Posts Tagged ‘lenders’
Writing a Business Plan With Lenders in Mind
Friday, November 30th, 2007
For many, starting a business is a life long dream. But, as with any dream, there are obstacles which need to be overcome before the dream can become a reality. A business start-up must begin with the essential business plan. There is the option, with business planning, to hire an outside source to write the plan, but, there is a level of personal knowledge and commitment you will not achieve with this choice. Your business is your baby and only you should write the business plan.
The purpose of a business plan is many fold, giving form to the vision, transforming thought into reality and, the most important, convincing a bank you have a business that will work and render a profit.
A company with a business plan chalked out formally is a company that will attract lenders. Being the main company document and a gauge for measuring the company’s success, a proper business plan often keeps the organization from implying ideas that are truly unachievable. For businesses just starting out, the shoe-string budget may not allow for business guidance outside of the company’s walls. No matter the financial tight rope of the company, four points are common for every business - outlining the goals, expected costs, a well-devised marketing plan and an exit strategy.
Outlining Goals
An executive summary introducing the business strategy by outlining goals and objectives, makes up the most important section for lending institutions. A loan officer should be persuaded within the first couple of pages. It’s the viable business proposal that emerges the winner.
Expected Costs
The loan institution needs to be convinced that the amount they are lending, is not for exorbitant costs and frills. A solid plan of the companies start up costs as well as the projected goals will be required before a loan will even be considered. A financial projection of the next three- to five-years, encompassing the domains of financial forecasts (better with spreadsheets and formula), balance sheets, income statements and cash-flow projections for the entire forecast period.
Marketing Plan
A properly laid marketing strategy needs to let the target audience know what is available or the product or service you are pitching. Even if you are going for a word of mouth mode of publicity, you must mention your product, along with explaining how shall it prove fruitful.
The goals and objectives are to be explained in a few paragraphs, with a mention of the expected short- and long-term achievements, growth and the target demographic besides the service or product you plan to offer. The product or service must differ in some aspect or the other from everything else on the market in order to generate the other party’s interest. That translated, is a good marketing copy stating the market potential for your service or product. This is also to convince lenders, employees and others why you are the best at what you do and what you offer.
Exit Strategy
An exit strategy is a vital part of all good business plans. This lays out the benchmarks to use in case the venture fails. The strategy can be depicted by dollar figures, by revenue growth, by the market’s reception of the idea, or a proved assurance of the service or products future demand. This gives rise to a consensus among the decision-making authority.
Starting a business is an exciting time. Whether you have waited your entire life to live your dream or are making a spur of the moment decision, business planning and loan assurance is the first step to achieve the dream. Business plans do not have to be professional works prepared by a consulting firm. Keep your dream close to your heart and follow these tips to preparing your own business plan.
Tags: business plans, Finance, Finance and Accounting, lenders, loans, Starting a Business
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Set Up Vendors, Lenders and Subcontractors Before You Need Them
Tuesday, August 28th, 2007
When a small business can establish relationships with vendors, lenders and subcontractors well in advance of when they are needed, it can avoid mistakes and save money. Planning all stages of development in advance is always a winning strategy.
Starting the search early provides the luxury of time: time to accurately determine the services and supplies needed; time to shop around for the firm or individual that provides the best fit with company needs; time to compare prices; time to negotiate terms; and time to weigh options and gather the most information possible before making a decision. On the other hand, waiting until the last minute to begin the search minimizes all of these advantages.
Starting the search before needs arrive requires planning. Because every growing business eventually will need to establish ongoing relations with vendors, lenders, etc., management should create a list of projected needs in these areas, well before those needs exist. You can then make initial contacts, interviewing candidates in depth. Based on the interviews, lenders and outside contractors can be selected, so that immediate action can be taken when actual needs arise.
A well-designed business plan should include projected future needs for vendors and lenders. (Future need for subcontractors often is more difficult to determine.) Using the business plan as the basis, the need for vendors and lenders could include the following criteria:
Vendors/subcontractors
1. Projections for growth of existing operations/production in terms of supplies and outside services required. This should include timelines for revenue growth, employee growth and quantity of output.
2. Projections for new operations/production, including projected revenue, required employees and output.
3. Establishing relations with local and nationwide temporary staffing agencies.
Lenders
1. Projecting financing needs, specific uses of funds and dates for funding.
2. Working with lenders while setting up new or expanded operations, so they will be part of the project rather than outsiders.
3. Setting up immediate lines of credit to establish creditworthiness and to cover initial set-up expenses of new or expanded operations.
An ideal scenario for setting up vendors/subcontractors and lenders in advance might go something like this: You approach your lender months in advance with detailed plans for your new or expanded operations. These include (just as in your business plan) why you need the funds, projections for revenue growth, how you will use the funds, when you will need the funds, and how you will repay. This is a scenario lenders love because it involves them in every step of the operations they are funding. In addition, this advance time allows you to contact potential vendors and subcontractors to determine needs and negotiate terms, making these terms part of the loan package.
Article used with permission from the National Federation of Independent Business. NFIB is the leading advocacy organization representing small and independent businesses. A nonprofit, nonpartisan organization founded in 1943, NFIB represents the consensus views of its members in Washington, D.C., and all 50 state capitals. Visit www.NFIB.com to learn more.
Tags: business plan, jeff moses, lenders, NFIB.com, Starting a Business, startups, subcontractors, vendors
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