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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:

• What problem you're solving
• How your product or service fits into the current market
• What sets your business apart from the competition

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.

Competition

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.

Boost your chances of securing a loan

See how LivePlan can help you write a fundable business plan

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:

• Positioning strategy. What makes your business both unique and highly desirable to your target market?
• Marketing activities. Will you advertise with billboards, online ads or something else entirely?
• Pricing. What you charge must reflect consumer demand. There are a few models to choose from, including ‘cost–plus pricing’ and ‘value pricing.’

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:

• Revenue. List all your products, services and any other ways your business will generate income.
• Direct costs. Or in other words, what are the costs to make what you sell?
• Personnel. Salaries and expenses related to what you pay yourself, employees and any contactors.
• Expenses. Things like rent, utilities, marketing costs and any other regular expenses.

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:

• Profit & Loss. This statement pulls in numbers from your sales forecast and other elements to show whether you're making or losing money.
• Projected Balance Sheet. This is likely the first thing a loan officer will look at: it covers your liability, capital and assets. It provides an overview of how financially sound your business is.
• Projected Cash Flow. Essentially, this statement keeps track of how much money you have in the bank at any given point. Loan officers are likely to expect realistic monthly cash flow for the next 12 months.

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:

• Hire a professional business plan writer to do it for you. This is typically the most expensive route, but worth it if you're pursuing $100,000 or more in capital.
• Sign up for LivePlan. It's business planning software that walks you through a step–by–step process for writing any type of plan. It's an affordable option that also gives you an easy way to track your actuals against your business plan, so you can get the insights you need to grow faster.

LivePlan makes it easy to write a winning business plan

No risk – includes our 35-day money back guarantee.

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Why Do I Need a Business Plan?

Sections of a business plan, the bottom line.

• Small Business

How to Write a Business Plan for a Loan

How to secure business financing

Matt Webber is an experienced personal finance writer, researcher, and editor. He has published widely on personal finance, marketing, and the impact of technology on contemporary arts and culture.

A business plan is a document that explains what a company’s objectives are and how it will achieve them. It contains a road map for the company from a marketing, financial, and operational standpoint. Some business plans are more detailed than others, but they are used by all types of businesses, from large, established companies to small startups.

If you are applying for a business loan , your lender may want to see your business plan. Your plan can prove that you understand your market and your business model and that you are realistic about your goals. Even if you don’t need a business plan to apply for a loan, writing one can improve your chances of securing finance.

Key Takeaways

• Many lenders will require you to write a business plan to support your loan application.
• Though every business plan is different, there are a number of sections that appear in every business plan.
• A good business plan will define your company’s strategic priorities for the coming years and explain how you will try to achieve growth.
• Lenders will assess your plan against the “five Cs”: character, capacity, capital, conditions, and collateral.

There are many reasons why all businesses should have a business plan . A business plan can improve the way that your company operates, but a well-written plan is also invaluable for attracting investment.

On an operational level, a well-written business plan has several advantages. A good plan will explain how a company is going to develop over time and will lay out the risks and contingencies that it may encounter along the way.

A business plan can act as a valuable strategic guide, reminding executives of their long-term goals amid the chaos of day-to-day business. It also allows businesses to measure their own success—without a plan, it can be difficult to determine whether a business is moving in the right direction.

A business plan is also valuable when it comes to dealing with external organizations. Indeed, banks and venture capital firms often require a viable business plan before considering whether they’ll provide capital to new businesses.

Even if a business is well-established, lenders may want to see a solid business plan before providing financing. Lenders want to reduce their risk, so they want to see that a business has a serious and realistic plan in place to generate income and repay the loan.

Every business is different, and so is every business plan. Nevertheless, most business plans contain a number of generic sections. Common sections are: executive summary, company overview, products and services, market analysis, marketing and sales plan, operational plan, and management team. If you are applying for a loan, you should also include a funding request and financial statements.

Let’s look at each section in more detail.

Executive Summary

The executive summary is a summary of the information in the rest of your business plan, but it’s also where you can create interest in your business.

You should include basic information about your business, including what you do, where you are based, your products, and how long you’ve been in business. You can also mention what inspired you to start your business, your key successes so far, and your growth plans.

Company Overview

In this section, focus on the core strengths of your business, the problem you want to solve, and how you plan to address it.

Here, you should also mention any key advantages that your business has over your competitors, whether this is operating in a new market or a unique approach to an existing one. You should also include key statistics in this section, such as your annual turnover and number of employees.

Products and Services

In this section, provide some details of what you sell. A lender doesn’t need to know all the technical details of your products but will want to see that they are desirable.

You can also include information on how you make your products, or how you provide your services. This information will be useful to a lender if you are looking for financing to grow your business.

Market Analysis

A market analysis is a core section of your business plan. Here, you need to demonstrate that you understand the market you are operating in, and how you are different from your competitors. If you can find statistics on your market, and particularly on how it is projected to grow over the next few years, put them in this section.

Marketing and Sales Plan

Your marketing and sales plan gives details on what kind of new customers you are looking to attract, and how you are going to connect with them. This section should contain your sales goals and link these to marketing or advertising that you are planning.

If you are looking to expand into a new market, or to reach customers that you haven’t before, you should explain the risks and opportunities of doing so.

Operational Plan

This section explains the basic requirements of running your business on a day-to-day basis. Your exact requirements will vary depending on the type of business you run, but be as specific as possible.

If you need to rent office space, for example, you should include the cost in your operational plan. You should also include the cost of staff, equipment, and any raw materials required to run your business.

Management Team

The management team section is one of the most important sections in your business plan if you are applying for a loan. Your lender will want reassurance that you have a skilled, experienced, competent, and reliable senior management team in place.

Even if you have a small team, you should explain what makes each person qualified for their position. If you have a large team, you should include an organizational chart to explain how your team is structured.

Funding Request

If you are applying for a loan, you should add a funding request. This is where you explain how much money you are looking to borrow, and explain in detail how you are going to use it.

The most important part of the funding-request section is to explain how the loan you are asking for would improve the profitability of your business, and therefore allow you to repay your loan.

Financial Statements

Most lenders will also ask you to provide evidence of your business finances as part of your application. Graphs and charts are often a useful addition to this section, because they allow your lender to understand your finances at a glance.

The overall goal of providing financial statements is to show that your business is profitable and stable. Include three to five years of income statements, cash flow statements, and balance sheets. It can also be useful to provide further analysis, as well as projections of how your business will grow in the coming years.

What Do Lenders Look for in a Business Plan?

Lenders want to see that your business is stable, that you understand the market you are operating in, and that you have realistic plans for growth.

Your lender will base their decision on what are known as the “five Cs.” These are:

• Character : You can stress your good character in your executive summary, company overview, and your management team section.
• Capacity : This is, essentially, your ability to repay the loan. Your lender will look at your growth plans, your funding request, and your financial statements in order to assess this.
• Capital : This is the amount of money you already have in your business. The larger and more established your business is, the more likely you are to be approved for finance, so highlight your capital throughout your business plan.
• Conditions : Conditions refer to market conditions. In your market analysis, you should be able to prove that your business is well-positioned in relation to your target market and competitors.
• Collateral : Depending on your loan, you may be asked to provide collateral , so you should provide information on the assets you own in your operational plan.

How Long Does It Take to Write a Business Plan?

The length of time it takes to write a business plan depends on your business, but you should take your time to ensure it is thorough and correct. A business plan has advantages beyond applying for a loan, providing a strategic focus for your business.

What Should You Avoid When Writing a Business Plan?

The most common mistake that business owners make when writing a business plan is to be unrealistic about their growth potential. Your lender is likely to spot overly optimistic growth projections, so try to keep it reasonable.

Should I Hire Someone to Write a Business Plan for My Business?

You can hire someone to write a business plan for your business, but it can often be better to write it yourself. You are likely to understand your business better than an external consultant.

Writing a business plan can benefit your business, whether you are applying for a loan or not. A good business plan can help you develop strategic priorities and stick to them. It describes how you are going to grow your business, which can be valuable to lenders, who will want to see that you are able to repay a loan that you are applying for.

U.S. Small Business Administration. “ Write Your Business Plan .”

U.S. Small Business Administration. “ Market Research and Competitive Analysis .”

U.S. Small Business Administration. “ Fund Your Business .”

Navy Federal Credit Union. “ The 5 Cs of Credit .”

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How To Write a Business Plan for Bank Loan in 9 Steps: Checklist

By alex ryzhkov, resources on bank loan.

• Financial Model
• Business Plan
• Value Proposition
• One-Page Business Plan
• SWOT Analysis
• Business Model
• Marketing Plan

Are you an aspiring entrepreneur looking to secure a bank loan for your business venture? Well, you're not alone. The fee-based model for bank loans in the US has become the go-to solution for many borrowers. In fact, this business model has experienced significant growth over the years, making it a popular choice for funding. According to the latest statistics, the fee-based model accounts for XX% of all bank loans in the country. With its ability to provide financing options with flexible repayment schedules, it's no wonder that both banks and borrowers favor this model.

Now that you understand the importance and prevalence of the fee-based model, let's delve into how you can effectively write a business plan to obtain a bank loan. This comprehensive 9-step checklist will guide you through the process, ensuring that you cover all essential aspects. So, roll up your sleeves and let's get started!

• Conduct market research
• Identify target customers
• Analyze competition
• Determine the amount of funding required
• Gather necessary financial documents
• Outline the purpose and goals of the loan
• Create a company profile
• Develop a marketing and sales strategy
• Identify potential risks and mitigation strategies

Following these steps diligently will not only enhance your chances of securing a bank loan but also provide you with a solid foundation for your business. So, let's dive right into the first step - conducting market research!

Conduct Market Research

In order to write a comprehensive business plan that will appeal to a bank for a loan, it is crucial to conduct thorough market research. This step will provide you with valuable insights into the industry, target market, and competitive landscape. By understanding these key factors, you will be able to make informed decisions and create a strong case for the loan application.

Here are some important points to consider while conducting market research:

• Identify your target customers: Clearly define the specific group of customers who are most likely to benefit from your product or service. This will help you tailor your business plan to address their needs and preferences.
• Analyze the competition: Identify your main competitors and analyze their strengths, weaknesses, and market positioning. This will help you differentiate your business and showcase your unique value proposition.
• Understand market trends: Stay updated with the latest market trends, consumer behavior, and industry forecasts. This will help you identify potential opportunities and challenges that may impact your business.
• Evaluate market potential: Assess the size of your target market and determine the potential demand for your product or service. This will demonstrate to the bank that there is a viable market opportunity for your business.

Tips for conducting market research:

• Utilize online resources: Take advantage of online research tools and databases to gather industry reports, market data, and consumer insights.
• Conduct surveys or interviews: Engage with your target customers to gather firsthand feedback and insights about their needs and preferences.
• Join industry associations: Participate in trade associations and networking events to connect with industry professionals and gain valuable market insights.
• Stay updated with the competition: Regularly monitor your competitors' activities, such as their marketing strategies, product offerings, and pricing, to stay ahead of the game.

By conducting thorough market research, you will gain a comprehensive understanding of your target market, competition, and industry trends. This knowledge will enable you to develop a robust business plan that showcases the potential success and profitability of your business to the bank, increasing your chances of securing a loan.

Identify Target Customers

Identifying your target customers is a crucial step in developing a solid business plan for a bank loan. To ensure that your loan request is well-aligned with the needs and preferences of your customers, it is important to have a clear understanding of who they are.

The first step in identifying your target customers is conducting thorough market research. This involves gathering data and insights about the industry, market trends, and the needs and wants of potential customers. This information will help you narrow down your target audience and tailor your business plan to meet their specific needs.

Once you have gathered relevant market research data, you can start creating a profile of your ideal customer. Consider factors such as demographics, psychographics, and buying behavior. Demographics include characteristics such as age, gender, income level, and location. Psychographics, on the other hand, delve into your customers' interests, attitudes, and lifestyle choices.

Creating a customer profile will help you understand your target customers on a deeper level and enable you to develop targeted marketing strategies. This will increase the chances of your business being successful and appealing to both your customers and potential lenders.

Tips for Identifying Target Customers:

• Consider conducting surveys or interviews to gather direct feedback from potential customers.
• Utilize market segmentation techniques to identify specific customer groups that may have unique needs or preferences.
• Research your competitors and understand who their target customers are to gain insights.
• Monitor industry trends and patterns to identify emerging customer segments or target markets.

Analyze Competition

When seeking a bank loan, it is crucial to have a clear understanding of your competition in the market. Analyzing your competition will not only help you identify potential threats but also highlight areas where you can differentiate yourself and gain a competitive advantage.

Start by identifying direct competitors who offer similar products or services to yours. Research their market share, pricing strategies, distribution channels, and target customer demographics. This information will give you insights into their strengths and weaknesses.

Compare your products or services to those of your competitors and identify your unique selling points. What sets you apart from the competition? Do you have any patented technology, superior customer service, or innovative features that give you a competitive edge? Understanding these factors will help you position your business in a way that appeals to potential lenders.

Tips for Analyzing Competition:

• Subscribe to your competitors' newsletters and follow them on social media to stay updated on their latest offerings and marketing strategies.
• Visit their websites and evaluate their online presence. Look for customer reviews and testimonials to gauge customer satisfaction.
• Monitor industry publications and trade shows to gather information about new entrants, emerging trends, and market developments.
• Stay up-to-date with industry reports and market research to understand the overall competitive landscape.
• Consider conducting a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis to assess your business in relation to your competitors.

By thoroughly analyzing your competition, you can demonstrate to the bank that you have a solid understanding of the market landscape and have strategically positioned your business to succeed.

Determine The Amount Of Funding Required

When applying for a bank loan, it is crucial to determine the exact amount of funding your business needs. This will help you create a clear and realistic financial plan that aligns with your goals and allows you to meet your financial obligations.

Here are a few steps to help you determine the funding required:

• Evaluate your business expenses: Start by analyzing your current and future expenses. This includes everything from rent, utilities, and salaries to inventory and marketing costs. Consider any upcoming investments or expansion plans that may require additional funding.
• Estimate revenue projections: Assess your business's revenue potential based on market research, customer demand, and past performance. Take into account any potential growth opportunities or challenges that may affect your financial projections.
• Factor in contingencies: It's always wise to include a contingency fund to account for unexpected expenses or changes in the market. This will provide a buffer and ensure that your business can withstand any unforeseen circumstances.
• Be specific and detailed in your estimations to provide a realistic picture of the funding required.
• Consult with financial professionals or advisors to get a better understanding of your business's financial needs.
• Consider getting quotes or estimates from vendors and suppliers to accurately calculate the funding required.
• Regularly review and update your financial plan to reflect any changes in your business's needs or circumstances.

By carefully determining the amount of funding required, you can present a comprehensive and well-prepared business plan to your bank, increasing your chances of securing the loan you need to fuel your business's growth and success.

Gather Necessary Financial Documents

Gathering the necessary financial documents is a crucial step in the process of writing a business plan for a bank loan. These documents provide the bank with a clear understanding of your financial situation and help them evaluate the feasibility and potential of your business. Here are the essential financial documents you will need to gather:

• Profit and Loss Statement (P&L): A P&L statement provides an overview of your company's revenues, costs, and expenses over a specific period. It helps the lender assess your profitability and sustainability.
• Balance Sheet: A balance sheet provides a snapshot of your company's financial position at a particular point in time. It lists your assets, liabilities, and equity and enables the lender to evaluate your financial stability and ability to repay the loan.
• Cash Flow Statement: A cash flow statement shows the inflow and outflow of cash in your business. It helps the lender understand how effectively your company manages its cash resources and assesses your ability to generate sufficient funds to repay the loan.
• Business Tax Returns: Including your business tax returns for the past few years demonstrates your company's financial history and compliance with tax regulations. It validates the accuracy of your financial statements and enhances the lender's confidence in your business.
• Personal Tax Returns: Personal tax returns may be required if you are a sole proprietor or a small business owner. This document assists the bank in evaluating your personal financial situation and any potential impact on your ability to repay the loan.
• Bank Statements: Providing bank statements helps the lender assess your company's cash flow, bank balances, and transaction history. It offers insight into your financial activities and can support the accuracy of your financial projections.
• Financial Projections: Creating realistic financial projections is essential to demonstrate your future revenue potential and repayment ability. Ensure that your financial projections align with industry standards and are supported by market research and analysis.
• Organize your financial documents in a well-structured manner to make it easier for the lender to review.
• Ensure the accuracy and consistency of your financial documents to build trust and credibility with the bank.
• Consult an accountant or financial advisor to ensure your financial documents are comprehensive and meet the requirements of the bank.
• Keep your financial documents up-to-date and maintain records of any significant changes or updates.
• Include any additional supporting documents that may strengthen your loan application, such as business licenses, contracts, or insurance policies.

Outline The Purpose And Goals Of The Loan

When applying for a bank loan, it is crucial to clearly outline the purpose and goals of the loan . This not only helps the bank understand your business needs but also increases your chances of securing the funding you require. Here are some important points to consider:

• Specify the exact amount of funding you need and how it will be utilized. This could include purchasing inventory, expanding operations, investing in technology, or hiring additional staff.
• Identify the specific goal or objective of the loan. Is it to increase market share, launch a new product or service, or improve efficiencies in your business operations?
• Provide a timeline for achieving the goals outlined. This will demonstrate to the bank that you have a clear plan in place and helps establish realistic expectations for loan repayment.
• Outline the anticipated impact of the loan on your business. Will it result in increased revenue, improved profitability, or enhanced customer satisfaction?
• Highlight any potential risks associated with the loan and explain how you plan to mitigate them. This shows the bank that you have carefully considered any potential challenges and have strategies in place to overcome them.
• Including specific details and numbers can help strengthen your loan application.
• Clearly articulate how the loan will contribute to the growth and success of your business.
• Be realistic in setting goals and timelines to ensure feasibility.
• Demonstrate your understanding of potential risks and show how you are prepared to handle them.

Create A Company Profile

When applying for a bank loan, creating a strong company profile is crucial. This profile provides the bank with an overview of your business, its history, and its future prospects. It gives lenders confidence in your ability to repay the loan and showcases your business as a viable investment opportunity. Here are some important elements to include in your company profile:

• Company Overview: Start by providing a concise summary of your business, including its name, location, and legal structure. Give a brief description of your products or services, target market, and competitive advantages.
• Management Team: Highlight the qualifications and experience of your key personnel, including their roles within the company. This will demonstrate that your team has the necessary expertise to drive the business forward and manage loan repayments effectively.
• Financial Performance: Include key financial information, such as your company's revenue, profit margins, and cash flow. Show the bank that your business is financially stable and capable of generating sufficient income to cover loan repayments.
• Growth Potential: Outline your plans for growth and expansion. Explain how the loan will contribute to achieving your goals and increasing profitability. Be sure to include market research and industry trends to support your growth projections.
• Collateral: If you have collateral available to secure the loan, provide details about the assets that can be used as security. This could be real estate, inventory, equipment, or accounts receivable. Highlight the value of these assets and how they mitigate the bank's risk.
• Keep the profile concise and focused, highlighting the most important aspects of your business.
• Use clear and concise language to make the profile easy to understand.
• Include any awards, accolades, or industry certifications that reflect positively on your business.
• Provide references or testimonials from satisfied customers or clients to further enhance your credibility.

A well-crafted company profile can greatly increase your chances of securing a bank loan. It shows the lender that you have a solid business foundation, a capable management team, and a clear vision for growth. Remember to tailor the profile to the specific requirements of the bank and emphasize the aspects that are most relevant to their lending criteria.

Develop A Marketing And Sales Strategy

Developing a strong marketing and sales strategy is crucial for the success of your business, especially when seeking a bank loan. It demonstrates to the lender that you have a comprehensive plan to attract customers, generate revenue, and ultimately repay the loan. Here are some important steps to consider:

1. Understand your target market: Before developing your marketing and sales strategy, it's important to have a deep understanding of your target customers. Conduct market research to identify their needs, preferences, and behaviors. This will help you tailor your marketing efforts and messaging to effectively reach and attract your ideal customers.

2. Define your unique selling proposition (USP): Differentiate your business from competitors by identifying and promoting your unique selling proposition. This is what sets your product or service apart and makes it attractive to customers. Clearly communicate your USP in all your marketing materials to grab attention and convince potential customers why they should choose your business.

3. Develop a marketing plan: Outline the specific marketing activities you will undertake to promote your business. This may include online advertising, social media marketing, content marketing, email campaigns, traditional advertising, and more. Set realistic goals and allocate a budget for each marketing channel. Ensure your marketing plan aligns with your target market and USP.

4. Create a sales strategy: Your sales strategy outlines how you will convert leads into paying customers. Determine your sales process, including lead generation, nurturing, and closing techniques. Train your sales team (if applicable) to effectively communicate your value proposition and overcome objections. Consider whether you will offer any promotions or discounts to attract initial customers.

5. Utilize online channels: In today's digital age, online marketing is essential for reaching a wide audience. Establish a professional website that showcases your products or services. Leverage social media platforms relevant to your target market to engage with potential customers and build brand awareness. Consider implementing search engine optimization (SEO) strategies to improve your online visibility.

• Focus on building strong relationships with your customers to encourage repeat business and referrals.
• Monitor and measure the effectiveness of your marketing and sales efforts using analytics tools. This will help you identify what's working and what needs improvement.
• Stay informed about industry trends and adapt your marketing and sales strategies accordingly. Consumer preferences and behaviors can change over time, so it's important to stay relevant.

By developing a comprehensive marketing and sales strategy, you demonstrate to lenders that you have considered how to attract and retain customers, increasing your chances of securing a business loan. Keep refining and adapting your strategy as your business evolves to ensure long-term success.

Identify Potential Risks and Mitigation Strategies

Identifying potential risks is a crucial step in writing a business plan for a bank loan. Banks want to ensure that they are lending to a business that has considered all potential risks and has strategies in place to mitigate them. Here are some key risks to consider:

• Market Risks: Analyze the market conditions and assess any potential risks that could impact your business. This could include changes in consumer preferences, economic downturns, or competitor actions. Mitigation strategies may include diversifying your customer base, maintaining a competitive pricing strategy, or adapting your products/services to meet changing market trends.
• Operational Risks: Consider the potential risks associated with your day-to-day operations. This could include supply chain disruptions, equipment failure, or employee turnover. Mitigation strategies may include maintaining backup suppliers, implementing preventive maintenance plans, or investing in employee training and retention programs.
• Financial Risks: Evaluate the financial risks that your business may face, such as cash flow fluctuations, increasing expenses, or inability to meet debt obligations. Mitigation strategies may include creating a robust financial forecasting system, building a contingency fund, or negotiating favorable payment terms with suppliers.
• Regulatory and Compliance Risks: Be aware of any regulations or legal requirements that impact your industry and business operations. Non-compliance can lead to penalties, legal issues, and reputational damage. Mitigation strategies may include hiring legal professionals to ensure compliance, regularly reviewing and updating policies and procedures, and staying informed about changes in regulations.
• Be thorough in identifying potential risks and assess their potential impact on your business.
• Include specific mitigation strategies that are relevant to your industry and business model.
• Provide evidence or examples of how you have successfully mitigated risks in the past.
• Regularly review and update your risk assessment to adapt to changing circumstances and market conditions.

By demonstrating that you have identified potential risks and have strategies in place to mitigate them, you will instill confidence in the bank and increase your chances of securing a loan.

In conclusion, writing a business plan for a bank loan is a crucial step towards securing the funding needed to start or expand a business. By following the nine steps checklist outlined in this blog post, entrepreneurs can effectively present their business ideas to lenders, showcasing their market research, financial projections, and risk mitigation strategies. This comprehensive approach demonstrates professionalism and preparedness, increasing the chances of obtaining the desired loan amount at favorable terms. It is essential to remember that each bank may have its specific requirements, so adapting the business plan to meet their criteria is also crucial. By carefully crafting a business plan, entrepreneurs can position themselves for success and achieve their goals with the support of a bank loan.

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• Mar 30, 2023

The Ultimate Guide to Writing a Business Plan for a Loan: A Step-by-Step Walk-Through

The Ultimate Guide to Writing a Business Plan for a Loan: A Step-by-Step Walkthrough

As a business plan specialist and expert business planner, I'm here to guide you through the process of writing a comprehensive business plan for securing a loan. Whether you're a start-up or an established business looking to expand, a well-crafted business plan is essential for impressing potential lenders and securing the funding you need.

In this extensive, 5,000-word article, I'll cover everything you need to know about creating a top-notch business plan that will boost your chances of loan approval. We'll go through each section in detail, providing you with practical examples and tips to optimize your plan for success. So, let's get started!

Executive Summary

The executive summary is the first and most critical section of your business plan. It's a brief overview of your entire plan, highlighting the key points and giving readers an insight into your business.

Key elements to include in your executive summary:

Business concept: Briefly explain your business idea, the products or services you plan to offer, and the target market.

Company overview: Provide essential information about your company, including its legal structure, location, and mission statement.

Management team: Showcase the expertise and experience of your management team, emphasizing their ability to lead the business.

Market opportunity: Describe the market demand, trends, and target audience, highlighting the opportunity for your business to succeed.

Financial highlights: Summarize your financial projections, including sales, profits, and cash flow.

Loan purpose: Clearly state the purpose of the loan and the amount you're seeking.

Remember, the executive summary is often the first thing lenders read, so make it engaging and informative to grab their attention.

Company Description

The company description section is where you provide a more in-depth look at your business. It should give readers a clear understanding of your company's purpose, goals, and competitive advantages.

Key elements to include in your company description:

Business history: If your company has an existing history, briefly describe its origins and milestones achieved.

Mission statement: Articulate the purpose of your company and the value you aim to provide to customers.

Objectives: Outline the specific goals you want to achieve with your business, both short-term and long-term.

Products and services: Provide a detailed description of the products or services you plan to offer, emphasizing the benefits they provide to customers.

Target market: Identify your target audience, specifying their demographics, psychographics, and buying habits.

Competitive advantage: Explain what sets your business apart from the competition and how you plan to maintain this edge.

Market Analysis

The market analysis section demonstrates your understanding of the industry, market, and competition. It's crucial to show lenders that you've done your homework and have a comprehensive understanding of the market landscape.

Key elements to include in your market analysis:

Industry overview: Provide a high-level view of your industry, including its size, growth trends, and key players.

Market segmentation: Break down your target market into smaller segments, identifying their unique needs and preferences.

Target market characteristics: Describe the specific characteristics of your target market, such as demographics, psychographics, and geographic location.

Market demand: Present evidence of market demand, using data on customer needs, market trends, and buying behaviors.

Competitor analysis: Evaluate your main competitors, analyzing their strengths, weaknesses, and market share.

SWOT analysis: Conduct a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) to assess your business's position in the market.

Marketing and Sales Strategy

In this section, outline your marketing and sales strategy to show lenders how you plan to attract and retain customers, as well as generate revenue. A well-defined marketing and sales strategy is crucial to demonstrate that you have a clear plan for growth and profitability.

Key elements to include in your marketing and sales strategy:

Marketing objectives: Define your marketing goals, such as brand awareness, lead generation, or customer retention.

Target audience: Reiterate your target market, emphasizing their needs and preferences.

Unique selling proposition (USP): Highlight your USP, the main reason customers should choose your products or services over the competition.

Marketing channels: Identify the marketing channels you plan to use, such as social media, email, content marketing, or paid advertising. Explain the rationale behind your choice of channels and how they align with your target audience.

Sales process: Describe your sales process, from lead generation to closing deals. Include details on your sales team structure, training, and compensation plans.

Key performance indicators (KPIs): List the KPIs you'll use to measure the success of your marketing and sales efforts, such as conversion rates, average deal size, or customer lifetime value.

Operations Plan

The operations plan section details the day-to-day activities required to run your business. It shows lenders that you have a clear understanding of the operational aspects of your company and the resources needed to support your growth.

Key elements to include in your operations plan:

Facilities: Describe your business's physical location, including its size, layout, and any equipment or machinery required.

Production process: If applicable, detail your production process, including the steps involved, quality control measures, and production capacity.

Supply chain: Outline your supply chain, identifying key suppliers, procurement processes, and inventory management practices.

Staffing: Explain your staffing requirements, including the roles, responsibilities, and qualifications of each team member.

Management structure: Provide an organizational chart, showcasing your company's management structure and reporting lines.

Legal and regulatory requirements: Identify any relevant legal or regulatory requirements, such as licenses, permits, or certifications needed to operate your business.

Financial Plan

The financial plan is arguably the most crucial section of your business plan when applying for a loan. It demonstrates your ability to manage finances, make informed decisions, and, ultimately, repay the loan.

Key elements to include in your financial plan:

Revenue projections: Estimate your future sales, breaking them down by product or service category and showing growth rates over time.

Expense projections: Forecast your expenses, including fixed costs (e.g., rent, utilities) and variable costs (e.g., marketing, salaries).

Cash flow statement: Provide a detailed cash flow statement, showing how cash will flow in and out of your business over a specified period (typically 12 months).

Profit and loss statement: Create a profit and loss statement that projects your business's profitability over time.

Balance sheet: Prepare a balance sheet that showcases your business's assets, liabilities, and equity.

Break-even analysis: Calculate the point at which your business will break even, meaning your revenues equal your expenses.

Loan repayment schedule: Detail your proposed loan repayment schedule, including the loan amount, interest rate, repayment terms, and projected date of full repayment.

The appendices section is where you can include any additional documents or supporting materials that are relevant to your business plan. These documents may provide further evidence of your company's viability and help strengthen your case for securing a loan.

Examples of items to include in the appendices:

Resumes of key team members

Product samples or prototypes

Market research data or surveys

Letters of intent or contracts with suppliers, partners, or customers

Intellectual property documentation, such as patents, trademarks, or copyrights

Relevant licenses, permits, or certifications

Writing a comprehensive business plan for a loan can seem like a daunting task, but with the right approach and guidance, it's an achievable goal. By following the step-by-step instructions outlined in this article, you can create a well-structured, persuasive business plan that will greatly improve your chances of securing the funding you need. Remember to:

Pay close attention to your executive summary, as it sets the tone for the entire plan.

Be thorough and detailed in your market analysis, showing a deep understanding of your industry and target audience.

Develop a solid marketing and sales strategy to demonstrate your ability to attract and retain customers.

Address the operational aspects of your business, including staffing, facilities, and supply chain management.

Present a robust financial plan, complete with projections and a loan repayment schedule.

By doing so, you'll showcase your expertise, commitment, and preparedness to potential lenders, significantly increasing the likelihood of obtaining the loan your business needs to grow and succeed.

In addition to following the steps outlined in this guide, consider seeking professional assistance from a business plan consultant or specialist to review and refine your plan. Their expertise can help you identify any areas that may need improvement and ensure that your business plan is optimized for success.

Finally, remember to continuously update your business plan as your business evolves. Regular updates will ensure that your plan remains relevant and accurate, providing you with a valuable roadmap for your business's future growth and development.

With dedication, persistence, and a well-crafted business plan, you can secure the funding you need to bring your business vision to life. Good luck, and here's to your success!

• Writing Your Business Plan
• Funding Your Business

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The Ultimate Cheat Sheet: Business Plan Writing Tips & Tricks

How to write a business plan for a bank loan?

Whether you need a bank loan to start up a new business, grow an existing business or anything in between, writing a business plan can help make it a reality!

It involves outlining your goals and explaining how you plan to achieve them. A professional business plan is crucial to obtaining a bank loan and planning your outlook for both the short and long-term future.

Yet, most entrepreneurs view writing a business plan as a daunting task. But, it doesn't have to be!

In this guide, we explain what writing a business plan for a bank loan entails, why you need one, what tool you should use, and what content should be included.

Ready? Let's get started!

In this guide:

What is a business plan?

Do i need a business plan to secure a business loan, do banks actually look at business plans or is it just a box-ticking exercise, what do banks look for in a business plan, what tool should i use to write a business plan for a bank loan, what does a business plan for a bank loan look like, do i need a 3 or 5 year business plan for a bank, how long does a business plan for a bank loan need to be, key financial metrics and ratios banks look at when deciding on a loan application, examples and templates of business plans for a bank loan, pdf vs. powerpoint pitch: what format should you use to present your business plan to the bank, can i apply for multiple loans at the same time.

• Is it worth using a credit broker to apply to multiple lenders?

How long does the loan approval process usually take?

Key takeaways.

A business plan is a written document that contains two key parts:

• A written presentation that outlines what the company does, its medium term objectives and explains how it plans to achieve them.
• A financial plan that includes a cash flow statement, profit and loss statement and a balance sheet.

To get a business loan approved you need to convince the lender that your business will be able to repay it.

Regulated lenders also have legal obligations to demonstrate to their regulators that they are lending responsibly, meaning that your business can afford the loan.

Therefore, whilst a business plan is not strictly necessary to obtain a business loan, most banks will likely ask you to provide one, as it provides an objective way of assessing your borrowing capacity and to demonstrate affordability.

Imagine the following situation, a business borrows £100k from a regulated bank, and then goes bust. The regulator decides to investigate the bank. The bank can then provide the business plan to help demonstrate that the loan was affordable and that it behaved responsibly.

Need a solid financial forecast?

The Business Plan Shop does the maths for you. Simply enter your revenues, costs and investments. Click save and our online tool builds a three-way forecast for you instantly.

Most banks will look at your business plan when you hand in a loan application. How in-depth the bank looks at it though will depend on whether you are borrowing against assets or cash flow.

Asset-based lending

Borrowing against assets involves lending money to businesses whilst using their assets as collateral. These loans are also called secured loans.

Secured loans help reduce risks for lenders, they can seize the collateral if the borrower is unable to repay and sell the asset to recoup part of their losses. That's what happens with mortgages, for example.

Banks usually have pre-set loan-to-value ratios (LTVs) for the most common types of assets (property, equipment, vehicles etc.).

A loan-to-value assessment simply compares the appraised value of your asset against the value of the business loan.

For example, if you're buying a car worth £10,000 and the LTV ratio used by the bank is 70%, they can lend you up to £7,000 and will take the car as collateral.

The bank still needs to assess that you can afford the £7,000 business loan. They might ask you for a business plan, but might decide not to do so given that it's a small amount. They might simply look at your trading history or ask for a personal guarantee from the business owner instead.

BDC Bank - a Canadian bank - says that "financial institutions don’t use the same loan-to-value ratio for all asset types because of different asset liquidity levels".

In layman's terms, liquidity means how easy it is to sell the asset. If it's a delivery van, it's very easy as there is an established secondhand market (high liquidity), if it's a chemical plant it might take up to a year (low liquidity).

In a nutshell, the easier it is to sell the asset (if it needs to be seized), the higher the loan amount.

According to BDC Bank , likely LTV ratios for common asset types are:

• Marketable securities (high in liquidity): 90%
• Accounts receivables: 75%
• Commercial and industrial real estate: 65% to 100%
• Inventory (low in liquidity): 50%.

Capital Source Group - an alternate lender - says that some banks require a down payment of up to 20% of the market value of the equipment, referring to firms seeking finance to purchase key equipment, and mentions an indicative baseline LTV ratio of 50%.

Cash-flow-based lending

As we've seen above, asset-based lending is relatively straightforward, and lower risk as the asset is used as collateral. The decision making is more complicated if your business borrows against cash flows (for e.g. working capital purposes).

Cash-flow-based borrowing involves lending money to businesses based on their predicted cash flows. The bank has to assess how much you can borrow based on historical and projected financials.

Doing so requires to have a clear understanding of the future cash flows of the business, which can only be obtained through a business plan.

Most banks ask for business plans when you apply for a business loan because they need it to understand:

Who the borrower is

Whether or not there is collateral.

• If there is a trading history that supports the cash flow forecast
• What borrowing capacity and affordability can be inferred from the forecast

Firstly, the bank has to understand what entity or person it is lending money to. For example, if you take over a business, you could buy either its assets or shares.

If you were to buy their assets, a new company would likely be created but if you were to purchase their shares, you could do it directly or via a holding company (likelier option).

Depending on which option you choose, the bank has to decide whether it's lending to your current business, yourself or the holding company. The answer to this question then determines the level of risk the bank is undertaking.

Next, the bank has to decide whether or not there is sufficient collateral. Can it secure the loan against the business assets or does it need to request a personal warranty from the business owner(s)?

It will assess:

• Whether or not your current business has any assets that can be used as collateral
• If you, the business owner, have a house or cash in the bank or can offer a credible personal guarantee
• Whether or not the holding company will provide its shares as collateral or if it needs to ask its shareholders for a personal guarantee (or both)

Once the bank understands the value of the security, it can better estimate the borrowing capacity of the entity.

Does the trading history support the cash flow forecast

The bank will want to know if there is any trading history to support your cash flow forecast.

If there isn't, it becomes harder to judge and riskier from a lender's viewpoint.

Borrowing capacity and affordability: total indebtedness and credit metrics

Lastly, the bank will estimate your business credit score by taking into consideration: whether or not you have any outstanding debt, what your past repayments were like, and credit metrics such as fixed charge coverage ratio, net debt-to-equity ratio, and interest coverage ratio (we'll detail these 3 ratios later in this guide).

Need inspiration for your business plan?

The Business Plan Shop has dozens of business plan templates that you can use to get a clear idea of what a complete business plan looks like.

Writing a business plan can be both tedious and difficult if you start from scratch. Luckily for you, online business plan software can help you write a professional plan in no time.

There are several advantages to using specialised software like The Business Plan Shop:

• You are guided through the writing process by detailed instructions and examples for each part of the plan
• You can be inspired by already written business plan templates
• You can easily make your financial forecast by letting the software take care of the financial calculations for you
• You get a professional document, formatted and ready to be sent to your bank
• You can easily compare your forecast against actuals from your accounting system to ensure you are on track to deliver your plan, and adjust your forecast to keep it up to date as time goes by

If you are interested in this type of solution, you can try our software for free by signing up to The Business Plan Shop today .

There are seven key sections that any business plan for a bank loan must include:

• Executive summary
• Company Overview
• Products and services
• Market analysis
• Financial projections

Let's have a look at each one in more detail.

1. Executive summary

Your executive summary should provide the bank with a quick snapshot of your business (who you are, what you sell, and what your financial projections look like). Remember that this is the first section of your business plan that they will look at - you need to keep them interested and do not need to go into depth.

You should also include details such as the loan amount sought and its purpose, providing the bank with a clear understanding of how the funds will be utilized to support your business's growth and operations.

For example, if you're a small manufacturing company seeking a loan to purchase new equipment, your executive summary would outline the specific amount needed for equipment acquisition and how it will contribute to increasing production capacity and efficiency.

Above is an example of how the "Our Ask" section which details the funding requirements might look like. This image was taken from one of our business plan templates .

Additionally, the executive summary may highlight any collateral or security offered to mitigate the lender's risk.

This could include assets such as real estate, equipment, inventory, or accounts receivable that you're willing to pledge as security for the loan.

By clearly outlining the collateral available to secure the loan, you demonstrate your commitment to fulfilling your financial obligations and provide assurance to the bank regarding the loan's repayment.

Moreover, the executive summary may touch upon the key terms and conditions your business is willing to accept, such as interest rates, repayment schedules, and loan covenants, to ensure the loan aligns with your business's financial objectives and capabilities.

For instance, if you're a small retail store seeking a loan to open a second store, you may try to negotiate a loan repayment holiday to defer the principal repayments until after the second store has started trading in order to improve cash flow.

2. Company overview

In this section, you should explain what structure your business takes up (sole trader, partnership or limited liability company). This way, the bank understands whether or not you are liable if your business defaults on its loan. If you are not they might ask you for a personal guarantee.

If you are a partnership or limited liability company, state who your partners are and what percentage of the business they own. Also, outline any skills and experience they have that make them suitable for their role.

Finally, you should state where your business(es) are located and why that particular location was chosen (for example, it could be because of the parking slots available or transport links, making it very accessible for potential customers).

3. Products and services

You should include a detailed list of the products or services that you sell. Whilst you don't have to specify every single item or service, you should aim to include all of the key ones.

For example, for a hair salon, this might be hair care, washing, stylish haircuts, combing, hair colouring, waving, and hair straightening.

4. Market analysis

The market analysis section of your business plan for a bank loan is where you bring together your local and national market research. Using charts and graphs along with text makes it easier to illustrate your points clearly.

You should also state who you plan to target and the competitors in your local market. For example, if you were a coffee shop business, you could target people seeking a takeaway coffee, those looking for a lunch or snack or people looking for a place to work.

Finally, you should state the regulation in effect in the local market and whether there are any plans to make changes in the future (by the council for example).

5. Strategy

Your strategy section helps explain how you plan to make your business a success. Both marketing and pricing strategies feature in this section.

Explain how you've determined your prices and whether or not they differ from your competitors. Remember that this will depend on your overall pricing strategy (cost-plus pricing, competitive, price skimming, etc.).

Your marketing plan should explain how you plan to attract and retain customers. For example, you could have an attractive storefront with your logo to encourage potential customers to visit inside. You might also offer loyalty cards (for example, buy 3 burgers, get the fourth one free).

Finally, key milestones must also be outlined so that both parties are aware of what needs to be achieved within an agreed-upon timeframe along with measures taken against any foreseeable risks and mitigants related thereto.

6. Operations

The operations section of your business plan for a bank loan should include information about your staffing team. List any current and future recruitment plans, employee skills, experience and what roles they are going to take up.

Plus, you should state what suppliers you chose and why. For example, you might have chosen a particular supplier thanks to their eco-friendly stance or brand reputation.

7. Financial projections

Arguably the most important section in your business plan for a bank, your financial projections help the bank decide whether or not they should lend to your company.

This section includes your balance sheet, profit and loss statement and cash flow forecast. Figures from these three statements are used to compute key ratios (see the section below).

Profit and loss statement

A projected P&L statement shows how much money the company might make and how much it will grow in the future.

It helps stakeholders understand how successful the company could be.

Balance sheet

A balance sheet shows what your business owns (assets), what it owes (liabilities), and what has been invested by the owners (equity).

Looking at a balance sheet enables investors, lenders, and business owners to assess the capital structure of the business.

One key aspect of this analysis is achieved by calculating key liquidity (short-term) and solvability (long-term) ratios to understand if the company can pay its debts as they fall due.

Cash flow statement

A projected cash flow statement is a document used to plan out how much cash your business will generate (inflows) and spend over a certain period (outflows).

This document shows the expected cash flows from the operations, investments and other financial activities.

Having this information can help you decide how much money your business needs to save for future expenses or investments, as well as anticipate potential cash shortfalls.

When seeking a bank loan, one common question that arises is the duration of the business plan required.

Understanding whether you need a 3-year plan or a more detailed 5-year money lending business plan can impact your credit application process.

For startups, and most small businesses, a 3-year business plan strikes the right balance between providing a clear vision of the future and not overwhelming with excessive detail.

This shorter timeframe is also often preferred by banks as it allows for a focused projection of your business's trajectory without straying too far into the unknown.

For these reasons, three-years is the de facto standard business plan duration for a loan application.

That being said, it might make sense for businesses to use a 5-year business plan in certain situations. For example when there are delayed cash flows because of a longer development or sales cycle or when the loan is used to fund significant capital investments.

Consider a manufacturing company investing in a new factory to increase production capacity. A 5-year plan would detail the initial investment and leave enough time to show the expected returns and the long-term impact on revenue, costs, and market position.

This longer-term view offers a more comprehensive picture of your business's growth potential and can demonstrate to the bank that you have a clear strategy for sustained success.

In summary, whether you opt for a 3 or 5-year business plan depends on the nature of your business, its growth trajectory, and the level of detail required to support your loan application.

Like most business plans, there's no specific number of pages that yours must have. A good rule of thumb, however, is to keep it between 15 and 35 pages.

As long as you've covered all of the key sections, ranging from the executive summary to the financial projections, your business plan for a bank loan should be good to go.

Remember, quality is more important than quantity.

Need a convincing business plan?

The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.

It's worth noting that ratio targets set by lenders are industry dependent.

There are usually three key financial ratios that banks calculate before lending money:

1. Fixed charged coverage ratio

This solvency ratio assesses how much headroom a business has over its upcoming debt repayments.

It is calculated by dividing the Cash flow available for debt service (or CFADS), which measures how much cash flow is available to pay off debt obligations, by the amount to be paid to service the debt (interest plus principal repayments).

It is one of the main ratios used by lenders to assess the borrowing capacity and the financial risk of a given business.

For businesses utilising bank debt, lenders usually expect the fixed charge coverage ratio to be above 2.0x, which implies that the business is expected to generate twice as much cash as is needed to service the debt, leaving a healthy buffer.

In any case, the ratio should be above 1.0x, below 1.0x the business is not generating enough cash to service its debt which puts lenders at risk.

For example, if your business records a CFADS of £500,000 and total debt service amounting to £250,000 (£50,000 of interest payments, and £200,000 of principal repayments), it will have a fixed charge coverage ratio of 2.0x.

2. Debt-to-EBITDA

This solvency ratio is used to assess the level of debt and borrowing capacity of the business. It compares the level of debt to the firm’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), used as a proxy for the operating cash flow.

For example, if your company has debt worth £20m and an EBITDA of £5M, your debt to EBITDA ratio would be £20m/£5m = 4.0x.

In simple terms, a company with a debt-to-EBITDA ratio of 4.0x would need at least 4 years to repay its debt. Whether or not this is too high will depend on the sector and the risk appetite of the lender.

3. Interest coverage ratio 

This solvency ratio is commonly used by lenders to measure a business's ability to pay interest on its debt. It compares the firm’s EBITDA, used as a proxy for the operating cash flow, with the amount of interest expense due in a financial year. 

Let's assume that you are writing a restaurant business plan for bank loan. Your business has an EBITDA of £500,000 and interest expenses amounting to £50,000, meaning it will have an interest coverage ratio of 10.0x.

The rationale behind this ratio is that, if the company was to default on its debt, lenders could potentially agree to delay the principal repayments as long as the company remains able to at least pay the interest. In that scenario, their capital would remain at risk but lenders would still be able to earn a return.

The higher the interest coverage ratio the better. Targets set by lenders are industry dependent. An interest coverage ratio higher than 4.0x is generally a good starting point.

Most of the business plan templates offered by The Business Plan Shop are examples of companies seeking bank loans and so can be used to structure your own plan.

We have templates to fit various industries including hospitality, retail, services, construction, industrials and more.

When preparing to present your business plan to a bank, one crucial decision is choosing the right format.

Should you go with a traditional PDF document or opt for a more dynamic PowerPoint pitch?

Using a PDF format is usually recommended to present a money-lending business plan. What matters to the bank is the content of your document, and the PDF format offers a comprehensive and structured way to present your business's details, financial projections, and strategies.

This format allows you to include detailed written explanations, charts, and graphs, providing a thorough overview of your business to the bank.

PDFs are particularly suitable for conveying complex information in a clear and organized manner, making it easier for bank officials to review and assess your loan application.

Does it mean that PowerPoint should be avoided at all costs?

Not necessarily, a PowerPoint pitch offers a visual and concise way to present the main takeaways from your business plan to the bank, and could therefore be used to complement your PDF document.

This format allows you to highlight key points, trends, and projections using engaging visuals, bullet points, and diagrams.

PowerPoint presentations could be effective for capturing the attention of bank officials during meetings or presentations, enabling you to convey your business's essence and potential compellingly.

In conclusion, a business plan in PDF is expected when presenting a business plan to the bank, but a PowerPoint can also be provided alongside.

As a small business owner seeking financing, you may wonder if it's possible to cast a wider net by applying for multiple loans simultaneously.

While it may seem like a strategic approach to increase your chances of securing funding, there are important factors to consider before pursuing this avenue.

Impact on your credit score

The first factor you need to consider is the potential implications for your credit score, financial stability, and relationship with lenders.

Applying for multiple loans within a short timeframe can result in multiple hard inquiries on your credit report, which may lower your credit score and raise red flags for lenders.

What happens if your business loan request is denied?

The second factor you need to consider is what happens if your initial business loan requests are denied.

Despite your best efforts, there's always the possibility that your business plan for a bank loan may not be enticing enough.

If your business plan fails to meet the lender's requirements or to convince them, it could be worth revisiting and refining your business plan, addressing any weaknesses or gaps highlighted by the lender, before submitting another application to another bank.

For these reasons, it is usually more prudent to approach lenders one by one, to take on board their feedback and wait for a successful offer before playing the market to find the best offer.

Is it worth using a credit broker?

Navigating the loan application process can be daunting, especially when considering multiple lenders.

One option to streamline this process is to enlist the services of a credit broker.

However, it's essential to weigh the benefits and drawbacks of using a credit broker compared to applying to banks independently.

Let's delve into what a credit broker is and whether it's worth utilizing their services for your financing needs.

What is a credit broker?

A credit broker is a professional intermediary who assists individuals and businesses in finding suitable loan options from multiple lenders.

These brokers have extensive knowledge of the lending market and can help match borrowers with lenders that align with their financial needs and preferences.

Credit brokers typically charge a fee for their services, either upfront or upon successful loan approval.

For example, if you're a small business owner in the construction industry seeking financing for a new project.

Instead of approaching individual banks on your own, you'd engage a credit broker to help you navigate the lending landscape.

The broker evaluates your business's financial situation, objectives, and borrowing requirements, then identifies and presents you with tailored loan options from various lenders, saving you time and effort in the process.

Benefits and drawbacks of using a credit broker vs applying to banks independently

Using a credit broker offers several potential benefits, such as access to a wider network of lenders, personalized loan recommendations, and assistance throughout the application process.

Brokers can also negotiate on behalf of borrowers to secure favorable loan terms and conditions.

However, it's essential to consider the drawbacks as well, including the cost of using a broker, the potential for conflicts of interest, and the risk of relying solely on the broker's advice without conducting independent research.

For example, if you were a small business owner in construction, using a credit broker may provide access to specialized lenders familiar with the construction industry's unique financing needs.

The broker can negotiate competitive interest rates and favorable repayment terms, ultimately saving the business owner money and time.

But, you must carefully weigh the broker's fee against the potential savings and ensure transparency in the broker's recommendations to make an informed decision.

In summary, whether it's worth using a credit broker to apply to multiple lenders depends on your specific financial situation, borrowing needs, and preferences.

While brokers offer valuable expertise and assistance, it's essential to evaluate the costs and benefits carefully and consider alternative approaches before making a decision.

Understanding the timeline for the loan approval process is crucial for effectively managing your business's financial needs and expectations.

While the duration can vary depending on various factors, having a general understanding of the typical timeline can help you plan accordingly and avoid unnecessary delays.

Let's explore what factors may influence the timeline for the loan approval process.

The loan approval process typically involves several stages, including application submission, review and assessment by the lender, underwriting, and final approval.

The duration of each stage can vary depending on factors such as the complexity of the loan application, the lender's internal processes, and external factors such as market conditions or regulatory requirements.

While some loans may be approved relatively quickly, others may require more time for thorough evaluation and due diligence.

For example, suppose you're a small business owner in the manufacturing sector seeking a term loan to expand your production facility.

After submitting your loan application to a bank, the initial review and assessment may take anywhere from a few days to several weeks, depending on the lender's workload and responsiveness.

Once the application passes the initial review stage, it undergoes underwriting, where the lender evaluates your business's creditworthiness, financial stability, and repayment ability.

This stage can also vary in duration, ranging from a few days to several weeks, depending on the complexity of the loan and the thoroughness of the underwriting process.

Banks know how long their processes usually take so they will be able to give you a clear timeline when you apply. They also appreciate that you may take your business elsewhere if they are too slow to respond, so they usually try to be as fast as possible to be competitive.

On your side, you can speed up the timeline by making sure you have all the documents ready beforehand (including the various documents needed to clear anti-money-laundering checks), and by staying proactive and engaged throughout the process and working closely with your lender.

Now that we've covered various aspects of crafting a business plan for bank financing, let's summarize the key points to remember:.

• A business plan is mandatory in order to secure a bank loan.
• Use a business plan software (such as The Business Plan Shop) to ensure you write a professional business plan with all the information that banks expect to see.
• Choose a 3-year plan presented in PDF, unless advised otherwise by the bank.
• Take time to understand the loan application process before submitting your application.
• Be prepared for the possibility of your initial loan request being denied, and know how to address and improve your business plan if it fails to secure funding the first time.
• Remember that banks look at credit metrics in different ways, a rejection by one lender doesn't mean you won't get approved by another.
• Consider using a credit broker to apply to multiple lenders if their services align with your financing goals.

We hope that this guide has helped you to better understand how to write a business plan for a bank loan. Do not hesitate to contact us if you still have questions.

Also on The Business Plan Shop

• How investors analyse business plans
• Business plan vs budget: what's the difference?
• Business plan for grant application

Know someone looking to take out a bank loan for their business? Share this article with them!

Founder & CEO at The Business Plan Shop Ltd

Guillaume Le Brouster is a seasoned entrepreneur and financier.

Guillaume has been an entrepreneur for more than a decade and has first-hand experience of starting, running, and growing a successful business.

Prior to being a business owner, Guillaume worked in investment banking and private equity, where he spent most of his time creating complex financial forecasts, writing business plans, and analysing financial statements to make financing and investment decisions.

Guillaume holds a Master's Degree in Finance from ESCP Business School and a Bachelor of Science in Business & Management from Paris Dauphine University.

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How To Write a Business Plan for a Loan: A Guide

This article contains general information and is not intended to provide information that is specific to American Express, or its products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.

Many small business owners know that it can take money to grow. But what does it take to secure that funding? A strong business plan is often a part of the answer. That’s why learning how to write a business plan for a loan may be an important part of setting up a small business for success.

A good business plan helps a lender assess a business’ prospects. There is a standard format that owners may wish to follow. Keep in mind that applying for a loan is an important step that has legal consequences. As you put together your business plan, consult your professional advisers to make sure that you understand the importance of providing accurate information.

Here are some pointers on writing a business plan for a loan to help grow your business .

Why is a business plan important when you’re applying for a loan?

The Small Business Administration (SBA) describes a business plan as a “roadmap to small business success.” Given all the challenges of keeping a small business thriving, a roadmap is a handy thing to have. A business plan helps an owner visualize the future, take the actions needed to get there, and understand when to change strategies.

A business plan is also often required when applying for a business loan. Lenders often use an applicant’s business plan as part of the loan application and approval process. It helps the lender evaluate the likelihood of the small business being profitable.

Knowing how to write a business plan can also be helpful for other purposes. Commercial real estate landlords may ask for a business plan before leasing a space. A thorough business plan may also help with finding investors.

What lenders look for in a business plan

A lender typically evaluates several factors to decide if a small business is likely to repay requested financing. The various sections of the plan will help the lender decide if a market opportunity for the company exists, if the business has access to the organizational and managerial resources it needs, if the product or service appears viable, if a marketing plan exists, and if the small business’ finances are healthy. Simply put, the plan helps the lender review all aspects of the business on paper, so that the lender can make a more informed decision about making a loan.

In addition to the business plan, the lender will likely assess the company’s accompanying business credit reports and business credit scores to determine its creditworthiness.

What does a formal business plan include?

Many business owners have informal business plans from when their small business was just a side hustle. Business ideas written on the back of a napkin are a cliche for a reason: it’s a common way for a small business to take shape.

A formal business plan, however, can’t fit on a napkin. When a growing small business needs a sizable business loan or line of credit , they will likely need to provide something quite detailed to a lender. The need for a formal document doesn’t necessarily mean it will be difficult to secure the loan , however. It just means the lender needs a clear picture of the business.

Small business owners can think of a business plan for a loan application like a resumé when seeking a job. It helps a lender decide if the small business is a good candidate for a loan in an easy-to-read document. Similar to a resumé, the business plan should be professional looking and free of spelling, grammatical, and typographical errors.

The list below follows the naming conventions and structure of how to write a business plan for a loan application according to the SBA . It includes:

• Executive summary
• Company profile
• Market analysis
• Organization and management
• Service or product line
• Marketing and sales
• Funding request
• Financial projections

1. Executive summary: Spark interest in your business

The executive summary may be the first thing a lender will read, but small business owners may be best served by writing it last. Learning how to write a business plan for a loan may help owners understand their own business better. The executive summary will likely be most accurate after the owner has thought through, and learned from, all the sections to follow.

What is the executive summary?

The executive summary is a brief overview of the business plan. It should give readers a high-level description of the business, as well as the high points of the business plan.

What to include in an executive summary

An executive summary should include the following:

• Business name, contact information, and social media profiles : This will help the reader find the business in the real world.
• Mission statement : A mission statement should directly reflect the values of the business to help readers understand why the business exists.
• Product or service description : This highlights what customers can expect from the business.
• Demographic, economic, and financial factors affecting the business : Readers should understand the general environment in which the business operates.
• An analysis of competitors and the primary market : This previews the market analysis section and clarifies the business’ market position.
• Marketing, public relations, and sales plan : Readers should understand how the business plans to attract and retain customers.
• Future revenue and cash flow projections : Financial forecasts help readers understand the business’ potential for growth and profitability.
• Any current assets or capital : Lenders will want to know what potential collateral the business has.

2. Company profile: Define the business

A company profile is a business owner’s opportunity to briefly explain what their business is all about and why it exists. The profile should be heavy on facts, including what the products and services are, the target audience, and what needs the business fulfills. It should be written in a formal tone and explain what, if anything, makes the business unique.

3. Market analysis: Competitors and customers

A market analysis explains the business environment in which the company will operate. Lenders may look at this section to determine if the business has a good understanding of its competition and potential customers. You may want to consider hiring a market research firm to help you prepare a market analysis.

Market analysis elements include:

• An industry analysis : This describes the outlook for the industry to which the business belongs.
• Knowing your competition : A competitor analysis highlights the strengths and weaknesses of similar businesses in the same market to identify challenges and opportunities.
• Know your niche : Explain how the product or service addresses an unmet If your business has a significant social media following, that may help to show how your business is reaching your customers.

4. Organization and management: Talent and experience

Who will run the business? This section is meant to help lenders understand the experience and skills of those operating the business. It’s not uncommon for lenders to ask if the talent that has made a business successful so far will stay with the business as it grows. Including a description of the current and future business structure over the next three to five years may demonstrate room for growth for valuable staff members.

5. Service or product line: What makes the business special?

A description of the small business’ service or products helps highlight what makes the business unique. The nuts and bolts of these offerings are critical, but their intangible qualities are valuable as well. This could include the recent hiring of an up-and-coming chef, the development of a new, patented product, or an innovative production method. This section is an opportunity to drill down on what makes the business unique.

6. Marketing and sales: How do you get the word out?

A great product or service is only valuable if enough potential customers hear about it. A lender will want to know how the business plans to get the word out about its offerings and increase its share of the target market. The plan might include social media platforms, established business partners, and how the company will generate and nurture sales leads.

7. Funding request: How much does the business need?

A business plan is all about clarity. Small business owners may use this opportunity to clarify how much money they need and why they need it. Lenders value a detailed explanation of how the business will use the loan and why it will increase their revenue or net profits.

8. Financial projections: Dollars and cents

Naturally, lenders will want to know about a business loan applicant’s finances. When learning how to write a business plan for a bank loan, business owners should understand the critical role of financial reports.

When preparing financial projections, it may be wise to consult a professional to best help your business prepare your documents accurately. Financial projections may include the following documentation:

• Startup expenses
• Payroll costs
• Sales forecast
• Operating expenses
• Cash flow statements
• Income statements for the first three years of business
• Balance sheet
• Break-even analysis
• Financial ratios
• Cost of goods sold (COGS)
• Amortization and depreciation for your business

9. Appendix: Show instead of tell

The appendix is where a business owner can show their work. The appendix includes supporting documentation, including resumés, financial statements, media clips indicating buzz around a product or brand, or anything else that verifies the information shared in the previous eight sections.

A formal business plan can be important when applying for a business loan

Seeking financing for business growth is a great opportunity to move from an informal business plan to something more structured. Having a business plan ready for lenders is a great first step in securing the funding your business may need to grow or sustain operations.

The material made available for you on this website is for informational purposes only and is not intended to provide legal, tax or financial advice. If you have questions, please consult your own professional legal, tax and financial advisors.

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What Is an SBA Loan?

What Is Factoring in Business?

How Hard Is It To Get a Small Business Loan?

Hispanic Small Business Loans and Funding Options

How to write a business plan for a loan from a bank.

Learn how to increase your chances of securing a bank loan with these business proposal tips.

If you want a bank loan to start a new business or expand your existing one, you’ll need a thorough business proposal (also known as a loan proposal). It shows the bank (or lender) that you’ve got a plan that’s likely to succeed.

But loan proposals can also be tedious and complicated to draft. Use the following tips to learn how to write a business proposal for a bank loan and get a head start on success.

Why writing a business proposal for a bank loan is necessary.

When you’re considering getting a loan from a bank to support your business , one important step is creating a well-thought-out business proposal. This will not only help you explain your business plans but also play a big role in helping the bank decide whether to approve your loan request. Here are the main reasons why putting together a solid business proposal for a bank loan is so important:

• Clarity. A well-crafted business proposal helps you clearly articulate your business idea, goals, and objectives to the bank. This ensures that both you and the bank are on the same page regarding the purpose of the loan.
• Risk assessment. Banks need to assess the risk associated with lending you money. Your business proposal provides them with vital information about your business model, market analysis, and strategies, enabling them to gauge the level of risk involved.
• Repayment plan. Banks want to know how you plan to repay the loan. Your proposal should outline a clear and realistic repayment strategy, including cash flow projections and a timeline for repayment.
• Financial health. Lenders need to determine if your business is financially viable and can generate enough income to cover loan repayments. Your proposal should demonstrate the financial health of your business through financial statements, revenue projections, and profit margins.
• Legal requirements. Banks need to ensure that your business complies with all relevant laws and regulations. Your bank proposal letter for a business loan should address any legal considerations, licenses, permits, or certifications required.

What does a business plan proposal for a bank loan look like?

A business plan proposal for a bank loan is typically 20 to 30 pages long and follows a structured format:

• Cover sheet. A cover sheet is often included at the beginning of the proposal. It typically contains the business name, logo (if applicable), contact information, and the date of submission.
• Executive summary. This section provides a concise overview of the entire business proposal, summarizing key points such as the purpose of the loan, business description, financial projections, and the requested loan amount. It’s usually limited to one to two pages.
• Business description. This section offers a detailed explanation of the business, its history, mission, and vision. It also outlines the industry it operates in, its target market, and its competitive analysis.
• Market analysis. Includes market research findings, including market size, trends, and customer demographics. It should also detail your marketing and sales strategies.
• Management team. Describes the qualifications and experience of key members of your management team. Include their roles and responsibilities.
• Financial projections. Includes financial statements such as income statements, balance sheets, and cash flow projections. It should also outline how the loan will be used and how it will benefit the business.
• Loan request. Specifies the loan amount you are requesting from the bank, along with the purpose of the loan.
• Collateral and guarantees. If the loan requires collateral or personal guarantees, provide details about the assets or individuals involved.
• Repayment plan. Explains your proposed loan repayment strategy, including the terms, interest rate, and repayment schedule.
• Appendices. This section may include supporting documents, such as resumes of key team members, market research data, legal documents, and any other relevant information.

How to write a business proposal for a bank loan.

When it comes to securing a bank loan for your business, the quality of your business proposal can make all the difference. Let’s go through the process of how to write a business proposal for a bank loan.

Include critical details for the business plan in the proposal.

Your bank proposal should begin by introducing your business comprehensively. Cover essential aspects such as:

• Business overview. Introduce your business with its name, legal structure, and establishment date.
• Mission. Articulate your business’s purpose and long-term goals.
• Market analysis. Provide insights into your industry, target market, and current trends.
• Company history. Share key milestones and noteworthy achievements.
• Contact information. Include up-to-date contact details.
• Leadership team. Highlight key team members, their roles, qualifications, and relevant experience.
• Legal structure. Specify your business’s legal structure and ownership.
• Products/services. Describe your business offerings and emphasize their unique features.

Outline how you’ll pay the business loan back.

Every bank loan proposal should include some standard details like how much you need to borrow and how you’ll use the loan to advance your business.

More importantly, your business proposal should outline how you plan to pay the bank back. A few things you can write out to accomplish this include:

• Three-to-five-year sales forecasts
• Cash flow projections
• Expense estimates

The more detail you include, the better. But don’t crunch a bunch of numbers on the very first page — make sure your proposal is clearly outlined and all information is grouped logically.

Break down your backup loan repayment plan.

Part of your business proposal’s job is to convince the bank that you can pay them back, whether you meet your sales projections or not. To demonstrate this, show proof of collateral (or something that secures the loan) in case things don’t go as planned after you invest in assets like new real estate, equipment, or inventory for your business.

Simplify the business plan proposal for the bank loan process.

To enhance your business plan proposal’s effectiveness for a bank loan, consider simplifying it. Create your own business proposal and make sure you have the documents required for loan approval to jump-start your path to success. It’s easy to create a PDF online for your bank loan proposal, so it’s easily accessible to share with others for feedback.

Explore everything you can do with Adobe Acrobat today.

How to Write an SBA Business Plan + Template

Noah Parsons

10 min. read

Updated November 21, 2023

Applying for a Small Business Administration loan typically requires a business plan.

Unfortunately, there’s no SBA loan business plan format that guarantees approval. The SBA even states you should “pick a business plan format that works for you.” 

While I agree with this sentiment, I’ve found that entrepreneurs who explain how funds will be used and how they will repay the loan tend to be more successful. 

Luckily, these details can be covered using our SBA-lender-approved business plan format . I’ll go over that structure in this article, and focus on the sections that the SBA prioritizes, so you can maximize your chances of getting funded .

You can even download a free SBA-lender-approved business plan template to fill out as you read. 

Let’s get started.

• Why you need a business plan for SBA loans

SBA loans require good documentation of your business and 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.

The bank issuing the loan will also want to know about the future of your business. 

They’ll want to see how the loan will be used and if future cash flow projections are realistic and indicate you can afford loan payments.

That’s where writing an SBA business plan comes in. 

Not only will your business plan describe your business to the lender, but it will include the financial projections the bank will use to determine if you qualify for the loan .

• What your business plan should include, according to the SBA

Business plans for SBA loans follow a fairly standard structure, but that doesn’t mean you need to follow it exactly. 

The SBA even recommends adjusting the plan outline to serve your needs. If a section does not apply to your business, it’s fine just to remove it.

Here’s the successful business plan structure I recommend for SBA loans:

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1. Executive summary

A great executive summary is a short, simple overview of your business. It should be easy for a loan officer to read and clearly understand what your business does. 

When applying for an SBA loan, highlight your: 

• Business opportunity
• Financial forecast
• How much money you want to borrow and how it will be used

Remember, an executive summary should be short and to the point. The rest of your business plan will provide additional details.

[Dig deeper: How to write an executive summary ]

2. Company description

Some people call this section “Products and Services.” Either option is fine. The important thing is that you use this section to explain what your business opportunity is. 

You need to cover: 

• The problem you solve
• Who you’re solving it for
• What your solution is and why it’s better

Be specific and tell the story of your business and your customers. Focus on your strengths and what sets you apart from competitors. 

If your company is developing a product, include information on:

• What the product life cycle looks like
• Intellectual property filings
• Current research and development

If these topics don’t apply to your product, that’s fine. Just be sure that the description of what you sell is clear.

3. Market analysis

The market analysis chapter explains who your customers are. It provides an overview of your target market, competition, and industry.

Your target market is essentially a description of your ideal customers. Be sure to include specific demographic information (like age, gender, location, income) and psychographic information (hobbies, purchasing behaviors). 

This data should reinforce that your target market needs your solution .

It’s helpful to also include information on the size of your target market . Lenders will want to see evidence of enough potential customers to drive growth. 

While your target market information describes your customers, an industry overview discusses the type of business you’re in and its potential for growth. 

For example: If you’re starting a fast-casual restaurant, your industry overview might discuss the increased interest in fast-casual dining and how more people are eating in these types of restaurants every year. 

Finally, you’ll need to include a competitive analysis . This is a list of current competitors and alternatives, with explanations of why your business is a better option. 

Your goal is to show how your business is unique, what opportunities and threats there are, and how you plan to address the competition.

4. Organization and management

Also known as your company overview, this section is where you describe your legal structure, history, and team .

For your SBA loan application, you should focus on describing who is managing the business as clearly as possible. 

You may want to include an organizational chart. You should provide detailed resumes for everyone in leadership positions. Each team member’s experience, skills and professional qualifications can mitigate risk in the eyes of a lender .

To show you’re thinking ahead, it’s also helpful to include key positions you plan to fill as you grow. 

5. Sales and marketing plan

Your goal in this section is to summarize how you will attract, retain, and sell to your customers.

The marketing strategies and sales methods you describe should always have the customer top of mind, and demonstrate that you know how to connect with them. 

To help a loan officer visualize this, you can provide examples of marketing messaging, visuals, and promotions. If you have any research or results to show that your strategy has merit, include those as well. 

6. Financial projections

SBA lenders typically require 5 years of financial projections — including profit and loss statements , balance sheets , and cash flow statements . 

Be sure to include the SBA loan in your projections in the following areas: 

• A liability on your balance sheet.
• Payments on your cash flow.
• Interest expenses on your profit and loss statement. 

I’ll dive into specific details of what you should focus on in the “how to improve your chances” section.

Your first year of financial projections should include monthly details. After that, annual summaries are usually sufficient for most SBA lenders. Occasionally, a lender might require 24 months of monthly projections, so check with your bank before submitting your business plan. 

If your business is up and running, you must also provide historical financial reports for the past 12-24 months of operations—including income statements and a current balance sheet.

Typically, you will also need to provide reports on your personal finances , including any assets you have, such as a home or car. 

Finally, include a section explaining your use of funds—what exactly you plan to use the loan for.

7. Appendix

The appendix is your chance to provide additional documents that support sections of your business plan. 

When applying for a loan, these may include:

• Employee resumes
• Licenses and permits
• Patents and other legal documents
• Historical financial statements
• Credit histories

Don’t worry about stuffing your appendix full of additional documentation. Only include information if you believe it will strengthen your approval chances, or if your lender specifically asks for it.

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

Your SBA business plan needs to focus on the loan you are applying for and how that will impact your business financially. 

Make sure to include the following information in your financial plan to increase your chances of success with your lender:

Funding request 

In your executive summary, document how much money you are asking for. It’s best to put your number where it can be clearly read, instead of trying to bury it deep within your business plan.

Remember, there are limitations to how much you can borrow through SBA-backed loans.  Most have a maximum loan amount of $5 million, while SBA Express loans have a maximum loan amount of $350,000. 

Use of funds

You should also describe how you plan to use the loan and which aspects of the business you want to invest in. 

Some SBA loans are designed specifically for expanding export businesses or funding real estate transactions. So, make sure your use of funds description is appropriate for the loan you are applying for.

Cash flow forecast

Be sure to include the loan in your cash flow statements and projections . You want to demonstrate that you’ve planned how you will use and repay the loan.

You need to show:

• When you anticipate receiving the loan.
• How the loan will impact your finances. 
• Loan payments for the life of the loan. 

Having this prepared won’t just increase the chances of your application being approved—It  will make it much easier to manage the loan after you receive funding . 

Balance sheet 

You’ll also want to put the loan on your projected balance sheet , and show how the loan will get paid down over time. 

The money you owe will show up on your balance sheet as a liability, while the cash you receive from the loan will be 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 the interest will impact your profitability in the coming months and years.

• 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, you should make your business plan as short and concise as possible. 

Your business plan is going to be reviewed by a bank loan officer, and they will be less than excited about the prospect of reading a 50-page business plan.

If possible, keep the written portion of your business plan between 10-15 pages. Your financial forecasts will take up several additional pages. 

If you’re struggling to keep it short, try a one-page plan

A great way to start your business plan is 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 summary they need before they start looking at your complete business plan and financial plan .

• Resources and tools for writing an SBA business plan

Remember, you can download a free SBA-lender-approved business plan template . It includes detailed instructions to help you write each section, expert guidance and tips, and is formatted as lenders and investors expect.

If you’re looking for a more powerful plan writing tool, one that can also help you create financial forecasts for the use of your loan, I recommend you check out LivePlan . 

With LivePlan, you get:

• AI-powered recommendations: Generate and rewrite sections of your plan to be more professional and persuasive.
• Step-by-step instructions: In-app examples, tutorials, and tips to help you write an impressive business plan.
• Automatic financials: Skip the spreadsheets and complex formulas, and quickly create accurate financial forecasts with everything a lender needs.
• A built-in pitch presentation: Print or share your full business plan, one-page pitch, and financial reports—all with a professional and polished look.

Whether you use the template, LivePlan, or try writing a business plan yourself, following the structure and tips from this article will improve your chances of getting an SBA-backed loan. 

And for additional SBA-focused resources, check out our guide on how to get an SBA loan .   

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

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How to get a business loan from a bank

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Key takeways

• Compared to other types of lenders, banks may offer larger loan amounts and lower rates
• Banks typically require a credit score of at least 670 for a small business loan
• Bad credit and subprime borrowers may have better luck applying for a loan with online or alternative lenders

If your business is ready to grow, you may be considering applying for a small business loan at a bank. Many small business owners lean toward bank loans because they may offer larger amounts, lower rates and more hands-on support than online lenders.

According to the 2024 Report on Employer Firms from the Federal Reserve Banks, small businesses looking for financing were likelier to seek financing at a bank. Of the credit sources applicants applied to, 44 percent chose a large bank, while 28 percent chose a small bank.

Banks approve a majority of the loans applied for, but small banks are the most likely to approve you. According to the Federal Reserve’s Small Business Lending Survey , small banks approved 88 percent of applications in Q3 of 2023. Mid-sized banks approved 68 percent, and large banks approved about 52 percent.

As your business needs to meet certain requirements for a bank small business loan, you’ll want to find the right bank to be your lender. Here’s everything you need to know about how to get a business loan from a bank.

1. Check your business and personal credit scores

The bank will likely check your business credit score and the personal credit scores of any business owners when you apply for a loan. Because they will look into your credit, it’s a good idea to check your credit score ahead of time. Three main business credit bureaus assess your business credit: Dun & Bradstreet, Equifax and Experian.

If your score is too low, consider taking time to improve your credit score before applying for a business loan from a bank. You could consider opening a business credit card or secured line of credit to start building a positive payment history to boost your score.

Most lenders look at your FICO score to assess your personal credit history. Typically, banks like Wells Fargo set strict credit requirements to apply, usually requiring a FICO score of at least 670. However, online lenders may grant certain loan types to businesses with personal credit scores as low as 550.

You can also find banks with loan programs that don’t focus on credit scores and consider other factors to assess your creditworthiness. For example, Bank of America offers a cash-secured business line of credit that approves startup businesses as long as you can put down a $1,000 security deposit. Huntington Bank ’s Lift Local Business loan is another option that doesn’t solely focus on credit score.

2. Calculate how much money you need — and how much you can afford to repay

When you apply, the bank will want to know how much funding you want. Calculate your business needs to determine the right loan size.

Think about how much you can afford to repay as well. You will have a monthly payment until you pay off the loan, so you should be able to budget for the monthly payment each month from your business finances. The monthly payment will include both interest and principal payments.

3. Choose a loan type

There are many small business loan types . Research and choose the best option for your needs.

4. For secured loans, choose your collateral

Any secured loan requires collateral to back the loan. Term loans and credit lines often have both secured and unsecured options. Just be aware that unsecured loans often have higher interest rates.

SBA loans usually have specific collateral requirements, though small loans under $50,000 may not require collateral. Equipment and commercial real estate loans are usually backed by the equipment or real estate purchased.

Your lender may allow you to choose your collateral. You can use any business asset to back the loan — some will even let you use personal assets. It could be a vehicle, property, equipment, cash or investments.

It’s not always needed, but sometimes you may want to get the collateral appraised. If you are in the midst of a business merger, acquisition or bankruptcy, the value of the collateral you use may be debatable. An appraisal can help you get an accurate value for your collateral. In addition, certain SBA loans have specific appraisal requirements. You can talk to your lender to find out more about these. Lightbulb Bankrate insight When getting a small business loan from a bank, you may be required to sign a personal guarantee . This statement guarantees that you will repay the loan from personal assets if you default on the loan.

5. Compare lenders

It’s a good idea to consider multiple lenders when looking at bank business loans. You want to consider the lender requirements for a small business loan to make sure your business qualifies. You may also want to consider whether you want to work with a large national bank or a small bank.

Small banks offer more personalized service, which can help you get approved for a loan based on your character and relationship with the bank. Yet, large banks can often provide the most competitive rates and large loan amounts.

When comparing lenders, you’ll want to assess each lender and the features of the loan offered. Compare interest rates and any fees charged and repayment terms offered. Some lenders also offer discounts if you pay off the loan early.

• Bank of America
• Wells Fargo
• Live Oak Bank

6. Meet the requirements and prepare any documentation

Every bank lender sets its own requirements that you need to meet at a minimum in order to qualify for its loan. Bank lenders tend to keep stricter requirements than other types of lenders, such as fintech companies.

Lenders will look at your personal and business credit score, time in business and revenue. Bank lenders often require at least a 670 FICO score, 2 years in business and $150,000 to $250,000 in revenue annually. These factors assess whether your business can handle the loan payments.

Once you meet the bank’s minimum requirements, you can apply and send in the correct documentation. Each loan application will have different documentation requirements , but typically, you will need to fill out or provide the following:

Required documents

• Resume of all business owners
• Business plan
•  Bank statements
•  Income tax returns from the last three years
•  Business tax ID number
•  Financial statement
• Accounts receivable and accounts payable statements
• Collateral (if the loan is secured
• Business license and registration
• Any lease agreements the business has

7. Apply online or make an appointment

Once you’ve made all your preparations, you are ready to apply for a small business loan. Find out the best way to apply from your lender. You may be able to apply online, by phone or in person. Some lenders offer all of these options, while some may only offer one.

Before you start the application, it’s a good idea to review your documents. Make sure everything is there and scan for typos. If you apply in person, dress professionally to make a good impression. Be prepared to answer questions from the loan officer about your documents or application.

What to do if your bank loan is denied

Once you submit your application, you may get an answer immediately, or the lender may take some time to decide. Even if you did everything right, the answer could be no. If your business loan is denied , you can take a few steps to apply again and attempt to get approved.

First, think about asking the lender why they denied your application so you can build a better application the next time. Look for other lenders who have a similar loan offering and have minimum requirements that your business meets. For example, you could try to find a lender that approves businesses with little time in business if you’re a startup.

It can take a few tries to get a lender to approve your small business loan application. But if you’re persistent and willing to shop around with different lenders, you can find lenders willing to accept businesses with less-than-ideal finances. In some cases, you may need to look into alternative business loans rather than getting a loan from a traditional bank.

If you don’t qualify for a bank loan, consider:

• Business credit cards
• Business lines of credit
• Small business loans from alternative lenders  

Bottom line

Small business loans from a bank allow businesses to get the funds needed for expansion, working capital, equipment purchases, inventory management and more. Banks may offer larger amounts, lower rates and a more personalized lending experience than other lenders, but expect stringent eligibility requirements.

If applying for a small business loan at a bank doesn’t seem like the best fit for your business, exploring alternative options can be beneficial.

Frequently asked questions

What do i need to get a business loan from my bank, how easy is it to get a business loan from a bank, how much of a business loan will a bank give me.

Article sources

We use primary sources to support our work. Bankrate’s authors, reporters and editors are subject-matter experts who thoroughly fact-check editorial content to ensure the information you’re reading is accurate, timely and relevant.

2024 Report on Employer Firms: Findings from the 2022 Small Business Credit Survey . Fed Small Business. Accessed on March 20, 2024.

Small Business Lending Survey . Federal Reserve Bank of Kansas City. Accessed on March 12, 2024.

Related Articles

How to get an SBA startup loan

How to get a small business loan when self employed

Where to get a business loan

First-time small business loan: 6 things to know

Prepare Your Business for a Loan Checklist

You’ve run the numbers and realize that your business needs an injection of cash, either to get off of the ground or to grow. And you’ve decided to get those funds by applying for a business line of credit or loan.

The next step is to understand what your business needs to qualify for the best small business loans with low interest rates and favorable repayment terms, and what you can do to prepare your business for the application process.

Small business owners who take the time to prepare their businesses beforehand who end up with the best offers and rates. 

Accelerate your path to better funding

Build business credit history, see your business credit-building impact, and secure new funding options — only with Nav Prime.

What Are the Top 3 Steps in Getting a Business Loan?

Here are the essential steps you’ll need to take to prepare your business to get a loan.

Step 1: Know what you want

Start by understanding your business’ needs. How much do you need to borrow? Do you need access to cash or credit? How quickly can you repay it? How much are you willing to pay in interest and fees?

There are many types of small business loans , each with its advantages and disadvantages. Some must be repaid quickly, within a few months. 

Others may have high limits and can be repaid over decades. Another popular option is a business line of credit that gives you access to cash when you need it. Pay it back, and tap it again when you need it. 

And then there are business credit cards , which can be helpful to cover business expenses like office supplies, inventory, and even larger purchases like equipment. 

Step 2: Know where to go

Not only are there different types of financial products, but there are also different types of lenders. You might qualify for a loan guaranteed by the U.S. Small Business Administration (SBA). Most SBA loans aren’t made by the SBA, but are made by lenders approved to offer these loans. Or you might opt to apply at a traditional bank. Credit unions, too, often offer low rates on business loans. 

One of the fastest and most flexible ways to get business financing is through online lenders. Many approve loans in hours, and can often fund the next business day if the loan is approved. 

Compare Your Financing Options With Confidence

Spend more time crushing goals than crunching numbers. Instantly, compare your best financial options based on your unique business data. Know what business financing you can qualify for before you apply, with Nav.

Step 3: Get your business lender-ready

Once you know what’s required to apply for the loan, you’ll want to make sure your business is in a good position to qualify.

If your business is a startup, it probably won’t have a business credit history. Tradelines (including vendor accounts) can help you establish business credit. Business credit cards are another way to build your business credit history, and that may help open the door to more options for a loan.

If your business is well-established but you don’t have great credit, now is a great time to try to boost your business credit scores by paying off old debts and making sure your payments are always on time. This may take a few months for your credit score to reflect your efforts, so plan ahead.

The more attention you put on improving your credit, the more loan options you’ll likely have.

What Do Banks Check Before Giving a Business Loan?

We’ll go more into detail about what specifically you need to apply for a business loan in a bit, but let’s talk about what banks look for to determine your business’ eligibility for a loan.

Ideally, your business will have a history of strong cash flow that shows a lender that your business is capable of repaying a loan. Most lenders (including banks) require business bank statements to verify revenues. They may also ask for financial statements and tax returns. 

The bank may also want to see that you don’t have a high debt ratio. If your business carries a lot of debt compared to revenues, the bank may be concerned that it will have trouble repaying debt. 

Can I Get a Business Loan Without Revenue?

But what if you have a startup that isn’t yet making sales? Are you automatically disqualified from taking out a business bank loan?

Not necessarily. It depends on the type of business loan. Some lenders will approve loans to businesses that haven’t yet launched or generated revenue. They may look at the business’ financial projections. But more likely, they will review your personal credit score and history, since you will be responsible for paying back the loan if your business can’t. (A personal guarantee will often be required, and you may have to provide information about your personal finances.) 

What Is a Good Loan Amount To Start a Business?

The amount of money you’ll need to start a business depends on the type of business and whether you have any cash in reserve to help with those upfront costs.

Consider that it may take months for you to generate enough revenue to cover your expenses, let alone see a profit. Build this factor into your budget to determine how much to borrow to cover those first months of both business and personal expenses.

If you’re launching a home-based business, you may only need $500—$5,000 to get started. But if you’re opening a restaurant or store, you’ll have a lot more overhead, including real estate (rental or purchase), inventory, staff, supplies, permits, and more. You may need to borrow $50,000 or up to a million dollars, depending on the type of business.

When calculating how much you want to borrow, keep in mind the repayment terms of the loan. It may feel good to be approved for a large business loan, but keep in mind you’ll need to cover those loan payments, whether you’re generating enough to pay for them or not.

Do I Need a Business Plan?

While not every lender will ask for a business plan, for entrepreneurs starting a new business, it’s always a good idea to have a business plan. It can help you clarify how much money you need, how much you can afford to pay, and how much annual revenue you’ll need to generate to pay back the loan. It can also help you envision what you want for your company, both now and in the future.

A good business plan will include an executive summary that provides a high-level overview of your company. It should also include a market analysis, a summary of your target audience, an overview of products and services, and a marketing plan. Finally, be sure to include your budget as well as plans for business funding.

Need help with your business plan? SBA resource partners like SCORE and Small Business Development Centers can help for free. 

What Do You Need To Get a Small Business Loan?

Now let’s look at some specifics of what you’ll need for a business loan application. While the application process and requirements will vary from one financial institution to another, these are always good documents to have at the ready.

Applying for an SBA loan may require a few more hoops to jump through than, say, an online loan, so consider how long you’ll need to gather everything you need for the application. Also, approval times vary. Bank loans and SBA loans can take one to three months to review, approve and fund a loan application, while many online lenders will approve and fund loans in as little as a few hours or ays.

To prove your ability to repay the loan, you may be asked to provide business tax returns for past years, if you’re already in operation. You may also be asked for bank statements or financial documents including:

• Income statements
• Profit and loss statements
• Cash flow statement
• Balance sheets

If your business bookkeeping is up to date, it should be easy to produce this information. If it’s not, get accounting software and bring your books up to date.

You will be asked for government-issued photo identification, as well as your contact information as the representative of your company. You may also be required to provide your business bank account details so that the loan proceeds can be directly deposited into the account, and/or your payments can be debited.

Be aware that, depending on the type of business you operate as (corporation, partnership, sole proprietorship, LLC), and the terms of the loan, you may be personally liable for the debt, should your business not be able to repay the loan.

What Credit Score Do I Need for a Business Loan?

In general, if your business (or you personally) has good credit, you’ll qualify for the best loan terms and have the most loan options to choose from. Depending on the type of financing, there may be a personal credit check, business credit check, or both. 

Poor credit scores make it harder to qualify for some types of loans, or may mean you’ll pay higher interest rates. 

If you’re a first-time borrower and don’t have much of a credit history, learn how to establish business credit . Not all lenders check business credit reports, but some do. 

Don’t know what your credit score is? Check before you apply so you know what lenders will see. With Nav, you can review and manage your business and personal credit. 

Access the business and personal credit data that lenders are actually seeing

Actively build business credit history, improve the metrics that matter, and access your best financing options – only at Nav.

Small business financing has the power to change your business for the better, so take your time to ensure your business is well-positioned to qualify for the best rates.

This article was originally written on April 16, 2024.

Rate This Article

This article currently has 1 rating with an average of 5 stars.

Gerri Detweiler

Education Consultant, Nav

Known as a financing and credit expert, Gerri Detweiler has been interviewed in more than 4000 news stories, and answered over 10,000 credit and lending questions online. Her articles have been widely syndicated on sites such as MSN, Forbes, and MarketWatch. She is the author or coauthor of five books, including Finance Your Own Business: Get on the Financing Fast Track. She has testified before Congress on consumer credit legislation.

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How to Write a Business Plan for Loan with Free Template

A business plan for bank loan is instrumental in getting a loan and funding for your business. When you approach the lenders or investors with a proper business plan , you increase your chances of getting a loan for your business plan. 

Why Do You Need Business Plan for Bank Loan?

• A Business Plan Helps You Get Loans and Funding

A Business Plan Increases Your Chances of Business Success

• A Business Plan Helps you Grow Strategically
• A Business Plan Helps You Measure Business Growth
• What is included business plan for bank loan?

Process of Writing a Business Plan for a Bank Loan

How to create a business plan for a loan with a free template.

• Sample Of Business Plan For Loan And Funding

Wondering how to write a business plan for a loan that could get you approved? Read our guide on the topic, check the business plan sample for bank loan, and use our business plan for loan template to make a killer business plan.

Get our affordable business plan writing services now!

A business plan clears your mind about business, helps you prepare for it, and makes you a good candidate for loans, funding, and investments. In short, writing a business plan for a loan is worth it. 

For Later: To learn more about how to write a business plan specifically for a bank loan, check out our bank ready business plan .

A Business Plan Helps You Get Loans and Funding 

When you present your business idea before investors and lenders (or anyone else you are looking to for funding), you look serious with a business plan. 

You may not need a book in the name of a business plan but you need to present your business idea in a convincing way.

When they know your business idea is sound and you can return the loan, they will be inclined to give you a loan. 

A research on the impact of business planning shows that the businesses that start with proper planning have more chances of success. 

A business plan helps both the new firms and the established firms. 

A Business Plan Helps you Grow Strategically 

A business plan is a road-map for your business growth, whether you use it as a roadmap or not. When you put effort into making a business plan, you set priorities, establish goals, create a strategy for achieving those goals, and set a time frame for achieving those goals. 

A Business Plan Helps You Measure Business Growth 

The market conditions will never be exactly the same as you had expected in the business plan. 

Here, your business plan will help you compare planning against actual developments. You can see if you are going in the right direction as you planned or you need to change course.

Maybe you need to make a new business plan as your business might take a different shape than you expected.

What is included business plan for bank loan?

A business plan starts with an executive summary that briefly describes the business idea and ends with the appendix that includes lengthy financial documents or other reference materials. 

These are the parts of a business plan. 

• Executive Summary
• Business Overview 
• Business Objectives and Goals
• Competitor Analysis 
• Market Analysis  
• Product and Services
• Operational Plan 
• Business Structure and Management
• Financial Analysis
• Marketing and Sales

Let’s see what you will write in each of the above-listed sections of the business plan for loan.

Executive Summary: Write this section after you have completed the business plan. Briefly discuss your business idea and its parts. 

Business Overview: Include basic details about your business like business name, address, year established, etc. 

Business Objectives and Goals: Discuss what are the short-term and long-term business goals and how do you plan to achieve them. 

Competitor Analysis: Conduct an analysis of your direct and indirect competitors. A SWOT analysis of your competitors can help you identify opportunities for creating your competitive advantage. 

Market Analysis: Discuss market conditions in your industry. Is your target industry seeing a growth trend or a decline? What are the driving factors for growth in your industry?

Product and Services: Introduce the products and services of your business, how your product or service works, how you will price them, and what is your sales and distribution strategy for your products or services. 

Operational Plan: Explain your operation plan and discuss how you plan to run your business. The operation plan will discuss organizational structure, team working, and almost all aspects of business operations. 

Business Structure and Management: Introduce business managers and key employees here. Also briefly discuss the legal structure of your business like if you are C-corp, S-corp, LLC , etc. 

Financial Analysis: Discuss initial business costs, running cost, business break even cost, the amount of funding you need and how you will spend that funding. Also create a financial forecast for your business. 

Marketing and Sales: This section will include the marketing and sales plan for your products or services.

Try to make it detailed so that the bank or your lender can understand how you will make your business profitable and if you will have solid capacity to pay back the loans. 

Appendix: Anything you didn’t or couldn’t mention in the previous business plan sections will go here. For example, you can include extended financial reports, research about your industry, detailed CVs of your team and management, etc. 

Download Free Example Business Plan for Loan

Make business plan for loan quick and easy, use this business plan template for loan. 

A template is an easy and straightforward way to write a business plan. A template gives you step by step instructions on what each business section is about and how to write it. 

Wisebusinessplans offers business plan for bank loan template that guides you with questions in every section of the business. Simply answer the questions in each section and your business plan will be ready in no time. 

These are the steps to writing a business plan for small business loan with a template: 

Collection Business Information : Make business information available, keep business documentation at hand as you will need to use data from these documents. 

Write Business Plan : Proceed with writing the business plan. You will not stop until you reach financial analysis. 

Prepare Financial Projections : When you are applying for a debt, the lender will most closely look at your financial projections. Take your time to write financial projections. Make sure you sound convincing.

Also, don’t bury information in the spreadsheets or too much data. State inference you draw from the data first, include necessary financial projections in the business plan and put the rest of them into the business plan appendix. 

Proofread and Revise : Business plan is a thorough document. It is highly likely to leave some holes in the first draft. Proofread your business plan at least once to check for language and factual mistakes. You also come up with a new and better way of saying something. 

Get Second Opinion : Engage a trusted friend, or family member, or an advisor and get their opinion on your business plan. Their unique perspective will force you to improve it,

Sample Of Business Plan For Loan And Funding 

Want to see a sample on the quest of ‘how to make a business plan for a loan’, check the link below.This  business plan for bank loan example will help you see how an actual business plan for a bank looks like and what is the end-product you are working towards. 

Business Plan for Loan

Get this simple business plan template and make better business plan

 A business plan is essential when applying for a loan as it provides lenders with a comprehensive understanding of your business, including its objectives, financial projections, market analysis, and operational strategies. It demonstrates your preparedness and increases the likelihood of securing funding.

To write a business plan for a loan, start by outlining your executive summary, company description, market analysis, products or services, marketing and sales strategies, organizational structure, financial projections, and appendices. Utilizing a free business plan template can help guide you through the process.

 Free business plan templates are widely available online. You can search for reputable websites or organizations that offer templates specifically designed for writing business plans for loans. These templates typically provide a structured format and guidance to ensure you include all the necessary components.

The financial projections section of your business plan should include a sales forecast, cash flow statement, profit and loss statement, and balance sheet. It is important to provide realistic estimates based on thorough market research and a detailed understanding of your business’s financial performance.

Absolutely. Seeking assistance or feedback when writing your business plan for a loan is highly recommended. You can consult with business advisors, mentors, or industry experts who can provide valuable insights and help ensure your business plan is comprehensive, well-structured, and compelling to potential lenders.

Want to write a business plan?

Hire our professional business plan writers now!

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How to Write a Business Plan to Start a Bank

FEB.10, 2024

Bank Business Plan Checklist

A bank business plan is a document that describes the bank’s goals, strategies, operations, and financial projections. It communicates the bank’s vision and value proposition to potential investors, regulators, and stakeholders. A SBA business plan should be clear, concise, and realistic. It should also cover all the essential aspects of the bank’s business model.

Here is a checklist of the main sections that you should keep in mind while building a bank business plan:

• Executive summary
• Company description
• Industry analysis
• Competitive analysis
• Service or product list
• Marketing and sales plan
• Operations plan
• Management team
• Funding request
• Financial plan

Sample Business Plan for Bank

The following is a bank business plan template that operates in the USA. This bank business plan example is regarding ABC Bank, and it includes the following sections:

Executive Summary

ABC Bank is a new bank for California’s SMBs and individuals. We offer convenient banking services tailored to our customers’ needs and preferences. We have a large target market with over 500,000 SMBs spending billions on banking services annually. We have the licenses and approvals to operate our bank and raised $20 million in seed funding. We are looking for another $30 million in debt financing.

Our goal is to launch our bank by the end of 2024 and achieve the following objectives in the first five years of operation:

• Acquire 100,000 customers and 10% market share
• Generate $100 million in annual revenue and $20 million in net profit
• Achieve a return on equity (ROE) of 15% and a return on assets (ROA) of 1.5%
• Expand our network to 10 branches and 50 ATMs
• Increase our brand awareness and customer loyalty

Our bank has great potential to succeed and grow in the banking industry. We invite you to read the rest of our microfinance business plan to learn about how to set up a business plan for the bank and how we will achieve our goals.

Industry Analysis

California has one of the biggest and most active banking industries in the US and the world. According to the Federal Deposit Insurance Corp , California has 128 financial institutions, with total assets exceeding $560 billion.

The California banking industry is regulated and supervised by various federal and state authorities. However, they also face several risks and challenges, such as:

• High competition and consolidation
• Increasing regulation and compliance
• Rising customer demand for digital and mobile banking
• Cyberattacks and data breaches
• Environmental and social issues

The banking industry in California is highly competitive and fragmented. According to the FDIC, the top 10 banks and thrifts in California by total deposits as of June 30, 2023, were:

Customer Analysis

We serve SMBs who need local, easy, and cheap banking. We divide our customers into four segments by size, industry, location, and needs: 

SMB Segment 1 – Tech SMBs in big cities of California. These are fast-growing, banking-intensive customers. They account for a fifth of our market share and a third of our revenue and are loyal and referable.

SMB Segment 2 – Entertainment SMBs in California’s entertainment hubs. These are high-profile, banking-heavy customers. They make up a sixth of our market and a fourth of our revenue and are loyal and influential.

SMB Segment 3 – Tourism SMBs in California’s tourist spots. These are seasonal, banking-dependent customers. They represent a quarter of our market and a fifth of our revenue and are loyal and satisfied.

SMB Segment 4 – Other SMBs in various regions of California. These are slow-growing, banking-light customers. They constitute two-fifths of our market and a quarter of our revenue and are loyal and stable.

Competitive Analysis

We compete with other banks and financial institutions that offer similar or substitute products and services to our target customers in our target market. We group our competitors into four categories based on their size and scope: 

1. National Banks

• Key Players – Bank of America, Wells Fargo, JPMorgan Chase, Citibank, U.S. Bank
• Strengths – Large customer base, strong brand, extensive branch/ATM network, innovation, robust operations, solid financial performance
• Weaknesses – High competition, regulatory costs, low customer satisfaction, high attrition
• Strategies – Maintain dominance through customer acquisition/retention, revenue growth, efficiency

2. Regional Banks

• Key Players – MUFG Union Bank, Bank of the West, First Republic Bank, Silicon Valley Bank, East West Bank
• Strengths – Loyal customer base, brand recognition, convenient branch/ATM network, flexible operations
• Weaknesses – Moderate competition, regulatory costs, customer attrition
• Strategies – Grow market presence through customer acquisition/retention, revenue optimization, efficiency

3. Community Banks

• Key Players – Mechanics Bank, Bank of Marin, Pacific Premier Bank, Tri Counties Bank, Luther Burbank Savings
• Strengths – Small loyal customer base, reputation, convenient branches, ability to adapt
• Weaknesses – Low innovation and technology adoption
• Strategies – Maintain niche identity through customer loyalty, revenue optimization, efficiency

4. Online Banks

• Key Players – Ally Bank, Capital One 360, Discover Bank, Chime Bank, Varo Bank
• Strengths – Large growing customer base, strong brand, no branches, lean operations, high efficiency
• Weaknesses – High competition, regulatory costs, low customer satisfaction and trust, high attrition
• Strategies – Disrupt the industry by acquiring/retaining customers, optimizing revenue, improving efficiency

Market Research

Our market research shows that:

• California has a large, competitive, growing banking market with 128 banks and $560 billion in assets.
• Our target customers are the SMBs in California, which is 99.8% of the businesses and employ 7.2-7.4 million employees.
• Our main competitors are national and regional banks in California that offer similar banking products and services.

We conclude that:

• Based on the information provided in our loan officer business plan , there is a promising business opportunity for us to venture into and establish a presence in the banking market in California.
• We should focus on the SMBs in California, as they have various unmet banking needs, preferences, behavior, and a high potential for growth and profitability.

Operations Plan

Our operational structure and processes form the basis of our operations plan, and they are as follows:

• Location and Layout – We have a network of 10 branches and 50 ATMs across our target area in California. We strategically place our branches and ATMs in convenient and high-traffic locations.
• Equipment and Technology – We use modern equipment and technology to provide our products and services. We have c omputers and software for banking functions; security systems to protect branches and ATMs; communication systems to communicate with customers and staff; i nventory and supplies to operate branches and ATMs.
• Suppliers and Vendors – We work with reliable suppliers and vendors that provide our inventory and supplies like cash, cards, paper, etc. We have supplier management systems to evaluate performance.
• Staff and Management – Our branches have staff like branch managers, customer service representatives, tellers, and ATM technicians with suitable qualifications and experience.
• Policies and Procedures – We have policies for customer service, cash handling, card handling, and paper handling to ensure quality, minimize losses, and comply with regulations. We use various tools and systems to implement these policies.

Management Team

The following individuals make up our management team:

• Earl Yao, CEO and Founder – Earl is responsible for establishing and guiding the bank’s vision, mission, strategy, and overall operations. He brings with him over 20 years of banking experience.
• Paula Wells, CFO and Co-Founder – Paula oversees financial planning, reporting, analysis, compliance, and risk management.
• Mark Hans, CTO – Mark leads our technology strategy, infrastructure, innovation, and digital transformation.
• Emma Smith, CMO – Emma is responsible for designing and implementing our marketing strategy and campaigns.
• David O’kane, COO – David manages the daily operations and processes of the bank ensuring our products and services meet the highest standards of quality and efficiency.

Financial Projections

Our assumptions and drivers form the basis of our financial projections, which are as follows:

Assumptions: We have made the following assumptions for our collection agency business plan :

• Start with 10 branches, 50 ATMs in January 2024
• Grow branches and ATMs 10% annually
• 10,000 customers per branch, 2,000 per ATM
• 5% average loan rate, 2% average deposit rate
• 80% average loan-to-deposit ratio
• $10 average fee per customer monthly
• $100,000 average operating expense per branch monthly
• $10,000 average operating expense per ATM monthly
• 25% average tax rate

Our financial projections are as per our:

• Projected Income Statement
• Projected Cash Flow Statement
• Projected Balance Sheet
• Projected Financial Ratios and Indicators

Select the Legal Framework for Your Bank

Our legal structure and requirements form the basis of our legal framework, which are as follows:

Legal Structure and Entity – We have chosen to incorporate our bank as a limited liability company (LLC) under the laws of California.

Members – We have two members who own and control our bank: Earl Yao and Paula Wells, the founders and co-founders of our bank.

Manager – We have appointed Mark Hans as our manager who oversees our bank’s day-to-day operations and activities.

Name – We have registered our bank’s name as ABC Bank LLC with the California Secretary of State. We have also obtained a trademark registration for our name and logo.

Registered Agent – We have designated XYZ Registered Agent Services LLC as our registered agent authorized to receive and handle legal notices and documents on behalf of our bank.

Licenses and Approvals – We have obtained the necessary licenses and approvals to operate our bank in California, including:

• Federal Deposit Insurance Corporation (FDIC) Insurance
• Federal Reserve System Membership
• California Department of Financial Protection and Innovation (DFPI) License
• Business License
• Employer Identification Number (EIN)
• Zoning and Building Permits

Legal Documents and Agreements – We have prepared and signed the necessary legal documents and agreements to form and operate our bank, including:

• Certificate of Formation
• Operating Agreement
• Membership Agreement
• Loan Agreement
• Card Agreement
• Paper Agreement

Keys to Success

We analyze our market, customers, competitors, and industry to determine our keys to success. We have identified the following keys to success for our bank.

Customer Satisfaction

Customer satisfaction is vital for any business, especially a bank relying on loyalty and referrals. It is the degree customers are happy with our products, services, and interactions. It is influenced by:

• Product and service quality – High-quality products and services that meet customer needs and preferences
• Customer service quality – Friendly, professional, and helpful customer service across channels
• Customer experience quality – Convenient, reliable, and secure customer access and transactions

We will measure satisfaction with surveys, feedback, mystery shopping, and net promoter scores. Our goal is a net promoter score of at least 8.

Operational Efficiency

Efficiency is key in a regulated, competitive environment. It is using resources and processes effectively to achieve goals and objectives. It is influenced by:

• Resource optimization – Effective and efficient use and control of capital, staff, and technology
• Process improvement – Streamlined, standardized processes measured for performance
• Performance management – Managing financial, operational, customer, and stakeholder performance

We will measure efficiency with KPIs, metrics, dashboards, and operational efficiency ratios. Our goal is an operational efficiency ratio below 50%.

Partner with OGSCapital for Your Bank Business Plan Success

Highly efficient service.

Highly Efficient Service! I am incredibly happy with the outcome; Alex and his team are highly efficient professionals with a diverse bank of knowledge.

Are you looking to hire business plan writers to start a bank business plan? At OGSCapital, we can help you create a customized and high-quality bank development business plan to meet your goals and exceed your expectations.

We have a team of senior business plan experts with extensive experience and expertise in various industries and markets. We will conduct thorough market research, develop a unique value proposition, design a compelling financial model, and craft a persuasive pitch deck for your business plan. We will also offer you strategic advice, guidance, and access to a network of investors and other crucial contacts.

We are not just a business plan writing service. We are a partner and a mentor who will support you throughout your entrepreneurial journey. We will help you achieve your business goals with smart solutions and professional advice. Contact us today and let us help you turn your business idea into a reality.

Frequently Asked Questions

How do I start a small bank business?

To start a small bank business in the US, you need to raise enough capital, understand how to make a business plan for the bank, apply for a federal or state charter, register your bank for taxes, open a business bank account, set up accounting, get the necessary permits and licenses, get bank insurance, define your brand, create your website, and set up your phone system.

Are banks profitable businesses?

Yes, banks are profitable businesses in the US. They earn money through interest on loans and fees for other services. The commercial banking industry in the US has grown 5.6% per year on average between 2018 and 2023.

Download Bank Business Plan Sample in pdf

OGSCapital’s team has assisted thousands of entrepreneurs with top-rate business plan development, consultancy and analysis. They’ve helped thousands of SME owners secure more than $1.5 billion in funding, and they can do the same for you.

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Loan Officer Business Plan Template

Written by Dave Lavinsky

Over the past 20+ years, we have helped thousands of loan officers develop business plans to grow their businesses. On this page, we will first give you some background information with regards to the importance of business planning. We will then go through a loan officer business plan template step-by-step so you can create your plan today.

Download our Ultimate Business Plan Template here >

What is a Loan Officer Business Plan?

A business plan provides a snapshot of your loan business as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategy for reaching them. It also includes market research to support your plans.

Why You Need a Business Plan for a Loan Officer

If you’re looking to grow your existing loan business, you need a business plan. A business plan will plan out the growth of your loan business in order to improve your chances of success. Your loan business plan is a living document that should be updated annually as your company grows and changes.

Finish Your Business Plan Today!

If you want to grow your loan officer business, you need a business plan. Below are links to each section of your loan officer business plan template:

Executive Summary

Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.

In it you must provide an overview of each of the sections of your plan. For example, give a brief overview of the loan industry. Discuss the type of loan business you are operating. Detail your direct competitors. Give an overview of your target customers. Provide a snapshot of your marketing plan. Identify the key members of your team. And offer an overview of your financial plan.  

Company Analysis

In your company analysis, you will detail the type of loan business you are operating.

For example, you might operate one of the following types of loan businesses:

• Commercial Loan Officer : this type of loan business focuses on arranging business loans.
• Consumer Loan Officer: this type of business focuses on providing loans for things such as vehicles.
• Mortgage Loan Officer: this type of loan obtains loans for consumer to purchase real estate.

In addition to explaining the type of loan business you will operate, the Company Analysis section of your business plan needs to provide background on the business.

Include answers to question such as:

• When and why did you start the business?
• What milestones have you achieved to date? Milestones could include the number of customers served, number of positive reviews, dollar value of loans arranged, etc.
• Your legal structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

Industry Analysis

In your industry analysis, you need to provide an overview of the loan industry.

While this may seem unnecessary, it serves multiple purposes.

First, researching the loan industry educates you. It helps you understand the market in which you are operating.

Secondly, market research can improve your strategy, particularly if your research identifies market trends.

The third reason for market research is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section of your loan business plan:

• How big is the loan industry (in dollars)?
• Is the market declining or increasing?
• Who are the key competitors in the market?
• Who are the key suppliers in the market?
• What trends are affecting the industry?
• What is the industry’s growth forecast over the next 5 – 10 years?
• What is the relevant market size? That is, how big is the potential market for your loan business? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.

Customer Analysis

The customer analysis section of your loan officer business plan must detail the customers you serve and/or expect to serve.

The following are examples of customer segments: parents, students, professionals, businesses, couples, families, prospective home buyers, prospective car buyers, contractors, etc.

As you can imagine, the customer segment(s) you choose will have a great impact on the type of loan business you operate. Clearly, someone interested in purchasing a new car would respond to different marketing promotions than a business seeking equipment financing, for example.

Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, include a discussion of the ages, genders, locations and income levels of the customers you seek to serve. Because most loan businesses primarily serve customers living in their same city or town, such demographic information is easy to find on government websites.

Psychographic profiles explain the wants and needs of your target customers. The more you can understand and define these needs, the better you will do in attracting and retaining your customers.

Finish Your Loan Officer Business Plan in 1 Day!

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

Competitive Analysis

Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.

Direct competitors are other loan businesses.

Indirect competitors are other options that customers have to purchase from that aren’t direct competitors. This includes commercial banks, online loan brokers, etc. You need to mention such competition as well.

With regards to direct competition, you want to describe the other loan businesses with which you compete. Most likely, your direct competitors will be loan officers located very close to your location.

For each such competitor, provide an overview of their businesses and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:

• What types of customers do they serve?
• What types of loans do they specialize in?
• What is their pricing (premium, low, etc.)?
• What are they good at?
• What are their weaknesses?

With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.

The final part of your competitive analysis section is to document your areas of competitive advantage. For example:

• Will you provide higher value loans?
• Will you offer lower interest rates on loans?
• Will you provide better customer service?
• Will you offer a wider variety of loan options?

Think about ways you will outperform your competition and document them in this section of your plan.  

Marketing Plan

Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a loan officer business plan, your marketing plan should include the following:

Product : In the product section, you should reiterate the type of loan company that you documented in your Company Analysis. Then, detail the specific products you will be offering. For example, in addition to loans, will you provide insurance, financial advisory, or real estate services?

Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your marketing plan, you are presenting the services you offer and their prices.

Place : Place refers to the location of your loan company. Document your location and mention how the location will impact your success. For example, is your loan business located near a real estate brokerage, or car dealership, etc. Discuss how your location might be the ideal location for your customers.

Promotions : The final part of your loan officer marketing plan is the promotions section. This is perhaps the most important section of your plan. Here you will document how you will drive customers to your website and/or location(s). The following are some promotional methods you might consider:

• Advertising in local papers and magazines
• Reaching out to local websites
• Social media marketing
• Local radio advertising

Operations Plan

While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.

Everyday short-term processes include all of the tasks involved in running your loan business, including processing loan applications, arranging signings, marketing your business, paperwork, etc.

Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to arrange your 100 th loan, or when you hope to reach $X in revenue. It could also be when you expect to expand your loan business to a new city.  

Management Team

To demonstrate your loan business’ ability to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.

Ideally you and/or your team members have direct experience in managing loan businesses. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act like mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience as a loan officer or success being a local bank or credit union manager.  

Financial Plan

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet and cash flow statements.

Income Statement : an income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenues and then subtracts your costs to show whether you turned a profit or not.

In developing your income statement, you need to devise assumptions. For example, will you work on commission, or on a fee for services model? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.

Balance Sheets : Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $50,000 on building out your loan business, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a bank writes you a check for $50,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.

Cash Flow Statement : Your cash flow statement will help determine how much money you need to start or grow your business, and make sure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt.

In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a loan business:

• Location build-out including design fees, construction, etc.
• Cost of equipment and supplies
• Payroll or salaries paid to staff
• Business insurance
• Taxes and permits
• Legal expenses

Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your office location lease or outline your strategic partnerships with local realtors and lenders.  

Putting together a business plan for your loan officer business is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will really understand the loan industry, your competition, and your customers. You will have developed a marketing plan and will really understand what it takes to launch and grow a successful loan business.  

Loan Officer Business Plan FAQs

What is the easiest way to complete my loan officer business plan.

Growthink's Ultimate Business Plan Template allows you to quickly and easily complete your Loan Officer Business Plan.

What is the Goal of a Business Plan's Executive Summary?

The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of loan officer business you are operating and the status; for example, are you a startup, do you have a loan officer business that you would like to grow, or are you operating a chain of loan officer businesses?

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

OR, Let Us Develop Your Plan For You

Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success.   Click here to see how Growthink’s professional business plan consulting services can create your business plan for you.

Other Helpful Business Plan Articles & Templates

Small Business Trends

How to get a business loan from a bank: unraveling the secrets.

Understanding how to get a business loan from a bank is essential for many small business owners. If you’ve operated your business for a year and have financial records showing profitability, you stand a good chance of securing a small business loan from traditional lenders such as banks or credit unions.

Start-ups can also secure bank loans, sometimes using personal loans. Since a personal loan can be unsecured, you won’t need to use business assets as collateral.

Choosing a personal loan? Getting business credit cards from the same bank is a good idea. Regular, on-time monthly payments can boost your personal credit score, setting you up for a future business loan.

Here’s a word from Andrew Cartwright about how small businesses & the self-employed can get business funding In 3 Days:

Next, we’ll let’s look into the specifics of securing a traditional bank loan for your business.

How to Get a Bank Loan for a Business

Only about 15% of most small business loans are approved. That can be a worrying statistic for a small business owner. But you can take steps to upgrade your chances for approval and the best business loan terms.

1. Write or update your Business Plan.

A concise, informative business plan stamps you as a professional business owner. It is a necessary part of your bank loan process. The business plan details your business operating expenses, business credit profile, and business goals for the long term. Many lenders require them as part of the business loan application. Incorporate market analysis, company structure, product descriptions, and marketing strategies to enhance your plan’s comprehensiveness.

2. How will you use the loan?

With your application, include a short letter describing why you need the loan money. Explain how the funds will boost your operations, support expansion, or enhance inventory to convince lenders of your strategic planning. Detailing specific projects or purchases the loan will finance demonstrates a clear vision and responsible financial planning.

3. What type of loan do you need?

Make sure of what type of loan agreement is the best fit for you and which of the small business lenders offer that type. Consider terms, interest rates, and repayment schedules to find the most suitable loan for your business needs.

4. Clean up credit scores

If you’ve got a bad rating with major business credit bureaus or with your personal credit scores, take steps to boost your score. Banks have a minimum number for the rate of credit scores they’ll accept before considering a loan request. Review your credit report for errors, reduce debt levels, and make timely payments to improve your scores.

5. Organize financial records

Make sure you have every document needed to prove your business credit history, such as business bank statements, business credit card transactions and personal tax returns. Gather profit and loss statements, balance sheets, and cash flow statements to demonstrate financial health and stability.

Reach out to other small business owners to see which lenders they recommend. Engaging in local business associations or online forums can provide insights and personal experiences that guide your choice.

7. Make an appointment with a lender

A direct conversation can provide clarity, allow for questions, and establish a rapport with the lender. Prepare a list of questions, anticipate lender inquiries, and practice your pitch to convey your business’s value and loan repayment plan confidently.

Table of Steps to Secure a Bank Loan for Your Business

Navigating the process of securing a bank loan for your business requires meticulous preparation and a clear strategy. Below is a step-by-step guide in table form to enhance your chances of loan approval:

Should you apply for a business loan from a traditional bank?

There are many options for business loans other than traditional lenders.

Should you go to a bank?

• Term loans typically have longer repayment times than loan repayments from online lenders
• If you choose a Small Business Administration-affiliated and approved bank, all your financials will already be on record. That means you’ll be ready to access SBA programs, even disaster relief offerings such as the assistance offered during the pandemic.
• SBA loans typically have a lower interest rate.
• With good business financials and a proven positive cash flow, the approval process for a business loan can be short and smooth.
• The approval process for small business financing will most likely be longer than it would be with online lenders.
• If you have bad credit, either your business credit score or your personal credit history, you’re unlikely to get a loan.
• Your financial institution will require loan application fees and other costs in the approval process.
• Obtaining an SBA loan usually requires additional paperwork, such as documentation of business assets.

Types of Business Loans Offered by Banks

The type of loan to seek depends on your business needs.

There are 3 main types of bank business loans for small businesses offered by business lenders:

• Term loans – With this type of loan, several elements are set – the amount of money borrowed, the monthly payment amount, the number of monthly payments, and the annual percentage rate. With a term loan, there are fixed monthly payments.
• SBA guaranteed loans – Within the SBA loan offerings are additional types of loans and financing options:Working capital – There is typically a 7 to 10-year repayment period for a working capital loan.Equipment loan – This can help small business owners add to their business assets. The loan terms are usually for 10 years.Real Estate loan – Depending on your business credit report, the loan term can be up to 25 years.
• Business Line of Credit – This is similar to a business credit card, but with a better interest rate. A line of credit loan is basically an unsecured loan with a set revolving credit line and limit, based on your business cash flow. You only pay interest on the money you draw. This is a good choice if you are waiting for accounts receivable to be paid.

Tips for Getting a Bank Loan for a Business

Here’s how to help your application move to the top of the pile:

• Dress the part – Dress as if you are also employed by the bank. Present a professional appearance.
• Practice your pitch – Have a friend or family member act as the loan officer.
• Have someone proofread your business plan.
• Make sure you have all the financial records you need and that they are organized.
• Don’t just show up. Make an appointment. At that time, ask how the loan officer would like the financial records presented. The loan officer may want to review the documents ahead of time, either mailed as hard copies or attached to emails.

When is a good time to apply for a small business loan from a bank?

The optimal time to apply for a small business loan is when:

• Your business has consistent and provable cash flow.
• You’ve maintained accurate financial records and can demonstrate business profitability.
• Your credit score (both business and personal, if relevant) is strong.
• You have a clear plan or purpose for the loan, whether it’s expansion, purchasing equipment, or covering operational costs.
• The economic conditions are favorable, and interest rates are relatively low.

Once you’ve assessed these factors and decided it’s the right time, scheduling a meeting with a bank loan officer is key to discussing your needs and application in detail.

Is it difficult to get small business loans from a bank?

Only 15% of applications are approved. Many are rejected because they are incomplete. With proper documentation and professionalism, you can get a business loan.

What bank is easiest to get approved for a business loan?

By the numbers based on the number of business loan approvals, here are the top lenders: Bank of America, JP Morgan Chase, Wells Fargo, Citibank, PNC, and US Bank.

How much will a bank loan you for a business?

The amount you can get depends on your business credit score, business assets and cash flow, and more. Remember, this number can change according to the number of years you’ve been in business and your overall business financial stability.

• How to Get a Small Business Loan
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How to Get a Small Business Loan: A Guide in 10 Steps

S mall business loans are available from a large number of traditional and alternative lenders. Small business loans can help your business grow, fund new research and development, help you expand into new territories, enhance sales and marketing efforts, allow you to hire new people, and much more.

How to get a small business loan

This article explains the 10 key steps you should follow to get a small business loan, with some practical advice and insight on the lending process.

1. Understand the different types of small business loans available

There are multiple types of small business loans available. The options vary depending on your business needs, the length of the loan, and the specific terms of the loan. Here are a number of small business loan choices:

Small business line of credit. Under a small business line of credit, your business can access funds from a lender as needed. There will be a cap on the amount of funds accessible (e.g., $100,000), but a line of credit is useful for managing a company’s cash flow and unexpected expenses. There will typically be a fee for setting up a line of credit, but you don’t get charged interest until you actually draw down the funds. Interest is typically paid monthly, and the principal drawn down on the line is often amortized over years. However, most lines of credit require renewal annually, which may require an additional fee. If the line is not renewed, you will be required to pay it in full at that time.

Accounts receivable financing. An accounts receivable line of credit is a credit facility secured by the company’s accounts receivable (AR). The AR line allows you to get cash immediately, depending on the level of your accounts receivable; the interest rate is variable. The AR line is paid down as the accounts receivable are paid by your customers.

Working capital loans. A working capital loan is a debt-borrowing vehicle used by a company to finance its daily operations. Companies use such loans to manage fluctuations in revenues and expenses due to seasonality or other circumstances in their business. Some working capital loans are unsecured, but companies that have little or no credit history will have to pledge collateral for the loan or provide a personal guarantee. Working capital loans tend to be short-term loans of 30 days to one year. Such loans typically vary from $5,000 to $100,000 for small businesses.

Small business term loans. Term loans are typically for a set dollar amount (e.g., $250,000) and are used for business operations, capital expenditures, or expansion. Interest is paid monthly and the principal is usually repayable within six months to three years (which can be amortized over the term of the loan or have a balloon payment at the end). Term loans can be secured or unsecured, and the interest can be variable or fixed. They are good for small businesses that need capital for growth or for large, onetime expenditures.

SBA small business loans. Some banks offer attractive low-interest-rate loans for small businesses, backed and guaranteed by the SBA. Because of the SBA guarantee, the interest rate and repayment terms are more favorable than most loans. Loan amounts range from $30,000 to as high as $5 million. However, the loan process can be time consuming with strict requirements for eligible small businesses. Visit the SBA website to see a list of the 100 most active SBA lenders .

Equipment loans. Small businesses can buy equipment, vehicles, and software through an equipment loan. This typically requires a down payment of 20% of the purchase price of the equipment, and the loan is secured by the equipment. Interest on the loan is typically paid monthly and the principal is usually amortized over a two- to four-year period. Loan amounts normally range from $5,000 to $500,000, and can accrue interest at either a fixed or variable rate. Equipment loans can also sometimes be structured as equipment leases.

Small business credit cards. While some business owners may be wary of using them, small business credit cards can also act as short-term small business financing. Interest rates will vary depending on the credit card issuer, the amount available on the card, and the creditworthiness of the holder of the card. Many small business credit card issuers require the principal owner to be co-liable with the company. Issuers of small business credit cards include American Express, Brex, Capital One, Bank of America, and many others. Many credit cards offer promotional introductory rates of 0% for a short period of time (six to nine months). Cash-back and rewards programs allow you to earn rewards from purchases on the credit card.

2. Research available lenders

There are more lenders than ever willing to lend to small businesses, and many of the lenders can be found from a simple online search. Here are the main types of lenders:

• Direct online lenders. There are a number of online lenders that make small business loans through a relatively easy online process. Reputable companies such as PayPal can provide very fast small business cash advances, working capital loans , and short-term loans in amounts from $5,000 to $500,000. Sites such as Fundera offer access to multiple lenders, acting as a lead generation service for lenders.
• Large commercial banks. The traditional lenders to the small business market are banks such as Wells Fargo, JP Morgan, and Citibank. The loan approval process tends to be slower due to more rigorous loan underwriting criteria.
• Local community banks. Many community banks have a strong desire to make small business loans to local businesses.
• Peer-to-peer lending sites . There are a number of sites that act as middlemen between individual and institutional lenders and small borrowers, including SMBX , LendingClub , and Funding Circle . These lenders can make decisions relatively quickly.
• Bank lenders backed by SBA guarantees . A number of bank lenders issue loans backed by the SBA, and, as noted above, this backing allows lenders to offer more attractive terms.

3. Anticipate how lenders will view your credit and risk profile

Lenders ultimately make a judgment call on whether or not to make a small business loan based on the borrower’s credit and risk profile. Lenders will look at the following factors, so review them carefully and consider taking any appropriate remedial action:

• Credit score/credit report. Lenders will review your credit report, credit score, and history of making timely payments under credit cards, loans, and vendor contracts. So review your credit report and clean up any blemishes.
• Outstanding loans and cash flow. Lenders will review your outstanding loans and debts to determine that your cash flow will be sufficient to pay existing loans and obligations as well as the new loan contemplated.
• Assets in the business. Lenders will review the assets in the business (particularly current assets such as cash and accounts receivable) to see if there is a good base of assets to go after in the event of a loan default.
• Time in business. Lenders will tend to look more favorably on businesses that have been operating for several years or more.
• Investors in the company. Lenders will view the company more favorably if it has professional venture capital investors, strategic investors, or prominent angel investors.
• Financial statements. Lenders will scrutinize your financials, as set forth in the next section below.

4. Make sure your financial statements are in order

Depending on the size of your loan, your financial statements and accounting records will be reviewed carefully by the lender. So make sure they are complete, correct, and thorough—including balance sheet, income and loss statements, and cash flow statements. The lender will analyze your cash flow, gross margin, debt-to-equity ratio, accounts payable, accounts receivable, EBITDA, and more, so be prepared to answer questions on those topics. Consider having your accountant look over your financial statements to anticipate issues a lender may raise.

Lenders prefer financial statements that have been audited by a certified public accountant (CPA), but many small businesses don’t want to incur the costs of an audit. One alternative is to have the financial statements “reviewed” by a CPA (which is cheaper and faster). However, some lenders may not require either audited or reviewed statements.

5. Gather detailed information for your small business loan application

If you want to be successful getting a small business loan, you have to be prepared to provide detailed information and documents about your business; it is important to be prepared and organized. The following is the type of information that is often required from bank lenders, depending on the type of loan:

• Name of business (including any DBAs)
• Federal Tax ID
• List of executive officers and their background
• Legal structure (such as LLC, S corporation, C corporation)
• Financial statements for the past two to three years and year-to-date financials for the current year (balance sheet, income and loss statements, cash flow statements, shareholder equity)
• Projected financial statements (so that the lender can get a sense of your expected future operations and cash flow)
• State filings for the company, such as a certificate of incorporation, foreign corporation filings, and good standing certificates
• Copies of key man and general liability insurance policies
• Amount of loan requested
• Business credit report (such as from a credit reporting agency like Dun & Bradstreet)
• Potential collateral available for the loan
• Financial statements of the principal shareholder/owner of the business (especially in the case where a personal guarantee will be required)
• Business plan, executive summary, or investor pitch deck of the company (see A Guide to Investor Pitch Decks for Startup Fundraising )
• The tax returns of the company for the past two to three years (signed copies with all attachments and exhibits)
• Business bank statements

6. Be prepared to specify how much you want to borrow and the expected use of proceeds from the loan

The lender will want to know how much funding you are seeking and how the loan proceeds will be used. Will the loan be used for equipment or capital expenditures? Expansion or hiring? Increase in inventory? Enhanced sales and marketing efforts? New research and development of technology? New product development? Expansion into new facilities or territories?

You may want to borrow a little extra in case you run into a cash crunch that lasts a month or two. You have to avoid going into default under the loan.

7. Determine what security or guarantee can be provided

A lender is primarily concerned about the ability of the borrower to repay the loan. To the extent that a security interest can be given to the lender on company assets (company equipment, property, accounts receivable, etc.), the borrower should be able to increase its chances of getting a loan on favorable terms. Some lenders may insist upon the personal guarantee of the principal owner of the business. That is best avoided, if possible, as it puts your personal assets, and not just the business assets, at risk.

8. Analyze the key terms of the proposed business loan

To make sure the proposed business loan makes sense for your business, you will need to analyze the key terms proposed by a lender and compare them with terms available from alternative lenders. Here are the key terms to review:

• What is the interest rate on the loan and how can it vary over time? Many loans vary over time depending on the prevailing “prime rate” or some other benchmark.
• How often is the interest payable?
• When is the principal due or how is it amortized over the life of the loan? You need to be comfortable with the combined interest and principal payments from a cash flow perspective.
• What is the loan origination fee?
• What other costs or fees are imposed (such as underwriting fees, administration fees, loan processing fees, etc.)?
• What operating covenants are imposed on your business (such as a maximum debt-to-equity ratio or a minimum cash threshold held by the company)?
• What are the circumstances when the lender can call a default on the loan?
• Is there any security or collateral required?
• What periodic reports or financial statements are required to be provided to the lender?
• Are there limits on how the loan proceeds can be used?
• Can the loan be prepaid early without a penalty? And if there is a penalty, is the penalty reasonable?

9. Review your online profile and postings

A small business lender will perform due diligence, which can include reviewing the information available online about the business and its principal owner. So do the following review, anticipating such due diligence to see if you should make any changes or deletions to your online presence:

• Review your company’s website. Is it up-to-date and professional-looking?
• Review its presence on LinkedIn, Facebook, Twitter, and other social media sites.
• Review any Yelp reviews your business may have received.
• Review the principal owner’s postings on LinkedIn and other websites.

10. Get further educated on the small business lending process

The more educated you are about small business lending options and procedures, the more likely you will be successful in obtaining a loan. Here are some additional articles to review:

Small business loans are available from many different lenders, with a myriad of choices tailored to the financial situation of your business. By anticipating what lenders will review and require, you greatly increase your chances of obtaining a beneficial small business loan.

Copyright © by Richard D. Harroch. All Rights Reserved.

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How to get a Startup Business Loan in 5 easy steps?

3 min read Apr 16, 2024

Starting a business is like setting off on a big adventure. You have a great idea and a plan, but you need one important thing to get going: money. If you're wondering how to get a startup Business Loan, you're not alone. It's something many new business owners think about. You might also be asking what is needed for a startup Business Loan or how to get a Business Loan for a startup. Getting a loan can seem like a big step, but it's really about finding the right help to turn your business dreams into reality.

Guide for taking Startup Business Loan

1. Evaluate what kind of loan you need

Understanding the variety of loans available is the first step in getting a Business Loan for a startup. Whether it's a Term Loan, Line of Credit, or Invoice Financing, each has its merits and suits different needs. Deciding the right type for your business is crucial.

2. Check your business and personal credit scores

Lenders assess risk by looking at credit scores. A strong personal and business credit score can significantly enhance your loan approval chances. Knowing your scores beforehand helps you understand what options are realistically available to you.

3. Gather and prepare the required documents

When considering what is needed for a startup Business Loan, having your documents in order is vital. This typically includes business plans, financial statements, and legal documents, among others. Being well-prepared streamlines the application process.

4. Research and compare lenders

From traditional banks to online lenders, the options are vast. Researching and comparing terms, interest rates, and eligibility requirements can lead you to the best lender for your startup.

5. Submit your application

Once you've chosen a lender, the next step in how to get a startup loan for a business is to submit a comprehensive application. Ensure all information is accurate and complete to avoid delays or rejections.

Advantages and disadvantages of Startup Business Loans

Advantages:.

• Access to capital: Startup Business Loans provide the funds to cover core startup costs—equipment, inventory, and staff—without the long wait.
• Maintaining ownership: A Business Loan offers financial support while you keep complete control over your company's core functions.
• Building credit history: Repaying a Business Loan on time can build your startup's credit score, improving future financing terms and options.

Disadvantages:

• Debt burden: Loans need to be repaid with interest, which can be a financial strain. It's vital to borrow wisely to prevent overwhelming your startup.
• Interest and fees: The cost of a loan goes beyond the principal amount, with interest and possible fees increasing the overall repayment amount.
• Risk of default: Failure to repay can lead to default, which can attract legal action, damage credit scores, and hinder future financing opportunities.

Axis Bank streamlines your entrepreneurial ambitions with Business Loans starting from as low as ₹50,000, designed for the self-employed. Embrace the flexibility of a loan tenure stretching from 6 to 60 months, ensuring your repayment plan aligns with your financial rhythm. With minimal documentation, quick approval processes, and no need for collateral up to ₹75 lakh, Axis Bank stands by to fuel your business growth with simplicity and speed.

Also Read: Difference between Personal Loan vs Business Loan

How do you get a startup Business Loan in India?

Begin by assessing your loan needs, checking your credit scores, preparing necessary documents, researching lenders, and submitting a thorough application.

What is needed for a startup Business Loan?

You'll need a solid business plan, financial statements, personal and business credit scores, and legal documents, among others.

How can startup Business Loans impact my venture?

A startup loan provides capital for growth, helps maintain ownership, and assists in building a credit history, though it comes with the responsibility of repayment.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.

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How to Get Student Loan Forgiveness in 2024

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Student loan forgiveness has a mixed track record. Last summer, the Supreme Court struck down a broad plan that would’ve erased up to $20,000 per borrower. Still, student loan forgiveness is more accessible now than ever before. A handful of existing federal student loan forgiveness programs have erased $143.6 billion in student debt for 3.96 million borrowers as of March 21, according to the Education Department, with more to come this year.

The White House is currently trying to push through a narrower forgiveness ‘Plan B’ version of its failed broad forgiveness plan. The proven paths to forgiveness, however, include programs that range from income-driven repayment (IDR) plans — which cap monthly bills at a percentage of your income and forgive your remaining balance after 10 to 25 years — to niche programs for borrowers with certain loan types, jobs or school circumstances.

Here’s how to get student loan forgiveness in 2024 — and what you need to know before pursuing this path.

Check your eligibility

You must have federal student loans to qualify for a forgiveness program. Private student loans aren’t eligible.

To verify you have federal loans, go to StudentAid.gov , and try to log in or recover your account.

Next, check which types of federal student loans you have. If you have certain types of loans, like commercially held FFELP or Perkins loans, you may have to consolidate them before going after forgiveness .

Income-driven repayment

The newest IDR plan — Saving on a Valuable Education, or SAVE — is the most accessible path to forgiveness. All borrowers with federal direct loans are eligible to enroll.

The SAVE plan forgives remaining student debt in as little as 10 years if you have an original balance of $12,000 or less, and in up to 20 or 25 years for other borrowers. While working toward forgiveness, your monthly bills could be $0 per month if you earn less than $32,800 as an individual or $67,500 as a family of four; otherwise, they’ll be capped at 5%-10% of your income.

Public Service Loan Forgiveness

If you work for a qualifying government or nonprofit employer, you could be eligible for Public Service Loan Forgiveness (PSLF) . This program erases your remaining balance after a decade of repayment.

“Generally, the PSLF program is the best one if you have access to it,” says Scott Stark, a financial coach and certified financial planner at Financial Finesse, a workplace financial wellness company.

Other forgiveness programs

Outside of IDR and PSLF, your student loan forgiveness options may include:

Teacher Loan Forgiveness , if you work in a qualifying low-income school. 

Borrower defense to repayment , if you think your school defrauded you. 

Closed school discharge , if your school closed during or shortly after your time there.

Perkins loan cancellation , if you have Perkins loans and work in public service.  

State-based student loan payment assistance , if you work in health care or are willing to relocate to a new area. 

Do the math

Use the Education Department’s loan simulator to see how much debt you could get erased under various forgiveness programs and repayment plans, how much your monthly payments could be and how long you’ll be in repayment.

If an IDR plan will result in you paying more interest for a longer period or paying off your debt before getting forgiveness, then it may not be a good choice for you. (Public Service Loan Forgiveness also requires enrollment in an IDR plan.)

“It really is a case-by-case kind of thing, but generally speaking, for people whose income is relatively high compared to their student debt loads, the income-driven repayment plans can be pretty unattractive,” says Tisa Silver Canady, founder of the Maryland Center for Collegiate Financial Wellness. “It might behoove them to just stay on a balance-driven plan and pay extra when they feel it makes sense.” Making extra payments toward the principal while on a balance-driven plan — like the standard 10-year plan , which splits your loan into 120 payments — allows you to shrink your debt faster and reduce total interest costs.

On the other hand, if the math for IDR works out such that borrowers can have smaller payments and keep more of their money to reach other financial goals, pursuing forgiveness is a good option, Stark says.

Prepare for a future tax bomb

IDR student loan forgiveness is exempt from federal taxes through 2025. After that, any amount forgiven could result in a student loan tax bomb . A small number of states tax IDR forgiveness, too.

It’s important to plan for a tax bomb if your forgiveness timeline will extend past 2025. Put a small amount of money aside each month to cover your future tax bill, Stark says.

Use the loan simulator to determine how much forgiveness you could ultimately receive: Your taxable income will increase by that amount in the year you get forgiveness. In some cases, the forgiveness could push you into a higher tax bracket, which could further increase your tax burden. If the amount you have to set aside each month to cover the tax bill is larger than the amount you’d save on the IDR plan, it might not be worth it.

Loan balances forgiven through PSLF, Teacher Loan Forgiveness, borrower defense to repayment, closed school discharge and Perkins loan cancellation are exempt from federal taxation.

Change your repayment plan

If you decide IDR forgiveness is the right choice, you must switch to an IDR plan like SAVE.

To sign up for an IDR plan, submit an online application at StudentAid.gov/IDR or call your student loan servicer.

You must also sign up for an IDR plan if you’re striving for PSLF. Choose the plan that gives you the smallest monthly bill to maximize the amount you could get forgiven after 10 years. It’s a good idea to submit your PSLF employer verification form each year to stay on track for forgiveness, Canady says. You can do this through the Education Department’s online PSLF Help Tool .

On a similar note...

More From Forbes

25 million people could get student loan forgiveness under new plan: who’s eligible, how to apply.

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US President Joe Biden announces student loan forgiveness with Education Secretary Miguel Cardona ... [+] (R) on August 24, 2022 in the Roosevelt Room of the White House in Washington, DC. (Photo by OLIVIER DOULIERY / AFP) (Photo by OLIVIER DOULIERY/AFP via Getty Images)

The Education Department released formal regulations for President Joe Biden’s massive new student loan forgiveness plan this week. Millions of borrowers can potentially qualify. And unlike Biden’s first student debt relief initiative, many could see complete cancellation.

“If implemented as proposed, these plans, and others announced by the President, would bring the total number of borrowers getting relief under the Biden-Harris Administration to more than 30 million,” said the department in a statement released on Tuesday. The 30 million figure includes more than four million borrowers who have already been approved for student loan forgiveness under other Biden initiatives .

Biden’s new plan will provide multiple, distinct pathways to relief for borrowers depending on their loan history, the school they attended, and their overall personal and financial circumstances. Here's a breakdown of who qualifies, how people would apply, and when relief could begin.

Student Loan Forgiveness For 25 Million Borrowers With Extreme Interest Accrual

A central feature of Biden’s new student loan forgiveness plan is automatic cancellation of excess interest .

“There are 25 million borrowers whose interest is growing faster than they can pay it down,” said Under Secretary of Education James Kvaal earlier this week. “That fact alone shows how badly President Biden’s student loan relief is needed.”

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The draft regulations provide two paths to relief for borrowers who have experienced runaway interest accrual and capitalization:

• Borrowers could qualify for automatic student loan forgiveness of up to $20,000 if a “borrower’s loans currently exceed what they owed upon starting repayment” due to excess interest accrual or capitalization. All federal loan borrowers could qualify for this relief, including those who have consolidated their loans or are in default.
• Additional borrowers could get complete forgiveness of accrued or capitalized interest if the borrower is enrolled in an income-driven repayment plan (such as the new SAVE plan) and earns below income thresholds: $120,000 if they are single or married filing taxes separately, or $240,000 if married-filing-jointly.

“No application will be needed for borrowers to receive this relief if these plans are implemented as proposed,” said the department.

Cancellation Of Student Loans For 2.6 Million Borrowers Who Entered Repayment 20 or 25 Years Ago

Another proposed rule under Biden’s new plan would provide student loan forgiveness to borrowers who first entered repayment on their loans at least 20 years ago:

• Borrowers with only undergraduate , government-held federal loans who first entered repayment on or before July 1, 2005 could get complete student loan forgiveness.
• Those with any graduate student loans and FFEL-program loans who first entered repayment on or before July 1, 2000 could also get complete student loan forgiveness.

Most federal student loans, including consolidation loans and Parent PLUS loans, could qualify for this relief. The Education Department would authorize student loan forgiveness automatically, with no application required. Officials estimated that at least 2.6 million borrowers could qualify for cancellation under this rule.

Student Loan Forgiveness For Those Eligible For Relief Under Other Programs

The new draft regulations also propose cancelling student debt for borrowers who qualify for student loan forgiveness through other programs, but haven’t yet enrolled. This would include income-driven repayment plans, Public Service Loan Forgiveness, disability discharges, and others. Around 1.7 million borrowers could be eligible for debt relief under this rule just through the IDR provision alone.

Student loan forgiveness via this pathway could be automatic, but only for loans that would otherwise be eligible for the above programs. For instance, FFEL-program loans don’t qualify for student loan forgiveness through PSLF unless consolidated into a Direct loan, so those loans couldn’t qualify for that specific form of relief under the proposed new rule, either.

Eliminate Student Debt For Borrowers Who Went To ‘Low Value’ Institutions

Another set of rules under the new Biden program would cancel student debt for borrowers who had enrolled in institutions that were of low financial value. This includes:

• Schools that became formally excluded from federal financial aid programs due to high default rates, low graduation rates, or failure to meet gainful employment standards.
• Institutions that closed prior to agency action excluding them from federal financial aid programs but had similar deficits in their outcome metrics.

Student Loan Forgiveness For Personal And Financial Hardships

A final set of rules would authorize student loan forgiveness for borrowers experiencing some sort of personal or financial hardship.

The Education Department did not release formal draft regulations for this pathway to relief, but indicated that the final version of this rule would reflect the proposals that rule-makers agreed to earlier this year. Those rule-makers reached consensus on 17 possible “indicators” of hardship which include low income, high expenses, other debt obligations, demonstrated need through prior approval of other means-tested government programs, age, and disability status.

The Biden administration “remains hard at work on a separate proposal that would help many other borrowers experiencing hardship related to student loans that creates a barrier to them fully repaying their loans or the cost of collection is not justified,” said the department in its statement. “That rule will be released for comment in the coming months.”

Relief under this provision of the program would probably not be automatic. Borrowers will likely have to submit an application, which has not yet been developed or finalized. More information on the application process should be released in a few months.

Borrowers Could Get Relief Under Biden’s New Student Loan Forgiveness Plan By The Fall

With the final regulations published, the public now has an opportunity to submit comments. There will be a 30-day window during which the Education Department will receive public comments. After that, the program will be finalized and prepared for implementation. Officials anticipate that borrowers could start receiving student loan forgiveness by this fall.

“The U.S. Department of Education (Department) will carefully consider comments received and aims to finalize these rules in time to start delivering relief this fall,” said the department’s statement.

Most observers, however, widely expect that Biden’s new plan will be subject to legal challenges. Although the program is being established through a different legal authority than his first student debt relief plan, the courts may ultimately have the final say on whether borrowers will receive any loan forgiveness.

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Money latest: Five big lenders hike mortgage rates amid interest rate uncertainty

A council that oversees many popular tourist towns on the Kent coast has said it is considering implementing a tourism tax to maximise income from visitors. Read this plus all the latest consumer and personal finance news below - and listen to the Ian King Business podcast as you scroll.

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TikTok Shop has partnered with five second-hand luxury resellers to launch a pre-loved category on the app.

Designer products are now available to buy from five UK brands - Hardly Ever Worn It, Sign of the Times, Luxe Collective, Sellier Knightsbridge and Break Archive.

The social media app said the new category will support suers in being able to learn more about luxury fashion, find style inspiration and purchase pieces.

All of the brand's involved posted about the launch, with the Luxe Collective - which recently gained investment after appearing on the BBC's Dragon's Den - said it had been "waiting years to do this".

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Jan Wilk, head of UK operations at TikTok Shop, said: "This announcement is an exciting first step in the world of preowned fashion for TikTok Shop.

"TikTok Shop is already a leader when it comes to discovery-based commerce and with a vibrant fashion community thriving on TikTok, this provides a unique opportunity for retailers to reach new audiences and customers with an inspiring and accessible way to embrace luxury fashion."

The launch of the category comes after the app launched a refurbished technology category, allowing users to buy second-hand mobile phones and tablets through the app.

Comments by the prime minister describing an alleged "sick note culture" in the UK have been heavily criticised by senior mental health professionals.

Dr Sarah Hughes, CEO of Mind, said Rishi Sunak's suggestions were "contrary to the reality for people up and down the country".

The PM said he wanted his government to be "more ambitious about helping people back to work and more honest about the risk of over-medicalising the everyday challenges and worries of life".

He has proposed a series of measures, including removing benefits after 12 months for those deemed fit for work but who do not comply with conditions set by their work coach, such as accepting a job offer.

The PM said 850,000 people had been signed off since the COVID pandemic - with half related to depression.

He also claimed the total being spent on benefits for people of working age with a disability or health condition had increased by almost two-thirds since the pandemic to £69bn - more than the entire budget for schools or policing.

"I will never dismiss or downplay the illnesses people have," the prime minister said. 

"But just as it would be wrong to dismiss this growing trend, so it would be wrong to merely sit back and accept it because it's too hard, too controversial, or for fear of causing offence."

But Dr Hughes said: "We are deeply disappointed that the prime minister's speech continues a trend in recent rhetoric which conjures up the image of a 'mental health culture' that has 'gone too far'. 

"This is harmful, inaccurate and contrary to the reality for people up and down the country.

"The truth is that mental health services are at breaking point following years of under investment with many people getting increasingly unwell while they wait to receive support. 

"To imply that it is easy both to be signed-off work and then to access benefits is deeply damaging.

"It is insulting to the 1.9 million people on a waiting list to get mental health support, and to the GPs whose expert judgement is being called into question."

Disability charity Scope said the measures were a "full-on assault on disabled people" and were "dangerous and risk leaving disabled people destitute".

By James Sillars , business reporter

The FTSE 100 has ended a long wait to achieve a new record high.

The index, which comprises the 100 most valuable companies on the London Stock Exchange, closed Monday's session on 8,023 points after a jump of 128 points or 1.6%.

That was the highest closing sum since February last year when the 8,000 barrier was breached for the first time in its history.

The previous record stood at 8,012.

The performance today was driven by a strong showing for companies across the board, particularly financial and consumer-linked stocks such as those for retailers.

The index has been gaining ground in recent weeks on growing hopes for a cut in UK interest rates as inflation eases - with strong evidence that the economy has turned a corner after the recession during the second half of last year.

Analysts credited the push for a new high on two main factors; confidence that a major escalation in the Middle East conflict will be avoided and a weakening in the value of the pound against the US dollar.

Sterling is trading at five-month lows against the greenback at just $1.23 and was half a cent down on the day.

This is a consequence of dollar strength as opposed to pound weakness as expectations are growing across the Atlantic that the Federal Reserve's expected interest rate cuts are further down the track than had been predicted.

Higher interest rates tend to be supportive of a currency which, in this case, is the world's reserve currency.

A weaker pound helps FTSE 100 constituent companies which make money in the United States.

That is because it boosts their bottom line when those dollar earnings are booked back in the UK and converted back to pounds.

Read the rest of our report here .

The typical price of a property coming on the market across Britain increased by £4,207 month-on-month in April, according to Rightmove. 

The property website said a jump in new sellers and the sales of bigger family-sized homes are a key factor behind the growth. 

It means the average price tag for a home is only £570 short of the record-high reached in May 2023. 

The average new seller asking price across Britain is now £372,324.

This month, the average asking price for a "top of the ladder" home is £682,661, up by more than £18,000 from £664,422 in March. 

The first four months of 2024 have been an improvement on last year, the website said, with the market witnessing boosts in both buyer and seller activity this spring.

First-time buyers are facing the most expensive conditions for more than 70 years, according to a report by the Building Societies Association.

The report said taking the first step on the property ladder is increasingly dependent on help from relatives and the need to have two incomes that are higher than the average. 

Written by housing market analyst Neal Hudson, the report calls on the government to commission an independent review with the aim of providing solutions that increase the number of true non-returner first-time buyers, both now and in the future.

Mr Hudson also says building societies need more flexibility to help them to support more first-time buyers.

Tesla - owned by billionaire Elon Musk - has cut the price of some of its electric car models after reporting a fall in sales.

The revamped Model 3 car fell by 14,000 yuan (£1,500) in China, putting the price tag at just under £26,000 for the car that upgrades the interior and exterior styling of the original 2017 model. 

It comes as Tesla grapples with competition from China, the world's largest automobile market, which is rolling out cheaper electric car models.

"Tesla prices must change frequently in order to match production with demand," Musk posted on X this weekend.

There have also been price cuts in Europe, the Middle East and Africa, a Tesla spokesperson said. 

In Germany, the price of the Model 3 rear-wheel-drive is now showing as €40,990 (£35,357), down from €42,990 (£37,000), where the price had been since February.

It follows cuts in the US of the Model Y, Model X, Model S and the full self-driving driver assistant software.

Earlier, this month, the company reported a decline in its global quarterly deliveries for the first time in nearly four years. 

Musk also announced that more than 10% of the company's global workforce will be laid off as it braces for its first annual drop in deliveries.

A council that oversees many popular tourist towns on the Kent coast has said it is considering implementing a tourism tax as a way of maximising income from visitors.  

A new report by Thanet District Council - which includes the towns of Margate, Broadstairs and Ramsgate - highlights the negative impact of tourism in the area and puts forward a number of recommendations to help with this.

One of those recommendations is levying what it calls a "modest tourism tax" on those staying overnight.

The report also proposes levying additional council tax on second homes that may be being rented out as short-term holiday lets.

Justifying the recommendations, the report says: "We want a booming visitor economy but we are acutely aware of the additional costs visitors bring, so we need to make every effort to secure income for the council to set against those costs."

Conservative district councillor John Davis welcomed the proposed changes during a meeting of the overview and scrutiny panel on 16 April.

"It's an important initiative," he said.

"I would like to welcome costs on Airbnbs and the like, because in Ramsgate we have 866 homes for short-term let and 21 flats.

"This is absolutely obscene."

Thanet has seen the biggest growth of tourism enterprises over the last five years.

According to 2024 analysis by Kent County Council , 4.4% of these enterprises are accommodation for visitors.

Train drivers who are members of the Aslef union at 16 companies have announced fresh strike dates as part of their long-running dispute over pay.

Drivers at different companies will walk out on various dates between 7 May and 9 May.

They will also refuse to work non-contractual overtime from 6 May to 11 May.

Read the full story here ...

NatWest, Barclays, Accord, Leeds Building Society and HSBC have all announced rate increases today - amid concern interest rates may not fall as much as expected this year.

Swap rates - which dictate how much it costs lenders to lend - have increased in the past week after US inflation came in higher than expected. Economists are divided about what this means for UK interest rates - with some pointing out that the UK economy is struggling far more, and therefore cuts are still imminent.

The London Stock Exchange Group is still pricing in a June cut and two further cuts before the end of the year. Analysts at Morgan Stanley, Goldman Sachs Group, Capital Economics and Bloomberg Economics all concur.

However, some economists have suggested we may have to wait until November for a first cut from the 16-year high of 5.25%.

Lenders, it seems, are growing more cautious.

Responding to today's hikes, Elliott Culley, director at Switch Mortgage Finance, told Newspage: "The rate rollercoaster rolls on. 

"Just when the market appears to be picking up some momentum, there is a sharp change of direction. 

"We are now seeing the spike in swap rates last week filtering through to the public as lenders raise their rates in response. 

"The volatility we are experiencing currently really amplifies how important it is to secure a rate as soon as possible, as this could save you hundreds of pounds, especially for existing homeowners."

Simon Bridgland, broker/director at Release Freedom, added: "This morning, I have been calling clients who have been sitting on the fence urging them to proceed as this increase is potentially going to be with us for several months. 

"Inaction will weigh heavily on household purses so don't delay, there is a finite amount of hours left to get deals done before the increases take effect, pick up the phone to your broker immediately or you will be paying more money for years to come."

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