How to Write a Business Plan to Get the Best Loan Rates

Many business owners do not know how to write a business plan, or what to include in a plan. Having a good business plan can give you an added advantage so that you can procure the best loan rate. A good business plan may not always guarantee the best rates. However, a poorly written plan will increase the possibility of not qualifying for the best rates. A business may not qualify for a better rate simply because important information was omitted, or not disclosed. Even though a professional can be employed to write the business plan for the business owner, being astute regarding what goes into a good business plan is very important. Leaving such a heavy task upon a stranger and trusting the fate of the loan's approval on the professional might not be the wisest thing to do. The owner should be aware of what is to be included in a good plan because ultimately, the owner is responsible for the plan.

What Should Be Included?

A good business plan is comprehensive. It provides the guide for business operations and outlines the business strategy. It gives the business an opportunity to describe its competition and identify its competitive advantage. The plan provides detailed, current and past financial information. This information will allow a lender to determine the growth pattern of the business. The plan gives information on the owner’s background and expertise. The plan also outlines any future plans and direction of the business. A plan is not complete unless it addresses all of the following areas:

  • Description of the business including the industry information
  • Marketing plans
  • Competition
  • Personnel
  • Financial Statements, at least three years of balance sheets and income statements
  • Financial Projections for future income and cash flow
  • Supporting information, tax returns, personal financial statements and resumes of the principal owners

This information in the business plan allows the loan officer to answer all of the key factors. Also, all of the information should be presented in a professional manner. Include a cover sheet and table of contents.

How a Good Business Plan Helps to Secure a Better Loan Rate?

Lenders must answer important questions in order to determine which borrowers receive the best rates. These questions center around the owners, their financial condition and the financial condition of the business. Lenders must feel that the owners are competent and possess the ability to operate the business. One way to judge the competence of the owners is by the quality of the business plan. The loan officer must also determine if the business has enough assets to secure the loan.

Finally, the lender must determine, based on the financial information provided, the ability of the business to repay. If a lender cannot answer all of these questions sufficiently, they often assume the worst case scenario. The worst case means that  the lender will believe they are assuming additional risk. If the loan is approved, a business deemed risky will be charged higher rates.