Seeking Substantial Finance? - Some Tips for the Business Plan
This article will cover some basic matters, which are the beginning of a successful business plan in depth. Every major finance application needs not only a clear and precise form of application submission, but also a convincing and properly documented business plan, which supports the application details.
For those who may be new to the ways of commercial funding, the first question is: What exactly is a Business Plan?
A business plan is a document describing a company's principal activities, or products, or services, its environment, and the objectives and strategies of management, backed up with suitable financial information. It is very often the first impression potential funders or investors get about a venture, which is presented to them for funding. Even if the project has a great product, team, and customers, it may not be the impression the lender or investor gets, if the plan has not been properly prepared.
Funders, either traditional lenders, or equity funders, or 'angel' investors, see thousands of business plans each year, and, apart from a referral from a trusted source, the business plan is the only basis they have for deciding whether or not to lend to, or invest in, a project.
So, whoever is presenting the business plan must ensure that properly the business plan is properly prepared, and is presented properly. Be aware that this may involve you having to 'go back to the drawing board', perhaps even several times. However, at the end of the day, you will see the benefit it reaps.
With so many opportunities being presented to them, many investors, and particularly lenders, have made a virtue out of declining most presentations. They reason that entrepreneurs who know what they are doing will not make fundamental mistakes. Every mistake counts against the applicant - and it does not make you, the applicant, look good.
However, you need to be able to present a business plan, which looks very professional. So, firstly, if you already have a business plan, decide whether the plan is in shape to be presented to a potential funder, or whether you need to rework it.
The Purposes Of The Business Plan Are Various
- The plan is a presentation of a company and its opportunities.
- It can serve as the basis for strategic planning, and as a management and control tool.
- It enables an investor or financier to evaluate a company, and assess the risks and prospects for return on investment.
- It requires fact-finding, and forces the management to be realistic, and to put theories to the test. It should prove the management team's planning capabilities, and reduce the time required to study and negotiate financing.
A plan should be prefaced by a summary of the business opportunity, and the key aspects of the firm, including information on:
- objectives;
- desirability of products or services; or feasibility of the project (such as in the case of real estate development)
- markets (if applicable);
- management team;
- financial projections;
- amount and nature of funding required, and the estimated return this will produce.
The plan must include enough information to enable a lender, investor or financier to make a decision, but it must not be overloaded with superfluous or irrelevant detail.
The plan may be prepared by the entrepreneur, or the management team of the applicant company itself, or it may be prepared by an outside specialist. Sometimes, however, the applicants themselves have better and more knowledge of the project than they can impart to an outsider. Nonetheless, it is usually wise to have the plan evaluated by a knowledgeable outsider before presenting it to potential lenders, investors or funders.
The plan must demonstrate that the project is able to meet the funders criteria, in areas such as:
- the management is qualified;
- the description of the market and marketing methods is well established and realistic (if applicable)
- the property has a sufficient valuation (if real estate)
- the projected new funding will be adequate;
- the product is competitive; or the project is profitable (for example, in the case of real estate development)
- the production capacity will be adequate (if applicable);
- the probability, if the plan is to be presented to an investor, of an attractive return on investment is high.
The applicant for the funding should have:
- prepared a 3 to 5-year plan;
- undertaken and documented a specific feasibility, and, if applicable, marketing study;
- be prepared to make a personal financial commitment. (In all cases of pursuing substantial funding, the applicant will have costs and expenses involved with the application);
- divided any large-scale plan into phases;
- provided a list of users, suppliers, clients, etc. who are ready to act as references;
- included both strengths and weaknesses of the business plan (this adds credibility, and underlines the practical knowledge of management)
In general, the plan must be adequate to the situation. Nevertheless, certain basic information is necessary in all cases. This includes the company's major objectives, opportunities and profit targets, any assumptions made, resulting forecasts, special risks, and also CVs of the management team.
Of course, there has to be some flexibility in the content of the plan. For example, a project based entirely on real estate development would not contain details relating to manufacturing, production and sale of a product, etc. On the other hand, a manufacturing project may well require real estate details, if there is, for example, factory real estate, which is part of the assets to be acquired, or to used as security.
Pay attention to the business plan, prepare it in a professional manner, and it will greatly ease the task of obtaining finance for your commercial, industrial, or any sort of project.
[This article is copyrighted. However, it may be reproduced, but only if reproduced in full, without alteration, and provided that it is accompanied by the resource material found below, also reproduced in full, without alteration]
Graham Turnbull is newly appointed Business Development Manager at Capital Credit [Intn'l] Corporation, a financial institution, which has been active as direct lenders, as well as venture capitalists, and fund managers for a quarter of a century. It provides loans internationally for the funding of a wide range of project worldwide. Commercial finance and industrial funding, as well as project developments are some of its areas of activity.
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