Posted on Thursday June 06, 2019

Developing Your Business Plan: 4 Key Considerations before You Apply for Financing

Submitting a business plan to a financial advisor is a critical moment in any entrepreneur’s career. After all, most projects can’t move forward without financing. We spoke recently with Dave Ouellette, Manager, Syndicated Loans and Business Transition at UNI Business, to discuss the 4 key components you need to address in your plan to qualify for financing.

1. Show that you are meeting a specific customer need.

All successful businesses meet a defined need among their targeted customers. The most important question that a business plan must answer is: What is this need, and how do my business’s products and services meet it? “People are trying to convince us to invest in their concept, and everything always looks good on paper, but as financial advisors, what we want to know is whether the proponent has done the homework,” Dave explains. “Do they know their market? Have they identified a need? Have they studied the competition? And, do they have a strategic plan in place for meeting this defined need successfully?”

2. Develop a brief, concise executive summary.

Avoid getting into unnecessary detail here. Your financial advisor should have a good understanding of the overall project after reading the executive summary. Detailed information backing up the claims made in the executive summary should then be set out in clearly identified supporting documents so that the advisor can locate it quickly. Consider including a summary of the project’s financial component, including the loan amount sought, monies invested to date and down payments.

3. Submit your project to an institution interested in financing it.

All financial institutions do not have the same objectives at the same time. Knowing that individual institutions may be focusing on diversifying their loan portfolio to avoid taking on excessive risks, you could be denied financing even if your project is sound. “As an institution, we have to protect our members’ savings by diversifying our portfolio,” Dave explains. “We consequently have objectives in terms of exposure in various sectors. For example, if a local caisse has financed several restaurant projects in recent months, it may have already reached its maximum risk exposure in that industry through its existing clients.”

4. Make cash flow projections for the first year.

One aspect that many people overlook when drawing up a business plan is preparing a document forecasting cash flow (i.e. income and expenses) during the company’s first year. By supplying a detailed breakdown of estimated income, including dates, and then comparing this to your list of anticipated expenses, you can give your institution a better idea of the nature and credibility of your overall financial forecast. Ask a professional to review this document before you submit it. This person can help you address any inconsistencies in your information before your financial advisor sees it.

Dave offers up an interesting metaphor: “Success in business is like a forest where each customer or sale represents a tree. It’s important to look at the business plan as a map or guide for navigating your way through the trees. I want to understand how big this forest is and how you plan to get the trees to grow. And I don’t want to have to go looking for this information! It should be clear and straightforward, just like your company’s vision.” We’re here to help you organize your ideas before you sit down to develop your business plan. Contact us today to make an appointment with a business advisor!