Why is my Lender Need a Business Plan?

Many business owners or budding entrepreneurs are taken aback when the creditor asks (and stresses) of a business plan. Why do lenders need this document?

Lenders view the plan for forcing the entrepreneur or business owner to look carefully so critical to their business project. They believe that if the company needs to grow and succeed this document will guide the businessman to their objectives. Ultimately the plan is a concise document that effectively communicates the ideas business people to the lender.

In theory, the business plan should identify areas of weakness or strength. If the truth must be known, of course, business plans tend to accentuate the positive. The author of this article has a favorite saying - 'I never met a formal financial pro I do not like'!

Additional information last comment that later, but suffice to say that in theory a good document-oriented funding is to balance both positive and negative aspects of the business and its financial data. A solid business plan geared toward a lender will have some ways to solve business challenges of the business model and the proposed financing.

We all know that stat is - half of all new businesses fail within the first two years, 90% within the next ten years. Why is not the case. The business guru tells us his lack of planning. Just why a business plan geared towards lending and financial data should be used as a critical follow-up in the area. It should be stored away! As we all learned, 'teaching is very high in the school of experience'!

Especially if people who do not know, or may not know your business model used successfully created a plan to evaluate your business and lend funds. The 'business plan' is in fact really a financing proposal. Here's how we look at our company.

We remember as a creditor, in many cases you do not know, he thinks. First of all he or she hopes that the information you provided is true. Remember also that someone works for the creditor, and must communicate the idea of ​​an investment committee of the subscriber. If you have not met the lender, trust me certainly did not encounter the underwriter or the investment committee.

Some of us might think that we are the only lender is reviewing the business plan. This is not the case, our plan could be between 10-20 others in a given loan. And finally, people have prejudices - will refer the projections against their past experiences. If your business plan and financial make them think that Microsoft and RIM will dig into the plan, if Nortel's visions come to mind that will not be the case!

Therefore entrepreneurs should put forth the plan on the basis that will be 'attacked' by the creditor to whom the contractor has to counter with a potential for 'real' upside. The lender must really feel a sort of enthusiasm for the business.

The biggest secret of the business plan, and yes, we are revealing here is that usually are not read in its entirety by the creditor. The real world imposes are given 5 minutes to read, more attention and emphasis is usually placed only on the financial. The owner must never think that both quantity and fineness of characters and graphics will get the financing they need.

In summary, do not assume that a plan is not actually required for a lender or financing, in fact, a company or an entrepreneur without a plan is, outside of luck, guaranteed to fail ....