How to Write a Business Plan for a Commercial Loan Application

Not every loan application requires you to prepare a business plan, but a well-written business plan elevates your chance at securing a commercial loan, especially for new businesses. When you’re seeking funding from the banks, how you communicate your business vision and plan to a lender could make a big difference. That’s why it’s important to understand how to structure it and what lenders will be looking for. This guide outlines the essential elements of a business plan.

Most business plans follow a similar structure, to start writing your own business plan, you can find a template on your own or download the business plan template here.

Part 1 – Key Company Details

Lenders need to know your key company details as it provides them with important information including your company’s legal name, ABN/ACN, shareholding position, and contact details. These details help lenders to have an initial assessment of the legitimacy of your business.

Part 2 – The business

The business section is important, to present a clear and concise overview of your business to help lenders understand its purpose and potential.

Plan summary – gives a snapshot of your business and its goals. Though positioned at the beginning, it is best written after completing the entire plan to capture the key insights.

Our why – explains the core motivation behind your business, why it exists and the problem it solves.

Our vision – describes where you see the business going long-term.

Our mission – defines the organization’s business, its objectives, and how it will reach these objectives.

Operations – highlights key products and services you offer, and resources needed to run your business.

Key people – shows lenders the experience and expertise behind your team. This structure helps lenders quickly grasp your business’s potential, stability, and leadership, which are critical to assessing loan risk.

Part 3 – The market

The market section of your business plan focuses on demonstrating your business’s market potential and strategy to lenders.

The problem – Identifies the specific issue or gap in the market that your business addresses. This helps lenders understand the need for your solution.

Our solution – Describes your product or service and how it effectively solves the identified problem. Highlight its unique value to stand out from competitors.

Our target market – Defines your customers, including their demographics, behaviours, and needs. Demonstrating a clear target market assures lenders that you understand your customers and have a focused approach.

Advertising and promotion – Explain your strategies to attract and retain customers, including marketing channels and tactics. This shows how you plan to drive sales and growth.

The competition – Analyses your competitors and highlight your business’s competitive advantages. Show how you’ll differentiate and succeed in a competitive landscape.

Pricing Strategy – Outlines your pricing model, ensuring it is competitive yet profitable. Lenders want to see that your pricing is sustainable and fits the market.

SWOT Analysis – Summarise your business’s strengths, weaknesses, opportunities, and threats. This gives lenders a comprehensive view of the potential risks and rewards associated with your business.

Part 4 – Risk management

The risk management section outlines your strategies for identifying, mitigating, and managing risks that could impact your business. Lenders need to see that you’re proactive in addressing potential challenges.

Risk assessment – Identify key risks specific to your industry or business, such as market volatility or operational risks, and assess their potential impact. This helps lenders evaluate the level of risk involved in lending to your business.

Insurance – Detail the insurance coverage your business has or plans to obtain. This reassures lenders that you are protecting your business against unexpected losses.

Succession plan – Explain your plan for leadership continuity in case of unforeseen events, such as the departure of a key executive. A clear succession plan shows lenders that your business can sustain operations long-term.

Laws we will need to comply with – List the relevant regulations, permits, and legal requirements your business must follow. Compliance with laws gives lenders confidence that your business operates legally and responsibly.

Part 5 – Goals and actions

The Goals and actions section requires you to outline measurable goals for your business and the actions you’ll take to achieve them. This shows lenders your commitment to grow your business and create sustainable profit.

Goals for Next Year – Provide short-term goals for next year, such as revenue targets, new product launches, or expanding your customer base.

Goals for the Next 3 Years – Provide long-term goals, lenders want to see a forward-looking plan that outlines sustainable growth and the ability to repay the loan over time.

Part 6 – Finances

The finances part provides an overview of your business’s financial health and projections. This section helps lenders assess the financial viability of your business.

Finance Needed – Clearly state the amount of funding required and how you plan to use it. Lenders need to understand why you need the loan and how it will support your business goals.

Sources of Funding – List current and potential sources of funding, such as your own contribution, other investors, or grants.

Current Finances – Present your current financial reports, including key figures in balance sheet and profit & loss.

Balance Forecast – Project your balance sheet for the next few years, outlining expected assets, liabilities and net assets.

Profit and Loss Forecast – Include a forecast of your expected sales, expenses, and net profit over time. Lenders use this to assess profitability and your ability to meet loan obligations.

Cash Flow Forecast – Provide a detailed projection of cash inflows and outflows, showing you have sufficient liquidity to manage day-to-day expenses while repaying the loan.

If you have questions about preparing your business plan, always consult your accountant.

Reginsun has been helping many Australian SMEs to seek the right financing. We understand even not every loan application requires a business plan, but in certain scenarios, a comprehensive and persuasive business plan can increase your chance of securing a better commercial loan. We can work with you and your accountant to craft a business plan not only facilitates the loan application process but also positions your business for sustained growth and success.

The information provided in this article is factual information only and does not constitute financial advice. Users should seek independent professional advice before making any financial decisions.