Preparing a Winning Business Plan: Key Elements Lenders Want to See

When seeking finance for your business, whether it’s for expansion, operations, or to kickstart a new venture, one of the most critical documents you’ll need is a well-crafted business plan. Lenders, including banks, private investors, and finance brokers, want to see that your business is viable and profitable. A strong business plan can help reassure lenders that you have a clear strategy for growth and the ability to repay your loan.

In this article, we will outline the key elements lenders look for when reviewing business plans, and how you can create a compelling proposal that enhances your chances of securing finance, including unsecured business loans, cash flow finance, and using a business finance broker to optimise your funding options.

As a broker our job is to present a customer’s proposal in the way an underwriter requires to give the proposal the best chance of approval.  A business plan should include a company description, market analysis, products and services, marketing and sales plan, operations and logistics as well as financial projections for at least the first 12 months (ideally the first 3 years). 

The business plan should also include an executive summary – a brief overview of the business plan.  As a broker we want to portray to the lender that the customer knowns what they are doing as well as demonstrating the ability to repay the loan they are applying for.

In addition to the business plan we would also like to see other supporting documentation such as personal bank statements, CVs of the directors, personal net worth statements of the directors or significant shareholders along with any potential contracts the business may have.

1. Executive Summary: A Concise Overview

   
   

Your executive summary is the first thing lenders will see, so it needs to be clear, concise, and compelling. It should give an overview of your business, its goals, and how the loan will be used. Whether you’re applying for unsecured business loans or cash flow finance, it’s crucial to show how the funding will help your business grow.

Key Points to Include:

• Business Description: What does your business do, and what sets it apart from competitors?
• Loan Purpose: What is the funding being used for? This could include expansion, equipment purchase, or working capital.
• Market Opportunity: What is the potential for growth in your industry, and how does your business plan to capture this?
• Financial Overview: A brief look at projected revenue, profits, and the amount of funding you are seeking.

Make sure the executive summary highlights your business's potential and convinces lenders that you have a solid strategy in place to use the loan effectively.

2. Company Description: Setting the Stage for Success

   
   

This section provides lenders with more details about your business. It should include information about your company's history, structure, and mission. Lenders want to understand your business model and why you’re well-positioned to succeed in your chosen industry, especially if you're seeking cash flow finance to address any short-term funding needs.

Key Points to Include:

• Company Background: When was the company founded, and what milestones have you achieved?
• Legal Structure: Is your business a sole trader, partnership, limited company, or corporation? Clarify your legal entity and why this structure supports your business goals.
• Mission and Vision: What are your company’s core values, and where do you see your business in the next five years?
• Management Team: Highlight the experience and qualifications of your leadership team. Lenders want to know they are backing a capable group of individuals with the skills necessary to drive success.

3. Market Research and Competitive Analysis: Proving Demand and Market Fit

   
   

Lenders will want to know that there is a demand for your product or service and that you have a clear understanding of the market landscape. This section should demonstrate that you’ve conducted thorough market research and are aware of industry trends, customer needs, and your competitors. If you're seeking unsecured business loans or any form of finance, showcasing a strong market fit is essential to gaining lender confidence.

Key Points to Include:

• Target Market: Who are your ideal customers, and how do you plan to attract them?
• Market Trends: Are there any significant shifts in the market that present an opportunity for growth?
• Competitive Landscape: Who are your competitors, and how does your business compare in terms of product, service, and market position?
• Barriers to Entry: Are there any challenges you face in entering or growing within the market, and how do you plan to overcome them? A solid understanding of your market will show lenders that your business has been well thought-out and is positioned for growth.

4. Products or Services: Showcasing Value and Differentiation

   
   

Lenders need to understand what you’re selling and why your offering stands out. Whether you're providing a product or service, you must clearly demonstrate the value it brings to the market. Explain how your offering addresses customer pain points and meets market demand, especially when you are seeking funding, such as cash flow finance, to ensure smooth operations and future growth.

Key Points to Include:

• Description of Products/Services: What are you offering, and how does it solve a problem or fulfil a need?
• Unique Selling Proposition (USP): What makes your offering different from competitors?
• Development Plans: Are there any new products or services in the pipeline? If so, outline how they will contribute to future revenue growth.
• Pricing Strategy: How do you price your products or services, and how does that pricing align with market expectations?

Showing that your product or service has strong market demand and a clear competitive advantage will inspire confidence in lenders.

5. Marketing and Sales Strategy: How You Plan to Grow

   
   

A well-executed marketing and sales strategy is essential to the growth of your business. Lenders want to know how you will reach your target audience, convert leads into sales, and ultimately grow your revenue. If you’re using a business finance broker, this section can include strategies for using their expertise to identify the best funding sources for your business.

Key Points to Include:

• Marketing Channels: Which platforms will you use to market your products or services (e.g., social media, digital advertising, email marketing)?
• Sales Tactics: What is your approach to generating sales and building long-term customer relationships?
• Customer Retention: How will you keep customers engaged and coming back for repeat business?
• Partnerships and Collaborations: Are there any strategic partnerships or collaborations that will help drive growth?

A clear and actionable marketing strategy will demonstrate to lenders that your business has a roadmap for increasing revenue and attracting more customers.

6. Financial Projections: A Detailed Roadmap to Success

   
   

Financial projections are one of the most critical sections of your business plan, especially when applying for unsecured business loans or cash flow finance. Lenders want to know that you have a realistic outlook on your finances and a clear plan for repaying any loans. Your financial projections should cover at least three years and be based on sound assumptions.

Key Points to Include:

• Profit and Loss Statement (P&L): Provide projections for revenue, cost of goods sold, and operating expenses.
• Cash Flow Statement: Lenders want to see that you can maintain positive cash flow and have the ability to meet loan repayments, particularly when you’re applying for cash flow finance to manage daily operations.
• Balance Sheet: Show your business's assets, liabilities, and equity, giving lenders a sense of your financial health.
• Break-even Analysis: How much revenue do you need to cover your costs and start making a profit?
• Key Financial Ratios: Include important metrics like the current ratio, quick ratio, and return on investment (ROI) to give lenders a comprehensive view of your financial position.

A solid set of financial projections backed by data and realistic assumptions will instil confidence in lenders and prove that your business is financially sound.

7. Loan Request and Use of Funds: Justifying Your Financing Needs

   
   

In this section, clearly state how much funding you need and how you intend to use it. Be specific about what the loan will be used for, whether it’s for purchasing equipment, increasing working capital, or expanding operations. Whether you are applying for unsecured business loans, cash flow finance, or working with a business finance broker, this is where you can break down exactly how the loan will contribute to your business’s growth.

Key Points to Include:

• Loan Amount: How much funding are you requesting?
• Use of Funds: Break down how the funds will be used in detail.
• Repayment Plan: How do you plan to repay the loan, and what is the expected timeline?

Being transparent about your financial needs and showing how the loan will drive business growth will enhance your credibility with lenders.

Conclusion: Crafting a Business Plan That Stands Out

A well-written business plan is essential when seeking finance from lenders. By addressing the key elements outlined above—executive summary, company description, market research, product/service offerings, marketing strategy, financial projections, and loan request—you can demonstrate to lenders that your business is a solid investment with strong growth potential.

Whether you are applying for unsecured business loans, looking for cash flow finance to stabilise your operations, or considering using a business finance broker to find the best lending options, a comprehensive, well-thought-out business plan is your first step towards a successful funding application. Taking the time to create a compelling business plan not only increases your chances of securing the funding you need, but it also sets the foundation for long-term success.

Whilst RLA Capital cannot offer financial advice, we can provide various business loansto assist with cash flow.  RLA Capital would recommend speaking with your accountant if you are experiencing cash flowproblems.

RLA Capital can arrange a wide range of finance facilities for the UK SME market.  Please do not hesitate to call us on 01244 389304 or email enquire@rlacapital.co.uk for further details.