan In 5 Steps

Jordan Tarver

Updated: Jul 12, 2022, 3:15pm

How To Get A Business Loan In 5 Steps

A business loan can provide the funds you need to expand operations, cover day-to-day expenses and purchase equipment or inventory. If you’ve never applied for a business loan, you might be unsure about where to begin or which documents are required.

Here’s a simple guide that walks you through the process of evaluating your options and preparing your business loan application in five easy steps.

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1. Decide Why You Need Financing

There’s more than one kind of small business loan. Deciding why you need financing will help you choose the right kind of loan. Here are a few common scenarios:

2. Check Your Eligibility

Although business loan requirements vary, here are four things lenders are likely to consider when reviewing your small business loan application:

3. Compare Business Lending Options

There are several places you can find small business loans . Here are three of the most common types of lenders.

Online Lenders

Online lenders offer a variety of loan products to small business owners, including term loans, merchant cash advances, lines of credit and microloans. Loan approval rates were higher for online lenders than traditional banks as of 2019—80% versus 74%, respectively—according to a 2019 Small Business Credit Survey by the Federal Reserve.

One reason for this is that online lenders often have less stringent requirements than traditional banks. As a result, you may find it easier to get approved for a business loan with an online lender if you have less-than-stellar credit. In addition, online lenders often have much faster turnover—some may issue funds as soon as the same business day.

A major downside of taking out a business loan with an online lender, however, is that it often charges higher interest rates than a traditional bank.

Related:  Average Business Loan Rates: What Will You Be Charged?

Traditional Banks

Traditional banks provide many of the same types of business loans as online lenders. The main advantage of applying for a small business loan with a bank versus an online lender or microlender is that it typically offers lower rates for well-qualified applicants.

One disadvantage of applying for a business loan with a bank is that it often has more stringent eligibility requirements. If you have a bad personal credit score (a FICO score less than 580), you will likely have a hard time qualifying without a co-signer—someone who agrees to repay the loan if you fail to meet your payment obligations.

Traditional banks might also not be the best option if you need quick access to funds—applicants were most frustrated by long wait times, according to a 2019 SBCS survey. For example, SBA loans through a bank can take several weeks to months to process.


Microlenders are typically not-for-profit organizations that issue microloans up to $50,000 to qualified applicants, often designed to provide financing for business owners who don’t qualify for traditional business loans. Microlenders usually have less stringent eligibility requirements.

For example, the microlender Kiva does not have a minimum credit score requirement. Instead, it approves applicants based on “social capital.” To qualify, you have to get a certain number of people to lend money to you through Kiva’s platform before your loan request becomes public on their website.

Related: Business Loan Calculator: Estimate Your Payments

4. Gather the Required Documents

Once you understand your lending options, gather the required documents. A lender will likely ask for these items:

If you’re unsure what documents are needed, contact the lender before applying.

5. Submit Your Application

The final step is to submit your small business loan application. Depending on what lender you’ve decided to work with, you can do this online or in person.

Here’s some information a lender might ask for:

Once you submit your application, you’ll have to wait for an approval decision. If your loan is approved, a lender will send you a loan agreement to sign before issuing your funds or a line of credit you can draw from.

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Frequently Asked Questions (FAQs)

What credit score is needed for a business loan.

Since lenders have different eligibility requirements, the personal credit score you need to qualify for a business loan varies. That said, minimum credit score requirements may range from 500 to 680.

The business credit score needed to qualify also varies from lender to lender. Plus, it depends on the type of loan you’re applying for and what business credit score a lender uses. For example, when it comes to SBA loans, you’ll typically need a minimum business credit score of 155 to pass the SBA’s pre-screen process. However, most lenders set their minimum score requirements between 160 and 165.

How can I get a business loan with no money?

Although most lenders have annual revenue requirements, it’s possible to get a business loan if your business doesn’t have any money. Some lenders offer no doc business loans—loans that don’t require verification of business income. To qualify, you’ll likely need to have excellent credit and provide a personal guarantee.

Can I get a business loan with bad credit?

Although you’ll likely find it tougher to get approved for a small business loan with bad credit, it’s possible. Some lenders specialize in offering business loans to borrowers who have bad personal credit scores . However, If approved, a lender will most likely charge you a higher interest rate.

To receive a lower interest rate and boost your approval odds, consider applying with a co-signer who has a good credit score (at least 670, according to FICO) and decent income, if possible. A co-signer is someone who agrees to repay your loan if you default. Before you ask someone to co-sign for you, make sure they understand that a missed payment can cause damage to their credit.

How can I get approved for a business loan without collateral?

Certain lenders may be willing to approve you for a business loan without collateral if you sign a personal guarantee. Providing a personal guarantee means that you legally agree to be personally responsible for paying back the loan with your own assets or savings if the business cannot. 

Since eligibility conditions vary by lender, shopping around can help you find a loan with application criteria that fits your situation. You may have the best shot at qualifying for a no-collateral loan through an online lender that has flexible application requirements.

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5 states with the highest sba 7(a) loan amounts, best startup business loans for bad credit of 2023, capital one business loans review 2023, nonprofit financing options: 8 ways to secure funds, best beauty salon loans of 2023.

Jerry Brown is a personal finance writer based in Baton Rouge, La. He's been writing about personal finance for three years. Financial products he enjoys covering include credit cards, personal loans, and mortgages.

Jordan Tarver is the Deputy Editor for Loans at Forbes Advisor. Before joining Forbes Advisor, Jordan was an editor and writer for multiple finance sites, focusing on loans, credit cards and bank accounts. When he is not working on personal finance content, Jordan is a self-help author and recently released his book You Deserve This Sh!t

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How To Write A Business Plan for A Bank Loan (3 Key Steps)

Wondering how to create a business plan that will wow your banker.

You're not alone.

Most entrepreneurs see writing a business plan as a gargantuan task – especially if they've never written one before.

Where do you start?

How do you calculate the financials?

How can you be sure you're not making a mistake?

And if you need a business plan for a bank loan, getting this document right is absolutely essential.

So here's what we recommend: simplify the planning process by breaking the work up into manageable, bite–sized steps. That way, you can focus on one section at a time to make sure it's accurate.

Here's a quick overview of the step–by–step process we guide entrepreneurs through when they sign up for LivePlan.

Step 1: Outline The Opportunity

This is the core of your business plan. It should give loan officers a clear understanding of:

There are three key parts to this step:

The Problem & Solution

Detail exactly what problem you are solving for your customers. How do their lives improve after you solve that “pain point” for them?

We recommend actually going out and chatting with your target audience first. That way, you can validate that you're solving a real problem for your potential customers.

Be sure to describe your solution in vivid detail. For example, if the problem is that parking downtown is expensive and hard to find, your solution might be a bike rental service with designated pickup and dropoff locations.

Target Market

Who exactly are you selling to? And roughly how many of them are there?

This is crucial information for determining whether or not your business will succeed long–term. Never assume that your target market is “everyone.”

For example, it would be easy for a barber shop to target everyone who needs a haircut. But most likely, it will need to focus on a specific market segment to reach its full business potential. This might include catering to children and families, seniors or business professionals.


Who are your direct competitors? These are companies that provide similar solutions that aim to solve your customers' pain points.

Then outline what your competitive advantages are. Why should your target market choose you over the other products or services available?

Think you don't have any competition? Think again. Your customers are likely turning to an indirect competitor that is solving their problem with a different type of solution.

For example: A taco stand might compete directly with another taco stand, but indirectly with a nearby hot dog vendor.

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Step 2: Show how you'll execute

This is where the action happens! Here you'll get into the details of how you'll take advantage of the opportunity you outlined in the previous section. This part demonstrates to banks that you have a strong plan to achieve success.

The three main components of this step include:

Marketing & Sales Plan

There can be a lot of moving parts to this one, depending on your business model.

But most importantly, you'll need to fully explain how you plan to reach your target market and convert those people into customers. A few example of what should be included:

This is the nuts and bolts of your business. It's especially important for brick–and–mortar companies that operate a storefront or have a warehouse.

You may want to explain why your location is important or detail how much space you have available. Plan to work at home? You can also cover your office space and any plans to move outside your house.

Any specialized software or equipment and tools should also be covered here.

Milestones & Metrics

Lenders and investors want to be confident that you know how to turn your business plans into financial success. That's where your milestones come in.

These are planned goals that help you progress your company. For example, if you're launching a new product your milestones may include completing prototypes and figuring out manufacturing.

Metrics are how you will gauge the success of your business. Do you want to generate a certain level of sales? Or keep costs at a certain level? Figuring out which metrics are most important and then tracking them is essential for growth.

Step 3: Detail your financial plan

This is the most crucial – and intimidating – part of any business plan for a bank loan. Your prospective lender will look especially close at this section to determine how likely your business is to succeed.

But the financial section doesn't have to be overwhelming, especially if you break the work into smaller pieces. Here are 3 items that your plan must have:

Simply put, this is your projections for your business finances. It gives you (and the bank) an idea of how much profit your company stands to make. Just a few items you'll need to include:

Exactly how will you use any investments, loans or other financing to grow your business? This might include paying for capital expenses like equipment or hiring personnel.

Also detail where all your financing is coming from. Lines of credit, loans or personal savings should be listed here.

Bankers will be giving this section a lot of attention. Here's what you'll need:

Don't forget the Executive Summary

The Executive Summary is the first section of your business plan, but we recommend you tackle it last.

It's basically an introduction to your company, summarizing the main points of your plan. Keep it to just one or two pages and be as clear and concise as possible.

Think of it as a quick read designed to get the lender excited about your business.

If you need help writing your plan

Not everyone feels confident writing a business plan themselves, especially if it's needed to secure a bank loan.

And although you don't need an MBA to write one, getting your business plan right often does require quite a bit of work. So if you need help writing your plan, here are two options to consider:

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How to Write an SBA Business Plan — SBA Template and Checklist

business plan for a loan

Applying for an SBA loan for your business requires preparation. You need to gather paperwork not only on your personal finances but on your business history and your projections for the future .

For most SBA loans, you’ll need to put together a business plan—one that shows how funds will be used and how the business will repay the loan over time. While this is not too different from a traditional business plan, there are some important details that you’ll need to pay attention to. 

Here’s what you need to know about SBA business plans and how you can maximize your chances for approval.

What is an SBA loan?

SBA loans are loans that are issued by banks and credit unions, but backed by the US Small Business Administration—the SBA. That means that if you default on your loan, the government helps repay the bank that issued the loan. 

The SBA requires personal guarantees from anyone that owns at least 20% of the business. This means that when you get an SBA loan, you are putting your personal assets on the line in the event that your business can’t repay the loan.

SBA loans are also typically targeted at businesses that have at least 2 years of history and strong financials. If your business is a startup or is struggling, an SBA loan may not be the right fit for you.

Despite the personal guarantee requirement, SBA loans are a popular way for small businesses to fund growth and expansion. For more on SBA loans, read our complete guide .

Why you need a business plan for SBA loans

SBA loans require a good amount of documentation on both your business and your 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.

Beyond gathering information about the past, the bank that is issuing the loan is going to want to know about the future of your business. They’re going to want to see how the loan is going to get used, and that your future cash flow projections indicate that your business will be able to afford loan payments.

That’s where an SBA business plan comes in. In addition to all the other documentation required for the loan, you’ll need to produce a business plan to accompany the rest of the loan application.

Not only will your business plan describe your business to your lender, but it will also have the financial projections that the bank is going to need to help determine if you qualify for the loan.

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, though, you should try and make your business plan as short and concise as possible . Your business plan is going to be read by a bank loan officer and they are going to be less than excited about the prospect of reading a 50-page business plan.

If possible try and keep the written portion of your business plan between 10-15 pages. You’ll then also have your financial forecasts that will take up several pages. 

A great way to start your business plan is to start 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 overview they need before they start taking a look at your financial plan and your complete business plan.

Free business plan template

How to write a business plan for your SBA loan application

Like any good business plan, a business plan for an SBA loan will cover the fundamentals:

1. Executive summary

A one-page overview of your business plan and how much money you’re looking to borrow.

2. Business opportunity

A description of the business you’re in and the problem you solve for your customers.

3. Market analysis

An overview of your target customers and your competition.

4. Sales & marketing plan

A summary of how you sell your product or service and how you market to your target customers.

5. Financial forecast

Anywhere from 3 to 5 years of financial projections, including sales, expenses, and cash flow.

Check out our complete business plan outline to ensure you have everything you need to write your plan. 

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

Beyond the basics, though, your SBA business plan needs to include a focus on the loan you are applying for and how that will impact your business financially. Make sure to include the following in your financial plan to increase your chances of success with your lender:

Loan amount

In your executive summary, be sure to document how much money you are asking for. It’s best to put your number out upfront rather than trying to bury it deep within your business plan.

The specific terms of SBA loans are negotiated between the borrower and the lender. However, most SBA-backed loans have a maximum loan amount of $5 million while SBA Express loans have a maximum loan amount of $350,000. 

Cash flow forecast

Be sure to include the loan in your cash flow projections. Show when you anticipate receiving the loan and how that will impact your finances over time. Your cash flow forecast will also show loan payments for the life of the loan. Having this prepared upfront will not only increase the chances of your application being approved but will make it much easier to manage the loan after you receive funding . 

Balance sheet 

You’ll also want to show the loan on your projected balance sheet as well as how the loan gets paid down over time. The money that you owe will show up on your balance sheet as a liability while the cash that you received from the loan will show up as 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 that will impact your profitability in the coming months and years.

Use of funds

In addition to your financial forecasts, you should also include a description of how you plan to use the loan and what aspects of your business you will be investing in. Some SBA loans are specifically for expanding export businesses or for funding real estate transactions, so make sure your use of funds description is appropriate for the loan you are applying for.

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Increase your chances of success with a business plan

A good SBA business plan will increase your chances of success with your lender. Of course, you’re going to also need the required assets for the personal guarantee and your business is going to need to be in good shape overall. But, a business plan that clearly explains your business and has solid financial projections will help your bank decide whether they will issue an SBA loan to you.

If you’re struggling to put together a business plan for an SBA loan, you may want to explore a business planning tool like LivePlan. With LivePlan , you get step-by-step guidance to develop a beautifully designed, SBA-approved business plan that provides everything investors need to evaluate your business. 

AvatarNoah Parsons

Noah Parsons


Noah is currently the COO at Palo Alto Software, makers of the online business plan app LivePlan. You can follow Noah on Twitter .

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For the development and improvement of any business, be it a small business or a large one, it needs some amount of fundings or loan. To apply for these business loans, you need a set of documents that you can use to sell yourself or your business in the eyes of the lender. Such plans should be simple but exhaustive enough to document the details of a particular company. Create a loan business plan by utilizing some of our plan templates which should help you create an image of the company.

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5 steps to create a loan business plan, 5+ loan business plan templates, 1. auto loan business plan template, 2. loan officer business plan template, 3. restaurant business plan to get a loan template, 4. micro loan business plan template, 5. sample loan business plan template, step 1: provide an outline of the plan, step 2: process of execution, step 3: give details of your financial plan, step 4: give an executive summary, step 5: proofread.

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Your Farm's Business Plan

A good farm business plan is your roadmap to start-up, profitability, and growth, and provides the foundation for your conversation with USDA about how our programs can complement your operation. Your business plan will be a living document that you can change as your vision and circumstances shift. 

On This Page

Key resources for planning your business, farm service agency (fsa).

Staff at your local service center, as well as your State Beginning Farmer Coordinator can connect you to local resources in your community to help you establish a successful business plan. If you are applying for a loan your loan officer will review your business plan and assist you in translating your plan and farm vision to your application.

This FSA business plan template is part of the application and shows you the type of information you should gather when preparing your plan and application materials.

The Score Mentorship Program partners with USDA to provide:

Learn more about the program through the Score FAQ .

Other Farm Business Resources

Special Considerations

Conservation and Risk Management

Another key tool is a conservation plan, which determines how you want to improve the health of your land. USDA’s Natural Resources Conservation Service can help you develop a conservation plan for your land, based on your goals, at your local USDA Service Center . 

A conservation plan can help you layout your plan to address resource needs, costs and schedules. Learn more about  conservation in agriculture .

Crop insurance, whole farm revenue protection and other resources can help you prepare for unforeseen challenges. Learn more about disaster recovery .

Prepare for Your Visit to a USDA Service Center

Once you've written out a business plan for your operation, prepare for your visit to a USDA service center. During your visit, we can help you with the necessary steps to register your business and get access to key USDA programs.

Learn more about how to work with your USDA Service Center

Setting Up and Financing Your Business

Tips to consider when setting up your business.

Use the New Farmers Checklist to understand the steps you might need to take before setting up your operation.

Learn more about how you can get funding for your operation on our Land and Capital page .

Learn more about opportunities for  beginning farmers and ranchers .

How to Write a Business Plan for a Loan

Writing a business plan for a loan , also known as a loan proposal, involves anticipating and detailing a company's potential financial needs well in advance of when the loan is needed. This plan, along with any necessary documentation from your lender, is used to apply for a small business loan and can factor heavily on getting approved for the loan.

Recommended: Try TRUiC’s free Business Plan Generator tool.

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What Is a Business Plan?

Why do you need a business plan to get a business loan, how to write a business plan to get approved for a loan.

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A business plan is a document made to prove that a venture will be successful by giving an idea of what the market the company operating in looks like, the resources it needs to operate, and a timeline needed to make it a success.

Most business plans are created before a company is ever formed.

Here are some things a good business plan can do for an entrepreneur:

Whether you are a startup or you've been around the block a few years, at some point, you're probably going to need a small business loan .

To get a business loan, you will need a business plan. Unfortunately, not all companies are perfectly planned out and put together. So, regardless if you've ever prepared a plan or not, this article will help you draft a business plan with the specific intention of impressing lenders, so you can get a loan.

Here are some reasons you need a business plan to get a small business loan:

There are nine sections within a successful business plan. Each section is important. However, the most important section is the Executive Summary. The executive summary should always be written last because it sells the lender on why your company will be profitable.

Here are the sections you need to have in your business plan and how to write each one:

Executive Summary

Market analysis, company description, organization and management, marketing and sales management, service or product line, request funding, financial forecasting and projections.

Recommended: Read our business planning guide for more information on how to write a business plan.

The executive summary answers the primary question: Why would your company be a profitable business to lend money to?

Write this section last, and be sure to include a summary of each section within this section. This section should be a snapshot of your entire business operation. You’ll want to sell lenders on why lending your company money is not a risky proposition for them. You’ll also want to include financial information and goals for growth in this section.

Every business needs to know its marketplace inside and out.

A market analysis details how the business competes, what the advertising spend and marketing strategy is, and what the potential to make money within the market is. Write your market analysis in such a way that you show lenders you’re serious about your company and know how to grab as much market share as possible.

As the name indicates, the company description is the section of your plan that identifies you as a business.

It tells your business story, what you do and how long you’ve been doing it. It tells potential lenders your location, who’s in charge, and how they can reach you. Write this section in such a way that you appear completely transparent, like an open book.

Make lenders believe you’re in it for the long haul so they feel secure lending you the money you’re requesting.

Every venture has a hierarchy structure that begins with a Director or CEO, all the way down to general employees.

Your plan’s organization and management section needs to explain to lenders who’s in charge and what their background is. For example, does the CEO have an MBA from Harvard? If so, this is something you want to add to this section. You also want to include information on what’s operations like and what’s the size of the organization.

Every company needs to be able to get their product or service in front of customers.

If they’re unable to do this, they fail. It’s important to show lenders in this section how you propose to or are already selling your product. You also want to explain your marketing strategy. Your reach and target market will determine how you set up your marketing strategy.

In this section, you explained to lenders what products or services you sell.

When you write this section, explain how your products and services are differentiated from your competitors. Show lenders you are a force to be reckoned with inside the marketspace you are operating.

In this section, state how much money you need to borrow and for what purpose.

Explain how the money will be spent and how and when it will be repaid. Make sure to answer how you will pay off your loan should a buyout or acquisition happen. Talk about outstanding debt your company has and how you’re paying back this debt. These items influence a borrower's ability to pay their small business loans back.

It is important to know where you expect your sales to be over a set period of time.

This is where financial forecasting and projections come into play. When you write this section, be as realistic as possible regarding your expectations and what you foresee happening in the future with your company’s sales and growth projections. This is also the time to list collateral .

Lenders want to see growth over stagnation.

The appendix is an optional section that we highly recommend you include. Here you’ll want to include all necessary documentation needed for getting a small business loan.

You will want to make sure you include copies of your resume, profit and loss statement or income statement, balance sheets, and cash flow statements. These three documents are the most important business documents that lenders will expect you to have. You will also want to make sure you include any requirements mentioned on your loan application.

This way, you save time so you can get your loan faster. It also shows lenders you're responsible and ultra-organized.

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How to Write a SBA Loan Business Plan

A business plan is a crucial piece of any SBA loan application. It’s what lenders will look at most closely when approving a loan, so it should be organized, well planned and persuasive. Set yourself up for success by learning how business plans impact loan approval and which critical elements to include.

What is a business plan?

Many entrepreneurs talk about their business plan — whether it’s stored only in their minds or scratched on napkin — but truly savvy business owners take the to time author a well-written one. So what exactly is a business plan?

A business plan is a living document (meaning it can and should be updated as your business progresses) with a three- to five-year outlook into your business. It should provide an overall summary of where the business is headed, plans for growth and projected revenue. Business plans take time, research and due diligence, but the reward is organized and actionable steps to grow your business. In fact, companies with a formal written business plan see a  30 percent increase in growth  compared to those that don’t.

How does a business plan help you get an SBA loan?

Outside of your basic eligibility requirements ( see Chapter 2 for the 5 C’s ), your business plan is the top element lenders will review to determine your attractiveness as a borrower. Having a solid business plan with clear ideas makes it easier it is for banks to see that your business will be successful, and therefore that you’ll be able to repay the loan. However, business plans are not a one-size-fits-all endeavor. If you’re running an independent business or launching a start-up, the importance of your business plan carries additional weight and will be more carefully scrutinized. If you’re funding the purchase of a franchise, the competitive analysis and management sections will be more closely reviewed than others because the business model has already proven successful.

Writing a business plan can sound intimidating, but even a thorough plan only needs to be seven to ten pages. Check out our free  eBook  and business plan template to help guide you through the process, and keep reading for an overview of each section of the business plan.

The 10 Elements of a Business Plan

Whether you’re writing a business plan as a part of your SBA loan application package or not, there are 10 essential elements to include. Here’s a look at what those sections are as well what’s included in a complete plan.

Cover Page and Table of Contents

The cover page and table of contents of your business plan is a great way to show your lenders that you’re a professional and organized businessperson. These pages should be simple and straightforward, but you can (and should) make them your own by including your company’s logo.

What’s included in the cover page and table of contents?

Executive Summary

As the first thing that lenders will read in your business plan, the executive summary is the most important section. Here, you will introduce yourself to potential lenders or investors, so the overall tone should be professional, but it should also paint a positive picture about the business.

What’s included in the executive summary?

Company Description

The company description is a closer look at how the business will function. This information is a good opportunity to show lenders you’ve thought through the day-to-day details and have a solid strategy in place. Consider the company description your extended elevator pitch.

What’s included in the company description?

Market Plan and Analysis

The market analysis section should show readers your deep understanding of the market and your plan to be competitive. Those looking to fund a franchise should give this section extra attention, as lenders will be reviewing this information closely. This is also great space to use visuals to help support your story.

What’s included in the market plan and analysis?

Organization and Management

Depending on the size of your business, the amount of detail in the management section can vary greatly. Even if there are only a few people in leadership roles, an organizational chart is an effective way to show lenders how the management team will be structured. If you are your only employee (and plan to remain so), you can write a short paragraph explaining this as well as your qualifications.

What’s included in the organization and management section?

Service or Product

When describing your service or product in your business plan, it’s important to emphasize how your particular offering will meet a need for your target market. Try to think beyond providing a general description of what your company is selling and focus on how your company provides value to your customers.

What’s included in the service or product section?

Marketing and Sales

The marketing and sales information in your business plan is all about how you’re going to connect with customers. Whether your strategy is to focus on advertising or inbound marketing, you should detail your plan here and explain why it makes sense for your target audience. You should also discuss how you plan to build and support your sales strategy.

What’s included in the sales and marketing section?

Funding Request

Your funding request is an opportunity to tell lenders how SBA funding will help your business, as well as how your business will successfully repay the loan. Here, you should explain why you’re asking for small business financing as well as an overview of how the funds will be used.

What’s included in the funding request?

Financial Projections

The information in the financial projections section of your business plan should cover three years of forecasted financial information. Keep in mind, you’re showing lenders how your business will perform by providing profit and loss, balance sheet and cash flow details. Remember, your business plan is a living document, so for your own benefit, you should continue to update this information even after funding.

What’s included in the financial projections section?

The appendix is the final section of your business plan, and is the best place to add any supporting documents. For example, if you had multiple pages of data to support your market analysis, you can include them here. You should reference which documents are in the appendix in earlier sections so lenders know where to find additional information.

What’s included in the appendix?

Creating a written business plan may seem like an arduous task, but it’s a crucial step to obtain SBA financing. This living document can also help to guide you once you’re in business — keeping you on track, helping you to see what’s working and possibly what’s not. Taking the time to write a business plan now will help you find success down the road.

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Analysis-U.S. Bank Loan Plan Provides Fed Rate Hike Path Amid SVB Fallout


FILE PHOTO: The U.S. Federal Reserve building is pictured in Washington, March 18, 2008. REUTERS/Jason Reed/File Photo Reuters

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) - A U.S. lending program to stem deposit outflows in the wake of Silicon Valley Bank's collapse gives the Federal Reserve scope to continue raising interest rates if needed to slow inflation without exacerbating losses on bonds held by banks.

That said, Tuesday's U.S. inflation news should not force the Fed's hand on aggressive hikes, as was expected before the regional bank crisis unfolded in recent days.

Under the Bank Term Funding Program (BTFP), aimed at shoring up liquidity in the sector, the Fed will provide banks with one-year loans at the rate of a one-year overnight index swap (OIS) plus 10 basis points (bps). Banks can use eligible government securities on their books like Treasuries and agency mortgage backed-debt to guarantee the loans.

Crucially, the program values these at par rather than at mark-to-market which helped submerge SVB.

The current one-year OIS rate on Tuesday was last at 4.73%. By comparison, a one-year loan from a Federal Home Loan Bank, a government state enterprise that provides low-cost lending to regional banks, is around 5.4%, according to market participants.

The ability to pledge discounted bonds that have marked-to-market losses with the surge in interest rates should help banks considerably, as intended, analysts said, which should give the Fed some flexibility to continue to tighten monetary policy.

"The net impact of the regional bank funding turmoil and the new lending program still means, on balance, less accommodative financial conditions than we were expecting a week ago," said Lou Crandall, chief economist at money market research firm Wrightson in New York.

"The Fed doesn't want to stop tightening prematurely because of stability concerns. It wants to find stability tools. In essence, the bank lending program will allow the Fed to keep raising rates."

California regulators shut down SVB last Friday following a failed stock sale that took out $42 billion in deposits in a single day. SVB had to fill in a $1.8 billion funding hole after it sold a $21 billion portfolio of available-for-sale securities at a loss as rising interest rates eroded the value of U.S. Treasuries.

With the new bank lending scheme, "banks will not be forced to liquidate bond portfolios at huge losses, even if they face funding pressures," said Ryan Swift, bond strategist at BCA Research in Montreal.

"Instead, banks can meet their liquidity needs by borrowing from the Fed. For the bond market, the structure of this facility means that the Fed can keep lifting rates without exacerbating the problem of unrealized bond losses in bank portfolios."

The latest Fitch Ratings report showed unrealized losses on bank securities portfolios stood at $690 billion as of Sept. 30, 2022, representing approximately 40% of U.S. banks' tangible common equity.

U.S. banks had raised their holdings of government securities during periods of ultra-low interest rates to defend falling interest net margins. Current U.S. bank holdings of government securities have ballooned to $4.4 trillion, or 19% of banking assets, Moody's said in a report on Tuesday, citing Fed data. In 2005, those holdings were $1 trillion.

Moody's expects the Fed to continue tightening despite funding turmoil which should darken the outlook for banks this year.

With SVB's failure, the bond market has pulled back expectations of further rate increases, pricing in cuts this year as well. Major banks led by Goldman Sachs and Barclays Bank have called for a pause from the Fed next week.

"The Fed's actions, backing up deposits, are to restore confidence in the system rather than to offer stimulus or loosen conditions, said Angelo Kourkafas, investment strategist at Edward Jones, in St. Louis.

"But as we think about what's played out, it's resulted in tighter financial conditions. Even though yields have fallen credit spreads have widened. So in a way what transpired is doing some of the Fed's work for the Fed."

The U.S. inflation data further eases the way for the Fed to keep tightening, although at a slower pace.

The consumer price index (CPI) rose 0.4% last month after gaining 0.5% in January. Shelter, which includes rents as well as hotel and motel accommodations, accounted for more than 70% of the increase in the CPI.

With inflation still strong, the Fed's inflation-fighting credentials on the line and financial markets calmed for now by the new bank facility, U.S. rate futures have priced in a 25 basis-point hike at next week's Fed policy meeting. The market has also priced the same increase in May.

"The SVB failure has ripples that will need to be addressed, but full-on contagion does not seem the issue," said Ellis Phifer, managing director of fixed income research at Raymond James in Memphis, Tennessee.

"The Fed still wants to address inflation and they will continue to hike for now."

(Reporting by Gertrude Chavez-Dreyfuss in New York; Additional reporting by Sinead Carew in New York; Editing by Alden Bentley and Matthew Lewis)

Copyright 2023 Thomson Reuters .

Tags: United States , loans , financial regulation

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Potential Plan B for Biden Student Loan Relief Messy, Untested

By Lydia Wheeler

Lydia Wheeler

Welcome back to Opening Argument, a reported column where I dig into interesting legal controversies and questions dividing appellate courts. Today: a look at a plan B for President Biden’s student loan relief.

It’s not a big deal if the US Supreme Court strikes down President Biden’s student loan forgiveness program because he’s got a backup plan.

That’s what the attorney for student loan borrowers challenging the relief seemed to suggest during arguments last week.

If the court rules the education secretary doesn’t have the power to forgive debts for 40 million Americans under the Higher Education Relief Opportunities for Students, or HEROES Act, Michael Connelly said the Biden administration will just try again using authority provided by the Higher Education Act and this time go through the proper notice and comment rulemaking process.

The chance to weigh in is all the borrowers say they wanted to begin with. But legal scholars aren’t sure if the education act is a valid Plan B. There are still lots of unanswered questions even if it is.

What would happen to student debts in the interim? Would it survive another legal challenge? And would it be worth the effort with a presidential election less than a year away? By June—when a Supreme Court decision is due—that time will be shortened to mere months.

Adam Minsky, a Boston-based attorney who’s focused on helping student loan borrowers, said there’s a provision in the education law that grants the education secretary fairly broad authority to “compromise, waive, or release’’ federal student loan obligations.

The Education Department recently invoked the HEA in agreeing to discharge some federal loans as part of a class action settlement. Student loan borrowers, who alleged for-profit colleges lied to them about job prospects after graduation, sued the agency when it stopped acting on their requests for debt cancellation as a result of the schools’ misconduct.

Minsky said the law has never been used for a widespread cancellation plan before.

“The reality is, if the justices are parsing words like ‘modify’ or ‘waive’ in the HEROES act, they’re going to, in my view, very likely have similar skepticism about words like ‘compromise’ and ‘waive’ in the HEA,” he said.

It’s also unclear if the government could bypass typical notice and comment rulemaking requirements. That process can take several months to a year.

If it can’t, the rule could get stuck in the drafting stage long after the election, said Dalié Jiménez, a professor and director of the Student Loan Law Initiative at the University of California, Irvine School of Law.

And if Democrats lose the White House, a final rule may never see the light of day.

In the meantime, Jiménez said it’s going to be very difficult for the government to continue its pause on student loan payments.

The Education Department is already facing a lawsuit brought by an online lender that wants people to start paying again. SoFi Bank and SoFi Lending Corp., which offer federal student loan borrowers private funding to refinance their loans, allege it was unlawful for Biden to extend the freeze on payments while its forgiveness plan is being litigated. The companies say the moratorium has hurt their bottom line.

Tara Grove, a federal courts and constitutional law professor at the University of Texas at Austin School of Law, said political campaign managers are going to have to figure out what will be most appealing to voters.

“Historically, politicians often get a lot of credit for trying programs even if those programs are ultimately rejected by the federal courts,” she said. “The ‘is it worth it’ question is a policy question that the Biden will have to weigh.”

The administration may decide it has no other choice but to try again.

“What’s the alternative? We give up? That’s a terrible story headed into an election,” Jiménez said.

Reinstating payments while working on a rule, though, may be worse.

Luke Herrine, an assistant professor and expert in student loan law at the University of Alabama School of Law, said the Education Department should just start canceling debts with its HEA authority.

“Don’t announce it 30 days in advance and wait to be sued, and have an injunction,” he said. “Cancel the debt and make the court reimpose it if they want to rule against you.”

In other words, play hardball.

Herrine said that will get the administration further with voters.

“It would be enormously stupid politically to have an upcoming election where you’re saying ‘We’re restarting payments, we ended the emergency, all this emergency relief is fading out. Sorry we can’t get anything through Congress and sorry we have to respect all these court rulings,’” he said. “I don’t think that’s a winning political message or an effective one in the long term.”

Know of an issue or circuit split worth writing about? Send ideas to [email protected] . To read more Opening Argument, sign up for our newsletter The Brief. You’ll get Bloomberg Law’s top stories delivered free to your Inbox every weekday afternoon and catch this column when it runs.

To contact the reporter on this story: Lydia Wheeler in Washington at [email protected]

To contact the editors responsible for this story: Seth Stern at [email protected] ; John Crawley at [email protected]

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What the FDIC takeovers of SVB and Signature mean for the banks’ customers and employees

Jeanne Sahadi

Here’s where things stand for customers and employees of Silicon Valley Bank and Signature Bank , both of which failed this week and were promptly taken over by the FDIC.

Will customers have full access to all of their money on deposit?

Over the weekend, the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corporation issued a joint statement noting that they were taking steps that “fully protec[t] all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”

A similar statement was issued for customers of Signature Bank .

That means customers will be able to access their insured deposits as well as their uninsured deposits from the “bridge bank” that the FDIC created for SVB deposits and the one it created for Signature deposits.

Both SVB and Signature were FDIC-insured. That means the FDIC insures up to $250,000 per depositor for each account ownership category. Some customers may be insured for more than $250,000 if they had more than one type of deposit account, since each account is covered separately.

What’s more, if more than one person owns an account jointly, each owner is covered up to $250,000.

But the move by the three agencies to provide customers access to their uninsured deposits as well was critical. Most SVB customers, for instance, are businesses, and they have a lot more than $250,000 on deposit because they used SVB for much of their cash management, including payroll.

What are the ways customers can access their money?

SVB and Signature customers will have many of the same banking conveniences that they had before their banks were taken over.

“Depositors and borrowers … will have customer service and access to their funds by ATM, debit cards, and writing checks in the same manner as before. Silicon Valley Bank’s official checks will continue to clear. Loan customers should continue making loan payments as usual,” the FDIC said in a statement Monday regarding SVB.

It issued a similar statement for Signature .

What about lines of credit?

Per FAQ s specific to the SVB and Signature closures, customers’ lines of credit have been transferred to the new bridge banks the FDIC created to handle customers’ transferred deposits and banking services. The agency notes that customers should contact the bank if they have questions about their credit lines.

Can customers continue to keep their money where it is?

Yes, but the FDIC will communicate to customers how long they can continue to do so.

The specifics of each individual bank closure will differ. But, as an example, when the FDIC took over the Bank of Eastern Shore in Maryland on April 27, 2012, it gave customers until May 25 to open accounts at other institutions, but they had varying dates before that for the ending of different types of services (such as online banking services, direct deposits, etc.).

So far, the FDIC has not established any end dates of services for SVB or Signature customers.

What if a customer has a loan through SVB or Signature?

Customers with a loan still have to make payments, even if the FDIC ends up selling the loan.

For now, the agency states, “You may continue to send your payments to the same payment address… You will receive a letter advising you of any changes.”

Will SVB and Signature employees keep their jobs?

Very likely, but perhaps not for long.

Typically, in an FDIC takeover, the employees of the failed bank are kept on to help with the transition . Their salary and benefits are paid for by the FDIC during that time. “It is customary that we seek to retain these employees during the resolution process to ensure continued customer service and access to deposits,” a spokesperson said.

The FDIC offered Silicon Valley Bank employees 45 days of employment and 1.5 times their salary, according to reports. The FDIC did not confirm those numbers, telling CNN it does not discuss the salary arrangements it makes with staff at former banks. Nor did it respond to a query about whether employees who are not kept on would get severance pay.

Should the FDIC find a buyer for either bank, the acquiring institution will be the one deciding whether the banks’ employees stay on.

But, as with any corporate merger, if SVB and Signature are sold to other entities, it wouldn’t be surprising if some layoffs followed.

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3 reasons student-loan borrowers could start taking on more debt once Biden's plan to lower monthly payments goes into effect

Monthly student-loan payments might soon be a lot cheaper for borrowers — but it could be a double-edged sword.

Alongside his announcement of up to $20,000 in student debt relief for federal borrowers in August, President Joe Biden also announced his plan to implement reforms to income-driven repayment plans. The plans are intended to give borrowers affordable monthly payments based on their income with the promise of loan forgiveness after at least 20 years. To date, servicer failures in tracking payments accurately have kept borrowers in repayment far longer than they anticipated.

Rather than creating an entirely new plan, Biden's proposal would amend the existing Revised Pay As You Earn (REPAYE) plan, which was created in 2016 to make payments more affordable for borrowers. The changes include ensuring borrowers pay no more than 5% of their discretionary income monthly on their undergraduate student loans — down from the current 10% — and shorten the timeframe for receiving loan forgiveness by allowing those who borrowed $12,000 or less originally to receive debt relief after ten years.

While Democratic lawmakers lauded the proposed improvements to IDR plans, Republican lawmakers criticized the proposal, along with its potential cost. That's why the House Education Committee Chair Virginia Foxx and Senate education committee ranking member Bill Cassidy asked the Congressional Budget Office (CBO) to prepare a report on the costs of Biden's IDR proposal. CBO released its report on Monday. It estimated the reforms would cost $230 billion over ten years, and if Biden's broad debt relief plan falls through, that cost would rise to $276 billion due to an expected increase in borrowing.

"The administration's Income-Driven Repayment rule is nothing more than a backdoor attempt to provide free college by executive fiat," Foxx said in a statement. "Transferring $230 billion from borrowers who willingly took out debt to taxpayers who did not is fiscally irresponsible and morally reprehensible. Make no mistake, I soundly reject this illegal abuse of power."

The CBO noted uncertainty with its estimates, as "it is difficult to anticipate the ways students and postsecondary institutions would respond to the availability of the plan." But it wrote in its report that should the IDR reforms be implemented as they were proposed, borrowing will increase by 12%, or about $10 billion, by fiscal year 2027 for three main reasons:

The CBO also noted that Biden plans to issue a new gainful employment rule in April, which would cut off federal aid for schools that offer career and certificate programs that leave students with a large of amount of student debt compared to their likely post-graduation earnings. The implementation of that rule would offset some of the increasing borrowing, the CBO said.

Insider has previously reported that Biden's IDR reforms could keep borrowers in the same repayment cycle if it isn't implemented properly. An Urban Institute analysis of the proposal found that the share of borrowers enrolled in IDR who earn a bachelor's degree that fully pay off their loans would fall from the current 59% to around 22%, and the share of those paying no more than half of what they borrowed would rise from 22% to 49%. 

"Under current IDR plans, most borrowers can expect to repay some or all their debt," the analysis said. "If the Biden plan is implemented as proposed, fully repaying a student loan will be the exception rather than the rule."

Matthew Chingos, vice president of education and data policy at the think-tank Urban Institute and coauthor of the analysis, previously told Insider that he thinks the reforms will be significant and that Biden's administration has "done the most they can through administrative action to simplify and move us towards a world where there really are basically two options, the standard option and an income-based option."

But it remains to be seen how effectively the reforms will be implemented, and Chingos said he's worried that "it doubles down on a failed system that just has never worked well."

business plan for a loan

Business Loan Requirements: How to Qualify for Funding

Business loan requirements overview.

The small business loan requirements for any form of commercial funding will vary widely , depending on the lender you work with and the type of financing you’re applying for. 

In this guide we’ll break down the most common business loan requirements, as well as review how to qualify and apply for a small business loan.

A Quick Guide to Business Loan Requirements

20 Requirements to Qualify for a Small Business Loan

So, what is required for a small business loan?

As we mentioned above, some of the requirements you’ll need to meet in order to qualify for a business loan will vary based on the lender you’re working with. To this point, bank loan requirements for businesses, for example, will be very different from the new business loan requirements of an online lender.

Fortunately, though, there are still several eligibility criteria that small business lenders have in common. Although not all lenders will require this full list of business loan requirements, it’s safe to assume that you’ll need to provide core credentials such as your personal credit score, annual revenue, and time in business.

With this in mind then, let’s break down the qualifications you’ll likely need for your business loan application:

1. Time in Business

Every lender will ask how long you have operated your business. The longer you’ve been in business, the better it is for your application because it shows a lender that your business has had long-term success.

Ultimately, the threshold that you should keep in mind is two years . If your business is under two years old, it doesn’t make it impossible to get a business loan, but it does limit your options.

Although banks may be less likely to lend to business under two years old, online lenders will often have more flexible requirements with regard to your time in business.

2. Personal Credit Score

One of the most important business loan requirements you’ll need to qualify for financing is your personal credit score.

Lenders will ask for your personal credit history and financial information to assess the likelihood that you’ll pay back your loan—if your personal finances are strong, lenders assume this means you’ll be able to manage your business finances as well. This being said, your personal credit score will not only influence whether or not you’re approved, but it will also play a role in determining your loan interest rate .

Ultimately, the better your personal credit score is, the more loan options you’ll have available to you. You’ll want to aim for a credit score of at least 600 —and ideally, even higher, especially if you’re looking to qualify for a bank or SBA loan.

3. Business Credit Score

Similar to the way your personal credit score indicates your history as a borrower, your business credit score measures your business’s creditworthiness. Your business credit score is based on your business’s history of payments to suppliers and lenders. Your business’s industry, size, and revenue can also impact the score.

Many entrepreneurs are unaware that their business has a credit score—or even that it’s a common small business loan requirement. This being said, there are three main agencies that track business credit, and each has its own method for evaluating your business credit score. Additionally, many lenders use the FICO SBSS score to evaluate your loan application, as it’s based on a combination of your business credit score from the other three agencies, as well as your personal credit score and business’s financials.

Therefore, before applying for a small business loan, it’s important to have a sense of what your business credit score looks like. Although not all lenders will check this score, those that do may pull it at any time during underwriting.

4. Annual Business Revenue and Profit

Your business’s annual revenue and profits will also be one of the most common small business loan requirements you see across different lenders.

Typically, lenders will want to see both a year-to-date profit and loss statement, updated within the past 60 days, and statements from the previous two years.

This being said, overall, banks will want to see that your business is  profitable in order to approve you for financing. Alternative lenders, on the other hand, will not often require profitability, but will usually have annual revenue minimums. 

Ultimately, regardless of the specific lender’s requirement, the stronger your business financials (as shown through your annual revenue and profits) the more likely you will be to qualify for financing, and business financing with the most affordable rates.

5. Bank Statements

Lenders will use your bank statements to determine  if you can afford your loan and will be able to pay it back.  Bank statements can also give lenders some insight into how well you manage the cash coming into your business.

Therefore, at a minimum, lenders will usually ask for four months of business bank statements to support the claims you’re making about your company’s financial history. If you’re applying for an SBA loan or conventional bank loan , you should be prepared to provide even more bank statements.

6. Personal and Business Tax Returns

Just like your personal and business credit scores, lenders will use your tax returns to evaluate the health of your personal and business finances, and therefore, your ability to afford and pay back a business loan.

Generally, you’ll need to provide at least the past two years of your personal tax returns. These documents will be  especially important if you have a pass-through entity (a sole proprietorship, partnership, or S-corp), where you report your business’s profits and losses on your personal tax return.

This being said, your business tax returns will be particularly influential if you  have a corporation or an LLC that’s taxed as a corporation. In these cases, the lender will use your last two years of business tax returns to verify your revenue, profit, and expenses.

7. Loan Purpose

It may seem obvious, but a typical small business loan requirement will be a statement describing what you plan to use the loan funds for.

In this statement, you’ll want to be as specific as possible—generally, lenders allow a variety of loan uses, they want to make sure, however, that the amount of money you’re requesting matches up with the purpose for the loan. 

8. Loan Amount

Directly related to the loan purpose, you’ll need to also specify your loan amount—in other words, how much money you want to borrow from the lender.

Generally, banks have access to the most capital and can issue loans that are six and seven figures.

Therefore, if you need a smaller amount of money (less than $250,000), banks will usually not be the best route. For smaller amounts of funding, you’ll likely want to turn to alternative lenders , and in some cases, SBA loans.

With this business loan requirement, it’s important to be straightforward and clear about how much financing you require (as well as how you’ll use it)—and of course, you don’t want to ask for more than you can afford.

9. Business Plan

A business plan or loan proposal won’t always be on the list of the small business loan requirements, but it will be for some.

For traditional term loans and SBA loans, for example, you’ll definitely need to provide a business plan for funding .

Within your business plan, you’ll have an opportunity to lay out both your financial goals—future sales, profits, income, cash flow, etc.—and your qualitative business goals. You’ll want to use this document to show your lender that you’ve thought about all the potential opportunities and challenges for your business and how you’re going to grow a successful company.

10. Industry

In short, your industry can affect your eligibility to get a business loan because every industry has a different level of risk.

This being said, most lenders have certain industries that they won’t lend to—such as firearms businesses and adult entertainment businesses—that could impact the lender’s reputation. However, some lenders also have less obvious restrictions. For instance, some lenders bar child care businesses, health care businesses, law offices, apparel companies, and financial companies.

Therefore, in order to ensure you’ll meet a lender’s industry requirement, you’ll want to check with them regarding any ineligible industries before submitting your application.

With this in mind, you’ll also want to make sure that you have correctly identified your business’s industry in your loan application—a small mistake could delay your application or even cause a lender to mistakenly reject it. There are two main industry code systems—Standard Industrial Classification (SIC) and North American Industry Classification System (NAICS). You can look up your code on the NAICS website .

11. Entity Type

Perhaps one of the simplest business loan requirements, a lender will likely ask you to report your business entity type.

From your lender’s perspective, knowing how your company is organized can give them insight into how you manage and operate your small business. Additionally, although it’s rare, some lenders won’t lend to sole proprietorships and partnerships.

These lenders prefer working with LLCs and corporations because these businesses have more legal protections and are less likely to fold if the owner faces a lawsuit or financial setback.

12. Business Licenses and Permits

Similar to your business entity information, another common business loan requirement is your business license or permit.

Although business license requirements vary by state and locality, lenders will want to see your proof of ownership and license to operate a business.

Additionally, depending on the size, location, and type of business, you may also need to provide proof of any relevant fire permits, sign permits, zoning permissions, environmental, sales tax, and health department permits.

13. Employer Identification Number (EIN)

Although you may not need an EIN for every business loan application (or for your business, depending on your entity type), you should specify your EIN on an application if you have one.

Overall, an EIN is like a social security number for businesses—the IRS uses this unique, nine-digit number to track your business’s tax returns. You can quickly and easily apply for an EIN online, and once again, although this number may not be required for all businesses or all loan applications, it may be worth getting one nevertheless.

14. Proof of Collateral

Although collateral isn’t always required, you may be asked to put up a fixed asset—like property or equipment—to secure your loan with a lender. Therefore, if you default on the loan, the lender can seize your collateral and use it to make up for some of the money they’ve lost.

Not all lenders will require specific collateral—however,  if you’re applying for an SBA loan or bank loan, for example, lenders will want to know what kind of collateral your small business has to offer, and the value of that collateral .

This being said, although alternative lenders typically won’t require physical collateral, they may require security in another form—such as a personal guarantee or blanket lien.

15. Balance Sheet

In addition to the other financial information we’ve discussed, many lenders will also ask to see your balance sheet as part of their small business loan requirements. Like your profit and loss statement, your balance sheet will help show a lender how your business  functions and whether or not your financials are in good standing.

Essentially, a lender will want to use your balance sheet to see that you have enough assets to cover your business’s operating expenses and pay back your loan on time and in full. Therefore, you should have your year-to-date balance sheet and the last two years of balance sheets (if you’ve been in business that long) ready to go as part of your application.

16. Copy of Your Commercial Lease

If you have a brick and mortar business, you should include a copy of your lease along with your other commercial loan documents .

A commercial lease proves that your business will be able to use the property for as long as the duration of the lease, no matter what happens to the landlord—and it also reassures your lender that you’ll be able to conduct business to pay back the loan.

17. Disclosure of Other Debt (Business Debt Schedule)

Small business lenders are very careful about lending to business owners who already have other loans, as they don’t want to offer you financing if you can’t afford your current loan payments–and for this reason, you might be asked to provide a business debt schedule as part of your loan application.

This being said, to  evaluate whether you can afford a loan, lenders often calculate your  debt service coverage ratio (DSCR) .

The ratio illustrates your current debt and interest payments in relation to your current incoming cash flow. If your DSCR isn’t high enough, the lender may reject your application or ask you to reapply later after you’ve further paid down existing debt.

18. Accounts Receivable Aging and Accounts Payable Aging

One of the more common bank loan requirements is  current accounts receivable (A/R) and accounts payable (A/P) aging reports. A/R and A/P aging reports show a lender how efficient your business is at receiving payment for goods and services and paying bills of its own.

The A/R report indicates the number of invoices you’ve sent to clients that are overdue and the length of time by which they are overdue. If this report shows too many accounts, it means your business hasn’t been very effective at collecting payments. On the other hand, if your A/R report has few overdue accounts, it means your repayment collection methods are effective, you extend credit to the right kind of customers, and your customers pay off debt quickly.

The A/P report is the opposite—showing the number of invoices from other businesses that you haven’t paid. A high number of delinquent accounts indicates that you’re not good at managing your expenses. You ideally will want to have a low number (or zero) overdue accounts on your A/P report.

19. Ownership and Affiliations

When you’re applying for a business loan, you should be  prepared to disclose any ownership that you or your partners have in other businesses as well as any affiliations, such as being a board member or consultant in another business. This information discloses any potential conflicts of interest that the lender may have with issuing the loan and any synergies that your business may have with other companies.

This being said, it can be more difficult to apply for a loan if your business has multiple owners.  Different lenders have different rules on how many owners need to approve a loan request . The SBA, for example, checks the personal financial information of anyone who owns 20% or more of the business and requires a personal guarantee from all of these owners. Other lenders may require approval from just 50% or 70% of overall ownership.

With this in mind, anyone  who needs to authorize the loan will need to provide a copy of their photo ID, a resume, a personal credit score, and other personal financial information that the lender requests.

20. Legal Contracts and Agreements

Finally, the last of the most common business loan requirements you’ll be asked to provide will be legal contracts and agreements that your business already has. Along these lines, lenders might ask to see any of the following:

How to Qualify and Apply for a Small Business Loan

Although this list may seem overwhelming, depending on your lender, you may not need  every one of these qualifications for your business loan application .

Ultimately, because small business loan requirements are so variable, it’s important to consult a lender about their process before actually submitting an application—this way, you’ll be prepared ahead of time to gather any documents or information you’ll need to submit, and therefore, optimize the process and hopefully, increase your chances for approval.

With all of this in mind, let’s continue our discussion by reviewing the basic steps you’ll want to follow to access a business loan.

Use our guide for more details on how to get a business loan.

The Bottom Line

At the end of the day, as you compare your options and search for the right business funding solution, you’ll want to remember that banks and SBA loans will require the most documentation and highest qualifications, but will also offer the most desirable rates and terms.

Alternative lenders, on the other hand, will have simpler application processes and more lenient qualifications, but their products will generally have shorter terms, lower amounts, and higher interest rates.

This being said, although the qualifications you need to meet will be specific to the loan product and the lender, by understanding the most common business loan requirements, as we’ve discussed, you’ll be in the best place to gather the necessary documentation and quickly and accurately complete your loan application.

Follow our guide for more information on how to apply for a business loan.

Business Loan Requirements: Frequently Asked Questions

Meredith Wood

Meredith Wood

Meredith Wood is the founding editor of the Fundera Ledger and a GM at NerdWallet.

Meredith launched the Fundera Ledger in 2014. She has specialized in financial advice for small business owners for almost a decade. Meredith is frequently sought out for her expertise in small business lending and financial management.


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Investors Fear Bank Contagion, Despite a Sweeping Rescue Plan

Shares in regional lenders were under pressure, even after regulators unveiled a vast backstop for U.S. banks after Silicon Valley Bank’s collapse

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By Andrew Ross Sorkin ,  Ravi Mattu ,  Bernhard Warner ,  Sarah Kessler ,  Michael J. de la Merced ,  Lauren Hirsch and Ephrat Livni

Fully backed by the U.S. government.

Bailout nation

Andrew here. Federal regulators on Sunday unveiled the most sweeping backstop for the U.S. banking system since the 2008 crisis, to limit carnage from the collapse of Silicon Valley Bank. The decision has shaken up global markets, with investors selling bank stocks and betting that the Fed would hold off on further interest rate rises.

Monday’s newsletter is a special edition deep dive into what just happened. Let’s start with some takeaways from the dizzying turn of events: Too Big to Fail is as alive as ever, but now no bank is too small to fail as well.

Banking is now officially a government-backed business, if it wasn’t before. Let’s admit it: Once the government guarantees all deposits, the “business” of banking isn’t much of a business — and maybe shouldn’t be. This is likely to become the biggest debate of the coming weeks and months.

The venture capital community, a group that includes a vocal group of libertarians, was just bailed out. Yes, these investors do good by funding start-ups, but they have also long lobbied for fewer regulations and also benefited from the special treatment of carried interest. This all looks particularly egregious after some of them spent the weekend begging for government help.

But the reality is that if S.V.B. was just a small regional bank that did not have ties to loud, politically connected venture capitalists and the tech community, it might have been allowed to die — and its customers, individuals and small businesses, would have suffered. Instead, because it is Silicon Valley, it commanded attention.

We have become a country of bailouts. We did it after the Sept. 11 attacks, in the wake of the financial crisis in 2008, during the pandemic — and now we are at it again. For those that say we should have lower taxes and shouldn’t fund the government, how are these bailouts supposed to be financed? (It’s also fair to say regulators should have done a better job, but the truth is that they have been pushed to do less , not more.)

Now that regulators will likely force small banks to raise their capital requirements to a level similar to bigger banks, costs for businesses and consumers will go up in the short term. That, of course, comes on top of higher interest rates.

Regulators should have kept a closer eye on small banks. They spent too much of the past decade or so focused on the big banks, because they apparently didn’t think that small lenders posed a systemic risk. But guess what? We have now decided that regional banks are just as risky.

Some of these institutions, including S.V.B., pushed back on more regulation, arguing that this wouldn’t allow them to compete with their bigger rivals. Silicon Valley Bank wrapped itself in the flag, arguing that was supporting small start-up businesses.

Shadow banking will expand. As more and more of the banking system faces tighter regulation, the business of making loans will increasingly move down the food chain to private firms. This has been happening for years already, but the trend is now likely to accelerate.

Bank runs are even more dangerous in the age of social media. Confidence can evaporate faster than ever when misinformation can spread in a matter of minutes, and a single tweet can send customers fleeing.

The big winner: Jamie Dimon and the big banks. JPMorgan Chase’s bankers spent the week opening up new accounts as everyone fled smaller lenders in favor of its “fortress balance sheet.” Investors have complained over the years about Dimon’s focus on having enough capital and sufficient liquidity at the expense of earnings, but his approach now looks like the right one.

Big banks’ behavior this time has been shaped by the fallout from 2008. Why isn’t Dimon buying S.V.B.? He has complained about the headaches of buying Bear Stearns and Washington Mutual at the government’s behest in 2008, having spent years fighting litigation and paying fines for those firms’ bad behavior. Bank executives who were around back then remember that.


The U.S., Britain and Australia will unveil a new defense pact to counter China. President Biden will announce the landmark nuclear-submarine agreement with the leaders of the other two countries at a meeting in San Diego. The talks come as China’s leader, Xi Jinping, vowed to bolster his country’s military and warned against “external interference” in Taiwan. Xi reportedly plans to meet as soon as next week with President Vladimir Putin of Russia and to speak with President Volodymyr Zelensky of Ukraine.

President Biden will greenlight environmental protections, as well as drilling, in the Arctic. A new measure defending more than 16 million acres of land and water in Alaska from oil and gas leases comes as he also plans to approve a contentious oil development project.

“Everything Everywhere All At Once” wins big at the Oscars. The sci-fi action comedy won best picture and six other awards, including best actress for Michelle Yeoh, making her the first Asian woman to receive the prize. The ceremony passed without incident after Will Smith slapped Chris Rock last year.

The race to stop banking contagion continues

Federal regulators hope that the sweeping backstop they introduced on Sunday to insulate the U.S. financial system from Silicon Valley Bank’s collapse will hold, even as they shut another regional lender, Signature Bank .

But yet another institution, First Republic, appears under pressure on Monday, despite securing funding. And the blame game is well underway.

First Republic reflects investor fears about banks’ health. The independent lender said on Sunday that it had secured access to about $70 billion in additional liquidity from the Fed and JPMorgan Chase. But its shares were down nearly 60 percent in premarket trading, suggesting markets are worried that it remains in trouble.

Investors more broadly feared further chaos was coming, despite the Fed’s efforts. European stocks, particularly big banks, were down this morning. Not even the prospect of a pause in central banks’ raising rates appeared to offer much comfort.

Regulators are still trying to sort out the wreckage of Silicon Valley Bank. HSBC said on Monday that it would buy the failed lender’s British operations for a symbolic 1 pound ($1.21), helping to shore up U.K. start-ups.

Meanwhile, bidders including JPMorgan and PNC Financial are reportedly still pursuing a deal for Silicon Valley Bank’s holding company , which includes asset management and a securities division and excludes the commercial bank now under F.D.I.C. control.

Start-ups are hoping they can finally exhale. Until the Fed announced that deposits at Silicon Valley Bank would be available from Monday, entrepreneurs raced to find cash to make payroll and pay expenses. Some found help from their venture capital bankers, private lenders and even from tech moguls like Sam Altman , of the ChatGPT creator OpenAI.

The billionaire investor Dan Loeb took a shot at some of his fellow venture capitalists, however: Start-ups could see who came to help, versus those who “hemmed and hawed or claimed their GPs didn’t have capital like that guy from a multi- billion quant shop,” he tweeted.

And recriminations are flying widely. Regulators face questions about how they missed red flags at Silicon Valley Bank, while venture capitalists were criticized as helping to spark a run at the lender. S.V.B. executives also took flak for mismanagement, including by failing to hedge against rises in interest rates, and for paying out employee bonuses on Friday.

But much of the criticism was aimed at the banking industry itself, which pushed back hard against tougher regulations after 2008. Lever News reported that allies of Silicon Valley Bank had opposed a higher deposit insurance surcharge from the F.D.I.C. to protect customer money. (Of note: One of Signature’s directors is Barney Frank, the former U.S. lawmaker who helped spearhead the expansive Dodd-Frank banking regulations. Incidentally, he blames this mess on crypto .)

Progressives used the moment to call for tighter regulations, including Senator Elizabeth Warren , Democrat of Massachusetts, in a Times Opinion guest essay:

These bank failures were entirely avoidable if Congress and the Fed had done their jobs and kept strong banking regulations in place since 2018. S.V.B. and Signature are gone, and now Washington must act quickly to prevent the next crisis.

What we know (and don’t know) about the bailout

The government’s deal to backstop depositors’ money held at all banks — and, in particular, at Silicon Valley Bank and Signature Bank — came as a huge relief to start-ups, the venture capital ecosystem and investors. But it hardly removes the contagion fears. Here are the main points of the rescue program, and the questions we still have.

The move could improve the prospects of a deal for S.V.B. A potential buyer wouldn’t have to absorb the bank’s huge losses, making the bank, which has a powerful customer base of tech elites and start-ups, more desirable. But will a savior demand some kind of protection against possible future litigation?

Silicon Valley shareholders will see their holdings wiped out. That’s a key difference from the Troubled Asset Relief Program, the sweeping banking bailout that saved U.S. lenders during the 2008 financial crisis .

Other banks have a new liquidity cushion. The Fed’s new program will let eligible banks borrow against bond holdings that have lost value since the central bank jacked up interest rates. That’s a big deal for banks sitting on huge quantities of these bonds, like Charles Schwab and First Republic, that would have had to take losses too if a wave of customer deposit withdrawals forced them to sell off those holdings. (Banks wouldn’t book a loss if those bonds are held to maturity.)

Are taxpayers really off the hook? Federal regulators say that banks insured by the F.D.I.C. (that is, most U.S. lenders) will be required to pay a tax to fund the measure.

But there’s nothing stopping banks from passing on that cost to customers, including through, say, credit card fees. And the loan program itself is backed by $25 billion from the Exchange Stabilization Fund, a Treasury Deposit emergency rescue fund financed by taxpayers.

What about other regional banks ? Markets’ volatility this morning shows that not all investors are convinced that these measures will safeguard American banks, particularly in an era of rising interest rates and industry consolidation.

The week ahead

Here’s what else to watch this week:

Tomorrow: The Commerce Department will release Consumer Price Index data at 8:30 a.m. Eastern. Economists, on average, expect the figures to confirm that inflation is moderating, but only slightly . On the earnings front: Volkswagen.

Wednesday: Adobe, BMW and Inditex, the owner of Zara, report results. New data on retail sales and the Producer Price Index are also due to be published. Elsewhere: Britain’s spring budget.

Thursday: It’s decision day for the European Central Bank. A half-percentage point increase is expected. Microsoft will present an A.I.-themed “future of work” event. The tech press is speculating that the software giant could offer details on a ChatGPT-powered Outlook software suite. FedEx and Dollar General report earnings.

Friday: The closely watched consumer sentiment report from the University of Michigan is scheduled for release.


Carl Icahn is reportedly planning a proxy fight at Illumina. (WSJ)

Silver Lake is set to buy the survey software maker Qualtrics in a $12.5 billion deal. (FT)

“A Supermarket Merger Will Redefine What You Buy at the Grocery Store” (WSJ)

Best of the rest

JPMorgan Chase has an uphill battle to make a former executive liable for any financial damages from lawsuits over the bank’s ties to Jeffrey Epstein. (FT)

Fox News could face a mortal blow if it loses the defamation lawsuit filed by Dominion Voting Systems — but it’s unclear whether damaging new evidence against the network will be heard in court . (MSNBC, NYT)

We’d like your feedback! Please email thoughts and suggestions to [email protected] .


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