Preparing to Take a Business Plan to the Bank

Posted by: Rod Kurtz on January 1, 2006

When you’re ready to take your business plan to the bank to apply for a business loan, be prepared. Many people misunderstand what the bank can and can’t do for you, and why. Before you get to the bank with the plan, consider these ways to prepare yourself — and your business plan.

1. As you develop your plan, set realistic assumptions about financing options. Bankers expect you to know the basics before you walk in their door.

They can’t lend you money just because they believe in your business plan. Laws that protect depositors’ money prohibit banks from risking that money on speculation.

Banks can make loans to borrowers who pledge assets they will lose if they are unable to pay. Many entrepreneurs pledge personal assets to borrow money for their business. I’ve done this myself, by taking out a second and even a third mortgage to get the business through hard times. Understand that if you do this, you risk losing your house, savings, or whatever else you pledge.

If you’re applying for an SBA loan, you’ll need to present an excellent business plan — and 30% of the financing. SBA loans will provide up to 70% of the money you need — if you get approved, that is.

There are at least two other ways to finance your small business: You can lease your equipment or you can use a credit card to buy whatever you need at very high monthly interest rates.

For the full article from AllBusiness, click here

Tim Berry
Author
CPA’s Guide to Developing Effective Business Plans
Eugene, Ore.

Reader Comments

Antonisha Adair

April 9, 2006 3:20 PM

how do i prepae a foolproof business plan.

Jeff

January 5, 2009 10:53 AM

Is it possible to obtain financial help to execute your business plan if you don't have any capital to bring to the table? If an SBA Loan can possibly give you 70%, what can I do creatively to obtain the other 30%? I know this column is old, but I would appreciate a reply. Thank you for the information you've provided.

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