Firstly apologies for the lack of juicy blog posts of late, life has been pretty hectic!
But I return bearing gifts... I have been spending a lot of time talking with bank representatives and other lenders, so I picked some brains and found out exactly what they're looking for, when someone approaches them for a small business loan.
They are echoing general consensus I'm afraid - it's all down to the planning. And I quote one person from one of the Big Two banks, "it's the most critical part" of any application.
Two things are graded when you go near a bank for a small business loan:
1) The composition of your business plan
2) Your commitment to the project in cash/savings/time/other investment (e.g. angel source)
The key to an excellent business plan according to the banks is writing it yourself! Everyone I have spoken to cannot emphasise this highly enough. The number of people coming into them for small business loans with a business plan under their arm is increasing. The percentage of this group who cannot defend anything in said plan because they have not even memorised the contents, is also on the rise. This is a common mistake! If you don't understand your own cashflow projections or the demand in your local/national/international market, then they are unlikely to support you with finance. These are just not times of risk, banks & building societies will not take any unnecessary risk at all.
You not only have to be able to defend your plan and discuss all areas within it, but you have to make sure that you and it are realistic. For example if you want to start a business in any sort of luxury product or service, you have to be extra convincing, since lots of people are pulling in the belts just now. It was in the paper only the other day that the number of returns coming into Revenue are on the increase - people are looking for spare cash everywhere - Med1 returns, Rent relief - they're all flooding into the revenue commissioners.
So just to give you the definitive list from a bank on what they consider the core of a business plan:
- History of the firm (you/your business to date)
- Overview of the business (you, your market)
- Threats (within your industry)
- Company Structure (assigning responsibilities to the management team)
- Overview of your Competitors
- Any investment highlights (angels, family donations, your own savings)
- A list of upcoming business opportunities
- Financial Overview (cashflow projections are OK for pre-start up businesses but accurate historical financial accounts are imperative for existing businesses - there is no point in approaching a bank or building society otherwise)
Hope that keeps you going for a while, I'm going into another hectic few weeks...
PS I've blogged once or twice on business planning and market research before... here and here. More can be found down in Labels. Good luck!