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If you’re applying for a loan or looking for investors, a business plan shows you’re prepared and have fully vetted your business idea, says Craig Allen, a financial advisor who teaches business plan writing classes at Southern New Hampshire University. The key is to provide a clear explanation of the opportunity presented and how the loan or investment will grow your company.
“If you have no financial forecast, which is part of the business plan, it’s very difficult to show the bank how you are going to repay the loan,” Allen says. 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 increase its sales by 50% over the next three years.
“They know what you can expect sales to be for that type of business in that market,” Allen says.
“If you walk in with a sales forecast 50% higher than other businesses, they are going to know that you are not being realistic, and that’s going to work against you.” Keep it concise: All you need is 15 to 25 pages for a good business plan, as long as the plan is clear, concise and contains all of the relevant information, Allen says.It should also include the percent ownership that each owner has and the extent of each owner’s involvement in the company.You can also discuss current or pending trademarks and patents associated with your product or service. [Back to top] This section provides a snapshot of your small business. It should include a mission statement, which explains the main focus of your business, as well as a brief description of the products or services offered, basic information such as ownership structure, and a summary of your plans. Appendix Business plan tips and resources This is the first page of your business plan.» MORE: Best loans for working capital [Back to top] Here, you’ll list your business’s legal structure — such as a sole proprietorship, partnership or corporation — as well as key employees, managers or other owners of the business.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.But you should also address the various risk factors of the business, Allen says.“The loan officer is definitely going to want to know that you’ve thought through all of the potential risks and that you’ve mitigated those risks in some way,” he says.