Business Plan Part XI

Applications and Expected Effect of the Loan

If you are looking for any type of funding, your business plan should include a section explaining what the money will be used for and how it will help the business.  This is true whether you are hoping to obtain a loan or a grant, or even if you are looking for investors.  Be very specific as to what the money is for.  Is it for equipment, inventory, working capital, etc?  If it is for equipment, inventory, or the like, be sure to include brief descriptions of all the items and also include any model numbers and pricing.  It would be wise to include any price quotes in the appendices “Supporting Data” section.  When possible, notate who you will be purchasing the items from.  When figuring costs for everything, don’t forget about an applicable sales tax, shipping or delivery costs, and installation charges. Most importantly, include how these purchases and expenditures are going to help the business and increase profits. 

When thinking about these expenditures while trying to come up with a request amount for your loan, use the “Three List” approach.  First, make a list of the “bare bones, got to have” list then make the “if money was no object” list.  From here, make the list of what you can reasonably do and the loan request should be determined from this list.  You want to be careful not to have your costs exceed the expected profits from the purchases.  Often, there is a fine line between not requesting enough funding and needing to come back and ask for more versus asking for too much and getting in over your head.  Much thought should go into just where the line is.

It’s hard to believe, but we have covered almost all the sections of a business plan.  Just a couple of things left.  Next time we’ll talk about the Summary section.  Until then…….

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