A business plan should not be produced solely to be presented to one or more banks. The main objective of a business plan is to validate the feasibility of business creation or takeover project. Then, it can also be used to convince potential partners, such as banks, of the consistency, credibility, and expected profitability of your project.
This is mainly the case when the entrepreneur needs bank financing. In this situation, each bank approached will require the communication of the business plan.
What should a Business Plan contain for the Bank?
A business plan presented to the bank as part of a financing request must be complete. The banker needs to rely on the document to understand its economic interest, organization, and financial consistency.
In terms of content, the business plan must include:
- The economic presentation of the project: the idea, the market, the customers, the proposed offer, the strategy, the team and the partners.
- And its financial analysis: balance sheet, income statement, cash flow statement and financing plan. The forecast horizon is generally three years. There is no need to go. Further, the information would be far too random.
How to build a business plan that is presentable to a bank?
From a technical point of view, it is recommended to use specific software or an application to build the business plan. This allows you to have a working environment, not to forget anything and to structure the process. Besides, the tool will generate a complete and presentable document.
Then, at the level of the approach, the entrepreneur must move forward on his business plan step by step and develop it gradually. A business plan cannot be established in a single day. It involves thought and work. First of all, it is the economic part that is worked on. To feed it, it is necessary for particular:
- Work on market research: the sector, customers, competitors, opportunities,
- Develop the product or service offered, in line with the opportunities detected,
- Define a strategy, gather resources and mobilize resources (financial and material).
Finally, it is systematically necessary to translate the project financially by drawing up a forecast. You must first have worked on turnover assumptions, then on all the expenses required for implementing the project. The use of the software is recommended to make the forecast.
Why does the bank ask the entrepreneur for a Business Plan?
When the entrepreneur needs financing within the framework of his project, the granting decision process goes through several people at the bank level: the bank adviser, the director of the agency, a commission or an analyst… The advisor does not have the power to decide directly. The oral presentation alone is not enough; the business plan is necessary to transcribe the project physically.
Therefore, the business plan is essential to help all of these interlocutors fully understand the project, with many details. Even if the advisor fully understood the project when the entrepreneur met him to present it, this will not necessarily be the other interlocutor’s case. The business plan allows these other people to learn about the project.
Our advice for making a Business Plan for the Bank
Here is a list of several tips that will allow you to develop a good business plan, first for you, then for your potential partners (such as a bank, for example):
- Be clear and precise about all the elements incorporated in the document so that each interlocutor can understand the project without asking for additional explanations or clarifications.
- Address all the essential points of the project; nothing should be forgotten or left to chance.
- Incorporate only realistic, sincere and justified information in the business plan. Random or unfounded information will not be appreciated.
- Have your business plan validated by a professional before presenting it to partners.
Regarding granting funding and having a coherent and profitable project, it is essential to have a sufficient personal contribution to hope to have a favourable return. Compared to this, it is now almost necessary to finance at least 20% of the total amount of the project. This threshold is a strict minimum; it is often required to bring more funds. It all depends on your situation and the project.
Validation of the Business Plan by a Chartered Accountant
Before presenting a business plan to one or more banks, the entrepreneur must have it validated by a professional. It can be a consultant specializing in project support or a chartered accountant. This check avoids communicating a document containing errors to potential partners, which would constitute a wrong signal.
A business plan validated by an accountant is sometimes a prerequisite required by the bank. The professional will notably validate the financial forecast of the entrepreneur.