What is a Business Plan?
Learn what a business plan is, why lenders require one for certain loans, and what sections to include when applying for SBA or bank financing.
A business plan is a written document that describes your business, its objectives, strategies, target market, and financial projections. For loan applications, the business plan demonstrates to lenders that you have a viable business model and a clear path to repaying the loan.
When Lenders Require a Business Plan
Not all loans require a formal business plan, but you will typically need one for:
- SBA loans (especially for startups or significant expansion)
- Bank term loans for newer businesses
- Business acquisition financing
- Large loan amounts relative to your business size
- Startup financing of any type
Established Businesses
If you have 2+ years in business with strong financials, many lenders will focus on your financial statements rather than requiring a detailed business plan. The plan becomes more important for newer businesses or major changes in direction.
Key Sections of a Business Plan
A loan-focused business plan typically includes:
- Executive Summary: Brief overview of your business, the opportunity, and your funding request
- Company Description: What you do, your business structure, history, and legal status
- Market Analysis: Your industry, target market, competition, and competitive advantages
- Organization & Management: Business structure, ownership, and key team members
- Products or Services: What you sell, how it works, and what makes it valuable
- Marketing & Sales Strategy: How you attract and retain customers
- Financial Projections: Income statements, cash flow projections, and balance sheets (typically 3-5 years)
- Funding Request: How much you need, what you will use it for, and proposed repayment
Financial Projections for Lenders
The financial section is what lenders scrutinize most. Your projections should be:
- Realistic: Based on actual market data and reasonable assumptions
- Detailed: Month-by-month for the first year, quarterly or annually after
- Documented: Clear assumptions for revenue growth, expenses, and margins
- Consistent: Numbers should align across income statement, cash flow, and balance sheet
Use of Funds Section
Lenders want to know exactly how you will use the loan proceeds. Be specific:
- Equipment purchases (list specific items and costs)
- Inventory investment
- Working capital needs
- Hiring plans
- Real estate or leasehold improvements
- Marketing and customer acquisition
Tips for a Strong Plan
For loan applications, keep your business plan focused and practical:
Lenders are not investors looking for massive returns — they want to see steady cash flow and loan repayment ability. Focus on demonstrating stable revenue and your ability to service debt, not hockey-stick growth projections.
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Read more →Important Disclosure
Not Financial Advice: The information provided in this article is for general informational purposes only and does not constitute financial, legal, or professional advice. You should consult with qualified professionals before making any financial decisions.
No Guarantee of Financing: Liminal Lending Co. is a business loan marketplace that connects borrowers with third-party lenders. We are not a lender and do not make credit decisions. Submitting an application does not guarantee approval or funding. Loan terms, rates, and availability vary by lender and are subject to borrower qualifications and lender criteria.
Third-Party Lenders: All loan products are offered by independent third-party lenders. Liminal Lending Co. is an Independent Sales Organization (ISO) and receives compensation from lenders for successful referrals. Terms and conditions of any loan are between you and the lender.
Rate Information: Rates, terms, and fees mentioned in this article are estimates based on publicly available information and may not reflect current market conditions or specific lender offers. Actual rates depend on creditworthiness, business financials, and lender policies.
Information May Change: Financial markets, lending regulations, and economic conditions are subject to rapid change. While we strive to keep our content accurate and up-to-date, information in this article may become outdated. Always verify current rates, terms, program availability, and regulatory requirements with lenders and official sources before making financial decisions.