How to Write a Business Plan for a Loan

How to secure business financing

Fact checked by Suzanne Kvilhaug
Reviewed by Andrew Schmidt

A business plan is a strategic document that outlines a company’s goals and details the strategies it will use to achieve them. It serves as a blueprint for the company, guiding a business through its marketing, financial, and operational decisions. Some business plans are more detailed than others, but they’re used by all types of businesses, from large, established companies to small startups.

You might consider using a traditional business plan format if you’re detail-oriented, require a comprehensive plan, or are seeking financing from conventional sources such as banks.

Your business plan can demonstrate your comprehensive understanding of your market and business model, and your realistic approach to achieving your goals. Although a business plan might not be mandatory for securing all types of loans, crafting one can significantly improve your chances of obtaining financing.

Key Takeaways

• Many lenders will require you to write a business plan to support your loan application.
• Though every business plan is different, there are a number of sections that appear in every business plan.
• A good business plan will define your company’s strategic priorities for the coming years and explain how you’ll try to achieve growth.
• Lenders will assess your plan against the “five Cs” of small business credit: character, capacity, capital, conditions, and collateral.

Why Do I Need a Business Plan?

There are many reasons why all businesses should have a business plan. It can improve the way that your company operates, but a well-written plan is also invaluable for attracting investment.

On an operational level, a well-written business plan has several advantages. A good plan will explain how a company is going to develop over time and will lay out the risks and contingencies that it may encounter along the way. It empowers you to tackle challenges and make crucial business decisions, including marketing and competitive analysis, customer and market evaluation, and logistics and operations plans.

A business plan serves as a crucial strategic guide, helping executives stay focused on their long-term goals despite daily operational challenges. It also provides a benchmark for measuring success, offering a clear direction for business progress.

Furthermore, business plans are valuable when it comes to dealing with external organizations. For example, banks and venture capital firms often require a viable business plan before considering whether they’ll provide capital to new businesses.

Important

Even with a proven track record and collateral, lenders often require a comprehensive business plan before offering financing. They aim to minimize their risk by ensuring that a business has a serious and viable plan to generate revenue and repay the loan, so supplement your business plan with profit and loss statements, cash flow budgets, and net worth statements to strengthen the case for financing.

Sections of a Business Plan

Every business is unique, and each business plan reflects that diversity. However, most business plans include several standard sections. Common sections include an executive summary, a company overview or description, products and services, market analysis, a marketing and sales plan, an operational plan, and details about the management team. When applying for a loan, it’s also crucial to include a section for funding requests along with financial statements.

Let’s look at each section in more detail.

Executive Summary

The executive summary is a summary of the information in the rest of your business plan, but it’s also where you can create interest in your business.

Provide a concise, detailed overview of your company, explaining the type of business and the reasons for its likely success. Include your mission statement, a description of your products or services, and key information about your leadership team, workforce, and location.

It’s also important to present essential financial data and outline your strategic plans for growth, especially if you’re seeking financing. This section should capture the essence of your business and its strategic direction to engage and inform potential investors or lenders.

Company Overview

Use this section to offer a comprehensive overview of your company. Delve into the specific problems your business addresses and outline the particular consumers, organizations, or businesses you aim to serve.

You can also highlight the competitive advantages that position your business for success. Mention any experts or key employees on your team, the strategic location of your operations, or any other strengths that may give your company an edge. This part of the business plan is your opportunity to showcase your company’s unique attributes and strengths.

Products and Services

In this section, describe the products or services your company provides. It’s not necessary to delve into technical details, but it’s important to highlight the appeal and value of your offerings. Explain how they benefit customers and outline their life cycle to illustrate their long-term viability and sustainability.

Also, you can discuss any measures to protect your intellectual property, such as copyrights or patents. This demonstrates the uniqueness and security of your products or services. If your company is involved in research and development, describe these efforts in detail to show your dedication to innovation and growth—key elements in attracting financial support.

Include details about how your products are made or how your services are provided—information that is valuable to lenders, especially if you’re seeking financing to expand your business. Understanding your production processes or service delivery methods helps lenders assess the efficiency and scalability of your operations.

Market Analysis

A market analysis is a core section of your business plan. Here, you need to demonstrate that you understand the market you’re operating in, and how you’re different from your competitors. If you can find statistics on your market, particularly on how it’s projected to grow over the next few years, include them in this section.

Marketing and Sales Plan

This section should detail your plans for attracting new customers and how you intend to engage with them. Outline your sales objectives and describe how they align with your planned marketing and advertising efforts.

If you aim to expand into new markets or target customers you haven’t reached previously, you should discuss both the risks and opportunities associated with these ventures. This analysis shows a comprehensive understanding of your market expansion strategy, which is crucial for lenders to evaluate your potential for business growth.

Operational Plan

This section explains the basic requirements of running your business on a day-to-day basis. Your exact requirements will vary depending on the type of business you run, but be as specific as possible.

If you need to rent office space, for example, you should include the cost in your operational plan. You should also include the cost of staff, equipment, and any raw materials required to run your business.

Management Team

The management team section is one of the most important sections in your business plan if you are applying for a loan. Your lender will want reassurance that you have a skilled, experienced, competent, and reliable senior management team in place.

Note

Even if you have a small team, you should explain what makes each person qualified for their position. If you have a large team, you should include an organizational chart to explain how your team is structured.

Funding Request

When applying for a loan, it’s crucial to include a detailed funding request. Specify how much money you need, whether you’re seeking debt or equity, the terms you desire, and the duration of the funding.

The most important part of the funding request section is to clearly outline how you’ll use the funds, whether to purchase equipment or materials, cover payroll, or manage specific bills until revenue improves, and therefore allow you to repay your loan.

Financial Statements

You can support your funding request with robust financial projections to demonstrate your business’s stability and potential for financial success. It’s best to include income statements, balance sheets, and cash flow statements for the past three to five years. Graphs and charts are often a useful addition to this section, because they allow your lender to understand your finances at a glance.

The overall goal of providing financial statements is to show that your business is profitable and stable. Include three to five years of income statements, cash flow statements, and balance sheets. It can also be useful to provide further analysis, as well as projections of how your business will grow in the coming years.

What Do Lenders Look for in a Business Plan?

Lenders want to see that your business is stable, that you understand the market you are operating in, and that you have realistic plans for growth.

Your lender will base their decision on what are known as the “five Cs.” These are:

• Character: You can stress your good character in your executive summary, company overview, and management team section.
• Capacity: This is, essentially, your ability to repay the loan. To assess this, your lender will look at your growth plans, funding request, and financial statements.
• Capital: This is the amount of money you already have in your business. The larger and more established your business is, the more likely you are to be approved for finance, so highlight your capital throughout your business plan.
• Conditions: Conditions refer to market conditions. In your market analysis, you should be able to prove that your business is well-positioned in relation to your target market and competitors.
• Collateral: Depending on your loan, you may be asked to provide collateral, so you should provide information on the assets you own in your operational plan.

How Long Does It Take to Write a Business Plan?

Writing a business plan can vary in duration depending on your specific business needs, but it’s crucial to dedicate enough time to ensure its accuracy and comprehensiveness. A business plan offers benefits beyond securing a loan; it serves as a strategic blueprint for guiding your business’s direction. According to a Harvard study, the optimal period for developing a business plan is about three months.

What Should You Avoid When Writing a Business Plan?

One common mistake business owners make when drafting a business plan is overestimating their growth potential. Lenders often recognize and are wary of overly optimistic projections. It’s crucial to provide honest financial forecasts, thorough market research, and realistic customer evaluations. These elements should reflect genuine market demand and competition, avoiding reliance on overly optimistic predictions.

Should I Hire Someone to Write a Business Plan for My Business?

While you can hire someone to write a business plan for your business, writing it yourself is often more advantageous. You likely have a deeper understanding of your business than an external consultant would. The U.S. Small Business Administration (SBA) provides a sample business plan template you can use for ideas on how to create a traditional business plan.

What’s New About Writing Business Plans in 2025?

Platforms and tools that use artificial intelligence (AI) are increasing in popularity to help write business plans. They can conduct market research, generate sales forecasts with greater accuracy, and streamline repetitive tasks (e.g., automating performance reports). However, although AI tools can improve efficiency, whatever they generate should still get a human review.

The Bottom Line

Writing a business plan can benefit your business, whether you are applying for a loan or not. A good business plan can help you develop strategic priorities and stick to them. It describes how you are going to grow your business, which can be valuable to lenders, who will want to see that you are able to repay a loan that you are applying for.