Contents Of A Business Plan – Key Information Required By Banks
Many small إقامة مستثمر في دبي owners and entrepreneurs produce business plans quickly and without much thought or analysis. While having one is critical when seeking loans from a bank, the actual contents are even more important. This is often over-looked as most business owners are not familiar with what banks are really looking for.
The contents of a business plan are critically important to the banks’ lending decision process. It’s not enough just to have all the headings covered off in the table of contents.
So what are banks really looking for? In this article, we will discuss the important of market and competition analysis in the contents of a business plan. Both of which are critical to a banks’ decision-making process.
Demonstrated understanding of the key target market
The contents of a business plan include a detailed analysis of the industry and market segment within which the business operates. Beyond merely providing the estimated size of the market, and market share, banks look for analysis on the relevant market.
Understanding and analyzing the competition
Banks will keenly examine and question the contents of a business plan covering competition analysis. The competition analysis section needs to show that the business owner has an understanding of their business strategy and model, and how they might respond to any competitive behavior in the market place.
The content needs to identify the strengths and weaknesses of top competitors and identify the needs in the customer base that are not being fully met by the competition.
Getting an understanding of how competitors are performing financially will also help support estimates made about the returns a business might make in the market it operates. This feeds into the financial section as one of they key factors that will form the basis of realistic sales projections.
This analysis will also identify the opportunities and threats to the business. Opportunities that can be capitalized on and incorporated into a well articulated business strategy, and threats that need to be mitigated or managed.
What perspective do banks take when assessing the merits of a business plan?
Banks make a fixed return on loans made to small businesses, unlikely equity investors who take the first loss risk, and all the upside profits as recompense for that level of risk. This is why banks will always focus on the downside risks to a business in their assessments of the contents of a business plan.
Business owners and entrepreneurs need to highlight and address the existing and potential risks to their business in the contents of a business plan being presented in support of a bank loan application. Addressing and mitigating risks in this document will reassure banks that management is fully aware of the risks involved and have provided reasons why they are acceptable or show how they will be minimized.