Project your business plans effectively for business loans options

Most small businesses, in the forms of sole proprietorships or partnerships, are closely tied to the experience, know-how, and overall character of the owner. The smaller the business, the more closely the individual behind it will be evaluated. Therefore, it is imperative that these business owners take the steps necessary to budget and effectively manage the funds they do have available.

A solid personal credit rating is also very important, since a small business is typically an extension of the individual who starts it. You need to make sure you get your own financial records in order before asking for a bank or any lender, for that matter for money to start a business.

However, it is a common occurrence that small businesses, particularly micro-businesses having 10 employees or less, tend to shy away from developing an operating budget.  Frequently the businesses are so small or so new that the owners are convinced they have no way of projecting their revenue and therefore have nothing to budget.  This is actually a serious mistake.

For new companies in the start-up phase, it helpful to have a solid business plan to present for business loans to potential lenders and investors.  Being able to see exactly where the money will be going and what it will be used for, as well as pertinent company information, potential forecasts and probable scenarios and exit strategies is critical. 

Before applying for small business loans assess your present and prospective future margins in detail, bearing in mind the potential impact of competition. Realistically assess sales, costs both fixed and variable, cash flow and working capital. Produce a profit and loss statement and balance sheet. Explain the research undertaken to support these assumptions. Demonstrate the company’s growth prospects over, for example, a three to five year period. What are the costs associated with the business? What are the sale prices or fee charging structures? What are your budgets for each area of your company’s activities?

It is always wise to keep the plan feasible. Avoid being overly optimistic. Most growing businesses ultimately target increased profits, so it’s important to know how to measure profitability. Highlight challenges and show how they will be met often the case with technology based businesses in particular. If it is envisioned that more than one round of financing will be required then identify the likely timing and any associated progress “milestones” or goals which need to be achieved.

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