How To Prepare a Business Plan To Obtain Money

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It is almost impossible to obtain a loan or investment capital unless there is a very clear explanation of what you want to do, and how those supplying money will be repaid. Those supplying money not only want you to be successful, they also want to have the opportunity to get their money repaid as promised, plus generate a return on their investment as measured by monetary profit and/or public benefits (e.g. jobs, taxes, community enhancement).

There are usually multiple people that participate in a decision to provide you with money but not all will have the opportunity to personally meet you, thus they must rely upon written information given to them to make a decision. As a result, it is vital that your plan be well written so that it easy to understand, accurate, and complete so that it clearly conveys your opportunities and potential for success. Most lenders and investors have far more requests than they can accomodate and do not have time to waste on incomplete or difficult-to-understand plans. The Ohio Department of Development program guidelines for various programs state that the following business plan information must be included in loan requests.

1. History and description of the business
2. Description of the market, industry, and competition
3. Resumes of owners and/or key managers
4. Business financial information that included income state and balance sheet for the past three years, current business financial statements less than 90 days old, financial projections for three years
5. Current personal financial statements from all owners that own 20% or more of the business
6. Conditional bank commitment
7. Phase 1 environmental audit (if applicable)
8. Cost verification and third party cost estimates
9. Appraisal by a qualified appraiser

The federal Small Business Administration suggests that the following information be in a written business plan.

1. Executive summary
2. Description of the business including type of business, location,product of service,brief history,annual sales,number of employees, proposed future operation, competition, customers, suppliers, date of information
3. Resumes of each owner and key managers
4. Description of how loans will be used (include purpose, amount, and type of loan)
5. Indicate how loan will be repaid including repayment sources and time requirements, cash flow schedules, budgets.
6. List collateral.
7. SBA requires personal financial statements (not more than 90 days old) and 3 years of federal tax returns of all owners owning 20% or more.
8. Complete financial statements for most recent 3 years and current financial statements, schedule of term debts and aging of accounts receivable and accounts payable
9. Pro-forma balance sheet reflecting sources and uses of equity and loans.
10. Financial projections for at least one year or until positive cash flow achieved with clear explanations
11. Documents that include leases, franchise agreement, purchase agreement, articles of incorporation, plans,licenses, letters of reference, letters of intent, contracts, partnership agreement.

Business startups that have little or no history upon which to base forecasts or judge management abilities must expend much effort to explain the market opportunity, industry, and competition. Some lenders require that a non-affiliated third party review such business plan information for accuracy.

At the top and bottom of this page is a link to a chapter (in a PDF format) from a book by Douglas Stemen titled "Steps To Business Success" that provides valuable insights into preparing a business plan. Doug is uniquely qualified to present this information. He was a professional salesperson in computer and telecommunication technologies prior to becoming a full time entrepreneur 1986. He has provided in-depth management consulting to hundreds of businesses, prepared many business plans, obtained millions of dollars from private and private lenders for clients, evaluates loan requests for community loan funds, taught college level finance courses, develops business software, and has undergraduate and graduate degrees in finance and an undergraduate degree in marketing.

Read "Business Plans & Planning"...

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