Writing a Business Plan for a Loan Application

Not every loan requires a business plan. For most online term loans, lines of credit, and MCAs, lenders rely on your bank statements and tax returns. But for SBA loans, bank term loans, or larger funding requests, a solid business plan can make the difference between approval and decline.

Here is how to write a business plan that actually helps you get funded. I will focus on what lenders want to see, not generic business school theory.

When Do You Need a Business Plan?

Be realistic about when a business plan is actually required:

Loan Type	Business Plan Required?	Notes
MCA	No	Decisions based on bank deposits
Online term loan	Rarely	May help borderline applications
Line of credit	Sometimes	For larger credit lines
Equipment financing	Sometimes	For new businesses or large purchases
Bank term loan	Usually	Most traditional banks require one
SBA 7(a)	Often	Required for startups, sometimes for existing businesses
SBA 504	Yes	Standard requirement

Check Before You Write

Ask your lender if they require a business plan before spending time creating one. Many established businesses can skip this step entirely.

The Lender Business Plan: Focus on What Matters

A business plan for a lender is different from one for investors or internal planning. Lenders care about one thing above all: will you repay the loan?

Everything in your plan should support this thesis. Here are the essential sections:

Executive Summary (1-2 Pages)

This is the only section some loan officers will read in full. Make it count:

Business overview: What you do, for whom, and why it matters
Loan request: Specific amount and exactly how you will use it
Repayment ability: Brief explanation of how cash flow supports repayment
Key financials: Revenue, profit margin, years in business
Ownership: Who owns the business and their relevant experience

Write This Last

Write the executive summary after completing all other sections. It should summarize the full plan, which you cannot do until the plan exists.

Company Description

Provide context about your business:

Legal structure: Corporation, LLC, partnership, sole proprietorship
Location: Physical address and any additional locations
History: When founded, major milestones, growth trajectory
Products or services: What you sell, who buys it
Competitive advantage: Why customers choose you over alternatives
Industry: Market size, trends, your position within it

Use of Funds (Critical Section)

This is the most important section for lenders. Be specific about how you will use the loan:

Category	Amount	Purpose	Expected Impact
Equipment	$75,000	CNC machine for expanded capacity	Increase production 40%
Working capital	$35,000	Inventory for Q4 season	Support $200K in new orders
Marketing	$15,000	Digital advertising campaign	Target 25% revenue growth

Bad use of funds descriptions: "General business purposes" or "Working capital needs."

Good use of funds descriptions: Specific amounts tied to specific purchases with expected returns.

Be Honest About Use of Funds

Lenders verify how funds are used after disbursement. Misrepresenting use of funds can trigger default and damage future borrowing ability.

Management Team

Lenders bet on people as much as businesses. Highlight relevant experience:

Owner backgrounds: Education, relevant work history, industry experience
Key employees: Critical roles and who fills them
Gaps: Be honest about areas where you need to add talent
Advisory support: Accountants, attorneys, industry advisors

Market Analysis (Keep It Practical)

Lenders want to know your market is viable, not read a dissertation. Cover:

Target customers: Who they are, where they are, how you reach them
Market size: Realistic addressable market (not "everyone"))
Competition: Who else does what you do and how you differentiate
Industry trends: Growth, decline, or stability in your sector

Financial Projections (The Heart of Your Plan)

Financial projections make or break loan applications. Lenders use them to stress-test your repayment ability.

Income statement projection: 3-5 years, monthly for Year 1
Cash flow projection: Shows when money comes in and goes out
Balance sheet projection: Assets, liabilities, equity over time
Break-even analysis: When revenue covers all costs
Loan payment schedule: How payments fit into your cash flow

Rules for credible projections:

Base them on history: Growth rates should align with past performance
Be conservative: Optimistic projections hurt credibility
Show your assumptions: "Revenue grows 15% based on new equipment capacity"
Include sensitivity analysis: What if revenue is 20% lower than projected?
Account for the loan payment: Show cash flow after debt service

Conservative Projections Win

Projections showing 10-15% growth are more credible than "hockey stick" projections showing 50%+ growth. Lenders have seen thousands of plans. They know what realistic looks like.

Debt Service Coverage Ratio

Include a specific section showing how you will service the debt:

Metric	Current	Projected (Year 1)	Projected (Year 2)
Net Operating Income	$180,000	$210,000	$240,000
Existing Debt Service	$24,000	$24,000	$24,000
Proposed Loan Payment	-	$42,000	$42,000
Total Debt Service	$24,000	$66,000	$66,000
DSCR	7.5x	3.18x	3.64x

Supporting Documents

Include these as appendices:

Historical financial statements: Last 2-3 years of actual results
Tax returns: Support the numbers in your financials
Equipment quotes: If purchasing equipment with the loan
Letters of intent: From customers committing to purchases
Contracts: Existing agreements that demonstrate future revenue
Resumes: For all key owners and managers

Common Business Plan Mistakes

Avoid these errors that kill loan applications:

Unrealistic projections: "We will 5x revenue in 18 months"
Missing use of funds: Vague descriptions of how money will be spent
Ignoring competition: Claiming you have no competitors
Inconsistent numbers: Projections that do not match historical trends
Too long: 50-page plans are not better than 15-page plans
Poor formatting: Hard to read, disorganized, unprofessional appearance
No contingency planning: What if things go wrong?

Business Plan Length Guidelines

Keep it focused:

Loan Amount	Recommended Length
Under $150K	8-12 pages
$150K-$500K	12-20 pages
$500K-$1M	20-30 pages
Over $1M	25-40 pages

Quality Over Quantity

A tight 15-page plan beats a rambling 40-page plan every time. Loan officers are busy. Respect their time with concise, relevant information.

Template Structure

Use this structure as a starting point:

1. Executive Summary (1-2 pages)
2. Company Description (1-2 pages)
3. Products/Services (1-2 pages)
4. Market Analysis (2-3 pages)
5. Management Team (1-2 pages)
6. Use of Funds (1 page)
7. Financial Projections (3-5 pages)
8. Repayment Analysis (1 page)
9. Appendices (as needed)

Getting Help with Your Business Plan

Free resources for business plan development:

SCORE: Free mentoring from experienced business professionals (score.org)
SBA Resource Partners: SBDCs offer free consulting in every state
Local community colleges: Often have small business programs
Industry associations: May have templates specific to your sector

If you hire help, expect to pay $1,500-$5,000 for a professionally written business plan. For larger loan amounts, this investment often pays for itself through higher approval rates.