You’ve found an excellent business opportunity, and are eager to act on it as soon as possible, lest that opportunity slip. However, you lack the proper funding to get that business of the ground. What can you do?
One option is to borrow from friends and relatives; another is to go to a financial institution like a bank and apply for a business loan. The latter requires some preparation; after all, you will have to convince the loan officer that you have a good business opportunity and have the background and qualifications to make it work.
Most loan officers will ask for details about the business opportunity, and how you plan to use the money to bring that idea to fruition. It’s important that you give solid facts to back up your plans. You will present all of this in your business plan.
<b>If You are Setting up a New Business</b>
The business plan is when you take any business opportunity, and give it form and structure. It starts with an executive summary, which must state the amount you need to borrow, the kind of loan you plan to take, and a short explanation of the business opportunity you want to pursue.
Aside from the Executive summary, you will also have to present some documents to support your request for a business loan. This includes, first and foremost, your financial projections. The loan officer needs to be convinced that the business opportunity has a good chance of making a good profit, which in turn will enable you to pay the bank back. Documents include your income statement, cash flow projections, and balance sheet.
You will also need to establish your credibility and skill, as a way of proving that you have the expertise to manage the business opportunity well. Do include your resume or bio-data, references, and any information on your business partners.
For filing purposes, you should also give your personal identification and social insurance number, a list of your bank accounts, your personal net worth statement (with a list of assets and liabilities), and credit references. This will help the bank evaluate your credit history, and determine how high the “risk’ the bank will take in lending you the money.
<b>If you are Expanding an Existing Business </b>
If the company is already in existence, and you are getting a loan to expand it, you will also have to furnish a copy of the company’s bank accounts and credit references, a complete set of financial statements from the last three years, current year to date financial statements, and accounts payables and receivables.
You will also need to supply the loan officer with a company history, a background of the existing products and services you provide, and statistics that prove that there is a viable market for expansion. You may have to give industry statistics or research that support that the business opportunity exists and that your existing resources cannot sustain the possible growth. You may also have to submit a plan of how you will allocate the money and the projected increase in revenues.