Monday, 13 June 2011

What do lenders want to see in your business plan?

What would you want to know if someone you didn't know asked you to lend them a large sum of money?  Probably you'd want to know a) the likelihood of getting your money back and b) the return (profit) you would make.

Your business plan is the story that provides this information to your potential lender.  I'm using the term "story" in the sense that it needs to be an interesting, rational and coherent explanation of what is going to happen - not in the sense of a fable.  The first person you must convince with your business plan is you; if you can't do this, or can't be bothered to, then take my advice - don't borrow any money.

Banks have money to lend, and want to lend it - but only to businesses that they believe will be able to pay it back.  In addition to the basic elements of a business plan (see previous blogs), lenders and investors want to see:

- A description of your management team - experience in the company and the industry, achievements & responsibilities;
- For an investor:  The required investment and the % shareholding offered, existing shareholdings and shareholder agreement;
- For a lender:  The required loan, the proportion of forecast profit the repayments will represent and any existing loans, mortgages or charges, the value of assets in the business

If you'd like to know more about developing a business plan then this event is for you.

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