By Rishi Mehra

A business plan is one of the most important documents that you need for your loan application process with any bank. Consider this as a set of documents that you can use to sell yourself or your business in the eyes of the lender.

Since you cannot make your case in front of every individual that decides and scrutinizes your loan application, a business plan does that job for you. It should create an image about the company, should be simple, but exhaustive enough to document the details about your business. Let us take a look at some of the key elements of the content of a business plan.

Executive Summary
The business plan should at first contain a summary. This should capture the key points in the plan and is meant to summarize the important details about the business. For anyone wanting to take a quick look at the proposal, the executive summary contains key points and details that can help for a picture about the business.

Your business

The plan should lay out in detail every aspect of your business. It should describe the trade, service or manufacturing activity that you are engaged in, how long and a background about the existence of the business. It should also be used to showcase the depth of the business and should lay out the ownership structure of the business. It should also contain the details of the management team, their education and experience. Banks want to see whom they are lending to and if there is no existing relationship between the lender and you, this part of the business plan proves crucial. Banks take comfort in an experienced management team and this should be highlighted in a business plan.

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What you need it for

One of the most vital aspects of a business plan proposal is to lay out clearly the reason for wanting the loan. It should lay out the need for the loan and what you intend to do with the loan. It is very important to be detailed and not merely one line on what the loan will be used for. It also allows the bank to gauge if you have made the application under the right product. For example, if you intent to buy a machine for your business, you can make an application under buying equipment and machinery.

The opportunity

Setting the context is also very important. It may make sense to you to get a loan to expand, augment existing infrastructure or anything else, but it must make sense for your lender to be a part of this. You should let your lender know that the money will be well spent and there is an opportunity that you would want to tap. Include third-party reports, market research, competition analysis, sector analysis, etc. so that the lender can get an unbiased view of what is happening in your line of business and figure out the opportunity.

Execution strategy

Lenders would also want to know how you plan to execute your idea once you get the money. The need and the opportunity may seem good on paper, but it will all come to naught if the execution is flawed. Your execution strategy needs to be detailed and exhaustive, so as to dispel any apprehension on the part of the lender. Include and marketing and production plan if the money being raised validates the need to have such a strategy.

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Financial aspects

Last, but definitely not the least, it is very important to include all the relevant financial details about your business. The crux of a lending decision hinges on the financial health of your business and your ability to service the loan. Financial documents that bring out your revenue, state the cost of running the business is particularly necessary. Lenders may also ask for your balance sheet and audited financial results if it is a company. Another vital financial document that lenders give a lot of attention is the cash flow statement and this should be a part of your business plan.

(The writer is, CEO, Wishfin.com)





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