do you need a business plan to apply for a business loan

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Why Do I Need a Business Plan?

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How to Write a Business Plan for a Loan

How to secure business financing

Matt Webber is an experienced personal finance writer, researcher, and editor. He has published widely on personal finance, marketing, and the impact of technology on contemporary arts and culture.

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A business plan is a document that explains what a company’s objectives are and how it will achieve them. It contains a road map for the company from a marketing, financial, and operational standpoint. Some business plans are more detailed than others, but they are used by all types of businesses, from large, established companies to small startups.

If you are applying for a business loan , your lender may want to see your business plan. Your plan can prove that you understand your market and your business model and that you are realistic about your goals. Even if you don’t need a business plan to apply for a loan, writing one can improve your chances of securing finance.

Key Takeaways

• Many lenders will require you to write a business plan to support your loan application.
• Though every business plan is different, there are a number of sections that appear in every business plan.
• A good business plan will define your company’s strategic priorities for the coming years and explain how you will try to achieve growth.
• Lenders will assess your plan against the “five Cs”: character, capacity, capital, conditions, and collateral.

There are many reasons why all businesses should have a business plan . A business plan can improve the way that your company operates, but a well-written plan is also invaluable for attracting investment.

On an operational level, a well-written business plan has several advantages. A good plan will explain how a company is going to develop over time and will lay out the risks and contingencies that it may encounter along the way.

A business plan can act as a valuable strategic guide, reminding executives of their long-term goals amid the chaos of day-to-day business. It also allows businesses to measure their own success—without a plan, it can be difficult to determine whether a business is moving in the right direction.

A business plan is also valuable when it comes to dealing with external organizations. Indeed, banks and venture capital firms often require a viable business plan before considering whether they’ll provide capital to new businesses.

Even if a business is well-established, lenders may want to see a solid business plan before providing financing. Lenders want to reduce their risk, so they want to see that a business has a serious and realistic plan in place to generate income and repay the loan.

Every business is different, and so is every business plan. Nevertheless, most business plans contain a number of generic sections. Common sections are: executive summary, company overview, products and services, market analysis, marketing and sales plan, operational plan, and management team. If you are applying for a loan, you should also include a funding request and financial statements.

Let’s look at each section in more detail.

Executive Summary

The executive summary is a summary of the information in the rest of your business plan, but it’s also where you can create interest in your business.

You should include basic information about your business, including what you do, where you are based, your products, and how long you’ve been in business. You can also mention what inspired you to start your business, your key successes so far, and your growth plans.

Company Overview

In this section, focus on the core strengths of your business, the problem you want to solve, and how you plan to address it.

Here, you should also mention any key advantages that your business has over your competitors, whether this is operating in a new market or a unique approach to an existing one. You should also include key statistics in this section, such as your annual turnover and number of employees.

Products and Services

In this section, provide some details of what you sell. A lender doesn’t need to know all the technical details of your products but will want to see that they are desirable.

You can also include information on how you make your products, or how you provide your services. This information will be useful to a lender if you are looking for financing to grow your business.

Market Analysis

A market analysis is a core section of your business plan. Here, you need to demonstrate that you understand the market you are operating in, and how you are different from your competitors. If you can find statistics on your market, and particularly on how it is projected to grow over the next few years, put them in this section.

Marketing and Sales Plan

Your marketing and sales plan gives details on what kind of new customers you are looking to attract, and how you are going to connect with them. This section should contain your sales goals and link these to marketing or advertising that you are planning.

If you are looking to expand into a new market, or to reach customers that you haven’t before, you should explain the risks and opportunities of doing so.

Operational Plan

This section explains the basic requirements of running your business on a day-to-day basis. Your exact requirements will vary depending on the type of business you run, but be as specific as possible.

If you need to rent office space, for example, you should include the cost in your operational plan. You should also include the cost of staff, equipment, and any raw materials required to run your business.

Management Team

The management team section is one of the most important sections in your business plan if you are applying for a loan. Your lender will want reassurance that you have a skilled, experienced, competent, and reliable senior management team in place.

Even if you have a small team, you should explain what makes each person qualified for their position. If you have a large team, you should include an organizational chart to explain how your team is structured.

Funding Request

If you are applying for a loan, you should add a funding request. This is where you explain how much money you are looking to borrow, and explain in detail how you are going to use it.

The most important part of the funding-request section is to explain how the loan you are asking for would improve the profitability of your business, and therefore allow you to repay your loan.

Financial Statements

Most lenders will also ask you to provide evidence of your business finances as part of your application. Graphs and charts are often a useful addition to this section, because they allow your lender to understand your finances at a glance.

The overall goal of providing financial statements is to show that your business is profitable and stable. Include three to five years of income statements, cash flow statements, and balance sheets. It can also be useful to provide further analysis, as well as projections of how your business will grow in the coming years.

What Do Lenders Look for in a Business Plan?

Lenders want to see that your business is stable, that you understand the market you are operating in, and that you have realistic plans for growth.

Your lender will base their decision on what are known as the “five Cs.” These are:

• Character : You can stress your good character in your executive summary, company overview, and your management team section.
• Capacity : This is, essentially, your ability to repay the loan. Your lender will look at your growth plans, your funding request, and your financial statements in order to assess this.
• Capital : This is the amount of money you already have in your business. The larger and more established your business is, the more likely you are to be approved for finance, so highlight your capital throughout your business plan.
• Conditions : Conditions refer to market conditions. In your market analysis, you should be able to prove that your business is well-positioned in relation to your target market and competitors.
• Collateral : Depending on your loan, you may be asked to provide collateral , so you should provide information on the assets you own in your operational plan.

How Long Does It Take to Write a Business Plan?

The length of time it takes to write a business plan depends on your business, but you should take your time to ensure it is thorough and correct. A business plan has advantages beyond applying for a loan, providing a strategic focus for your business.

What Should You Avoid When Writing a Business Plan?

The most common mistake that business owners make when writing a business plan is to be unrealistic about their growth potential. Your lender is likely to spot overly optimistic growth projections, so try to keep it reasonable.

Should I Hire Someone to Write a Business Plan for My Business?

You can hire someone to write a business plan for your business, but it can often be better to write it yourself. You are likely to understand your business better than an external consultant.

Writing a business plan can benefit your business, whether you are applying for a loan or not. A good business plan can help you develop strategic priorities and stick to them. It describes how you are going to grow your business, which can be valuable to lenders, who will want to see that you are able to repay a loan that you are applying for.

U.S. Small Business Administration. “ Write Your Business Plan .”

U.S. Small Business Administration. “ Market Research and Competitive Analysis .”

U.S. Small Business Administration. “ Fund Your Business .”

Navy Federal Credit Union. “ The 5 Cs of Credit .”

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Home » Blog » Business Loans » How To Write A Business Plan For A Loan

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How To Write A Business Plan For A Loan

A solid business plan is often critical to securing funding for your small business. Learn how to create a business plan for a loan that includes the information lenders want to see.

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Lead Staff Writer

A business plan is a crucial business document you need to have on hand when applying for business loans. However, the mere thought of writing a business plan for a loan is intimidating to a lot of business owners.

A one-page business plan may be sufficient for certain types of small business loans (for example, online loans), but bank loans and SBA loans typically require a more in-depth business plan that delves further into your financials.

If you need to write a business plan for a loan, you’ve come to the right place. Keep reading to learn more about everything you need to include in your business plan to improve your chances for loan approval.

Table of Contents

What Is A Business Plan For A Loan?

10 key sections to include in your business plan, what do lenders look for in a business plan, business plan examples, resources for writing a business plan for a loan, final thoughts on writing a business plan for a loan, faqs about how to create a business plan for a loan.

A business plan is a written document that provides a complete overview of your business, including information about your business’s services, strategies, finances, and goals. All businesses should have a business plan, but a business plan is especially important when applying for a business loan .

Most business plans should include some version of the following sections. Depending on your industry and other factors, such as whether you own a startup or established business, some sections could be condensed or combined. The exact verbiage for section titles can vary, as well.

For a business plan that’s longer than one page, it’s a good idea to preface these sections with a cover page and table of contents.

Executive Summary

This section is a condensed version of your entire business plan. It will likely include:

• Details of when, how, and why you started your business
• Your company mission statements
• High-level financial information about your business
• An explanation of how funding will help your business

Depending on whether you’re a startup or an established business, you may use this section to focus on your growth strategy or your past successes.

Company Description

Use this section to delve deeper into your company’s offerings, core principles, legal structure, and leadership. Your company description should also include your unique value proposition . Describe your company’s unique strengths that will ensure your success.

Products & Services

This section should detail the products and/or services your company provides. Make clear the problem that your offerings solve. Include information such as:

• Information on your raw materials and production process (if applicable)
• Profit margins
• Whether you have or plan to file patents or copyrights

Market Analysis

Use this section to demonstrate your understanding of your overall industry and the specific markets you serve, including market trends, competitors, and the demographics of your target customers. Some companies hire a consultant or agency to perform the research for the market analysis section.

Marketing & Sales Plan

Building off your market analysis, how will you market to your target customers and beat your competitors? How will you sell to them and distribute your product? What are your sales goals and projections? Provide these details in this section.

Organization & Management

Use this section to include your organizational and leadership structure, ideally including an organizational flowchart. Also include job descriptions, qualifications, and years of experience to demonstrate why your team is capable of delivering on your company goals and is worthy of investment.

Operational Strategy

This section is used to describe your day-to-day operational processes, including information about your location, facility, equipment, inventory, and daily production. If you have a service-based business, this section may focus more on your team’s daily activities and how they contribute to long-term goals.

Financial Outlook

This section should tell lenders how much you spend and how much you make in profits. Include up to five years of data if possible, including financial documents such as:

• Income statements
• Cash flow statements
• Balance sheets
• Capital expenditure budgets
• Sales forecasts
• Projected income statements
• Information on any collateral you have to secure the loan

Depending on how much financial documentation you have, you might refer to specific documents in this section and indicate that the full documents can be found in the Appendix section.

Though startups may not have all of this data, you can make projections based on monthly or quarterly data and industry averages.

Funding Request

Now that you’ve laid out your expenses and financial projections, it’s time to make your case for a loan. Be clear about how much money you need, how you will spend it, and how you will repay the loan. Be as detailed as possible.

In the Appendix, include any supporting documents, such as financial documents referred to in the Financial Outlook section. Some other types of documents you might include in this section are:

• Business licenses  or permits
• Credit reports
• Product photos
• Marketing materials
• Letter of intent to purchase business

If you know what lenders are looking for in a business plan for a loan, you will increase your chances of approval. Learn the five things lenders want to see in your business plan, followed by five tips to create a loan-worthy business plan.

The 5 Cs Of Credit

The Five Cs of Credit is a phrase that summarizes what lenders look for when deciding whether to extend a loan to a business. Lenders will, accordingly, look for the five Cs when reviewing the business plan in your loan application. The five Cs are:

• Character: Your knowledge, experience, and creditworthiness
• Capacity: Your ability to repay the loan
• Capital: How much you have already invested in your business
• Conditions: Your market viability, considering your industry as well as overall economic conditions
• Collateral: Assets you can use to secure the loan

5 Business Plan Tips For Loan Approval

Besides emphasizing your “5 Cs,” there are a few other things you can do to make the best impression with your business plan to increase your chances of securing funding.

• Avoid Industry Jargon: Use plain English rather than industry terminology that the lender might not be familiar with. Remember that the loan underwriter may not have deep knowledge of your specific industry.
• Show Cash Flow: Cash flow is one of the most important factors that determine loan eligibility. You can even get a loan with bad credit as long as your cash flow is sufficiently high. The more insight you can provide into your past, current, and future cash flow, the better.
• Show Your Investment: Before extending a loan, the lender will want to see that you have already invested some of your own resources, such as personal savings, into your business. Be sure to include documentation that demonstrates your investment.
• Enlist Help: You will likely need some professional assistance in creating your business plan, whether that means hiring a writer, an industry consultant, or both. At the very least, you should have a third party review your business plan before you submit it as part of a loan application.
• Revise Your Plan As Needed: If this is the first time you’ve taken a close look at your business strategy and financials, you will surely learn some things about your business while creating your plan. For example, you may realize you cannot afford a business loan as large as you planned to ask for. Rather than trying to justify the number you started with, it’s better to modify your funding request (and other aspects of your plan) to align with your financial reality.

It’s easy to find templates and examples of business plans online. Though you may not want to copy and paste from a template verbatim, these samples provide a starting point and show you different ways a business plan can be structured. Here are a few to start with:

• Business plan template for a startup (from SCORE)
• Business plan template for traditional businesses  (from the SBA)
• Business plan template for retail or eCommerce (from Shopify; requires email address)

These tools and resources can help you create a solid business plan for a loan. While some free business plan creation tools are available online, you will have to pay for some options.

SBA Business Plan Resources (Free)

The SBA has a great resource in its online learning center that includes business plan worksheets . In addition to business plan templates, the SBA also helps you connect to free local business counselors who may be able to help you with your business plan.

Business Plan Software ($)

If you need extra help creating a business plan and don’t mind spending a little bit of money, consider business plan creation software. For example, LivePlan ($20/month) is business plan software that connects with QuickBooks to import your financial data to your plan.

Business Plan Writer/Consultant ($$$)

If you’re willing to invest more heavily into your business plan, consider hiring a writer or consultant that specializes in creating business plans. This option costs anywhere from $2,000 to $20,000, with the lower end of that scale typically including only basic writing services and the higher end representing a specialized industry consultant agency.

While it’s helpful to know how to write a business plan for a loan, you can always hire someone to help you draft the plan if the task is too daunting. A business plan is a worthwhile investment no matter what type of business you have or whether you are currently trying to secure business funding. Even if you don’t need a loan right now, it’s important to maintain an updated business plan to serve as a guide for your own business decisions.

Was your loan denied because of your business plan (or another reason)? Learn what to do if your business loan was denied .

Do you need a business plan to get a loan?

No, you do not always need a business plan to get a loan. Most traditional business lenders, including banks and SBA lenders, do require a business plan. However, a lot of online business lenders (such as OnDeck ) do not ask for a business plan.

How do you write a business plan for a bank loan?

To write a business plan for a bank loan, you first need to lay the groundwork by analyzing your business’s finances, strategies, and market conditions. Alternatively, you can hire someone to do this research for you. Once you have all this information, you can use a guide, template, or software to help you organize it into a business plan.

How do you write a business plan for an SBA loan?

To get an SBA loan, you will usually need a comprehensive business plan, including a detailed plan for how you intend to use the funds. On the SBA website, you can find general information about what to include in a business plan, or you can download a free business plan template. Some online SBA loan services, such as SmartBiz , do not require a business plan.

How long should a business plan be?

There is no set length for a business plan. A typical business plan used to secure financing might be 20-40 pages. A so-called “lean business plan” that serves as an internal company document for a small business may only be one or two pages.

Who writes business plans?

Business plans are often written by the business owners themselves, but you can also hire a freelance writer or consultant to write a business plan. A business plan writer will still need the business owner’s input (and access to the business’s financial documents or accounting software ) in order to prepare the plan.

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Home > Finance > Loans

6 Most Important Business Loan Requirements

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If it’s time to expand your business, you’ll need access to working capital to pay for new employees, office space, materials, equipment, marketing, and more. Not every aspiring business owner has the savings to get up and running. This is where business loans come in.

But like most good things, business loans don’t come easily. Unlike a personal loan , they involve more risk for the lender, resulting in stricter eligibility requirements. While many business owners want to obtain a business loan, they may be unsure if they meet the requirements. It doesn’t help that the internet is flooded with an overwhelming amount of information on small-business loan requirements.

To cut through the noise and help you secure financing for your business, we’ve combed through all the loan application requirements for business loans so you don’t have to.

Once you’ve finished writing a business plan with financial projections and ensured fiscal responsibility, it’s time to get funded. (Remember, success is in the details.)

When considering a borrower, lenders primarily look at six different aspects of the borrower’s profile—and they may set a minimum requirement for each. Baseline small-business loan requirements typically include a good credit rating and an annual income of at least $20,000 (if you’re new in the business, some lenders will go as low as $10,000). However, since exact requirements vary from lender to lender, we’ve reviewed an assortment of lenders who can work around your unique needs.

Business loan requirements

• Cash flow and income
• Age of business
• Current amount of debt
• Business plan

• Credit . When a small-business owner requests funding, lenders almost always check the owner’s personal credit. So having a good personal credit score is essential. Building great credit for the business itself is also very useful when trying to get a good business loan.
• Cash flow and income . Lenders look at the debt-to-income ratio of a business when assessing its risk. The higher a business’s cash flow and income, the better its chances of getting a loan.
• Age of business . New businesses often have difficulty getting funding because most lenders only lend to businesses with a track record of at least two years
• Current amount of debt . The other part of the debt-to-income ratio is debt. Businesses and borrowers with too much debt will have difficulty getting new loans.
• Collateral . Lenders view debt backed by things of value as less risky, so collateral-based loans can be easier to get and have lower interest rates.
• Industry . During the loan approval process, lenders assess the risk of your type of business. Some industries are easier to get loans in than others.
• Business plan . Though not always required, lenders are more likely to favor applicants who can share exactly how they're going to build their revenue by sharing their strategy and financial projections. 

What is a business loan?

Before we get into what you need to get a business loan, you should probably understand what a business loan really is. Like a regular loan, it is typically repaid with interest over a set period of time, with the terms and interest rate determined by the lender based on factors such as the borrower's creditworthiness and the purpose of the loan. But the loan is used to cover a wide array of different business needs, whether that's equipment, inventory, or just basic working capital. These different needs can sometimes determine the type of loan you'd want to apply for—which we'll get into below. 

Lendio partners with over 75 lenders, which improves your odds and efficiency to get the funding you need.

Qualifications:

$50k in revenue

6 mos. in business

560 credit score

Before we dive in, let’s clarify the most common types of loans for small business owners. Here’s our quick-and-dirty guide, but you can get more detail on our ultimate small-business loan page .

• Business lines of credit let you spend up to a certain amount and then only pay interest on the amount you actually spend.
• Equipment loans help you pay not just for heavy equipment but for any physical asset your business needs as part of its daily operations.
• Invoice factoring loans (a.k.a. accounts receivable financing) pay you the amount of your outstanding invoices. No more waiting on clients who are slow to pay up—the lender pays you the invoice amount (minus a fee), and then they collect from your clients so you can get back to business as usual.
• Merchant cash advances trade you a lump sum for a promised percentage of your future sales.
• Peer-to-peer lending is a relatively new platform that lets you borrow a certain amount of money from a group of investors, usually in an online-only format.
• SBA-backed loans are endorsed by the U.S. Small Business Administration, making them generally reliable and low-interest loans.
• Term loans can get you a lump cash sum within 24 hours—with the trade-off of high interest rates.
• Unsecured business loans are loans that don’t require collateral. Most business credit cards and lines of credit are unsecured loans.
• Working capital loans give you the funds to pay for daily operations, pay employees, and deal with temporary drops in profit.

A note about term lengths: short-term loans give you money to spend with the expectation that you’ll pay back the total amount, usually within 18 months (though the term depends on the lender—some loans have a longer term limit, some shorter).

Long-term financing is better for long-term investment in your business; while short-term loans can tide you over during a seasonal dip in sales or help you purchase a crucial piece of equipment, long-term financing solutions offer a larger chunk of cash to grow your business and profits.

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For business owners considering a business loan, sky-high interest rates can feel like a punch to the gut. However, the better your credit score, the more likely you’ll get a low rate on a loan.

Remember that lenders look at both personal and business credit scores and history. And because most small-business owners don’t have business credit, personal credit is a vital factor in determining your eligibility. You’ll need a credit score of at least 600 to acquire a business loan in most cases.

Credit score tier information

Under the Fair Credit Reporting Act, you are entitled to a free annual credit report from each of the three major credit bureaus: Equifax, Experian, and TransUnion. You can get all three together or space out your credit report requests over time.

Outside of the major credit bureaus, there are a lot of “free” credit reports and scores floating around. But unfortunately, lenders typically don't use these scores when making credit decisions. We recommend getting a personal FICO credit score, which you’ll have to pay for. The FICO scoring system is used by 90% or more of lenders, so this is the credit score that matters.

If you have a weak credit score and credit history, don’t sweat it too much. There are several types of bad credit loans for borrowers with less-than-stellar credit scores.

Types of loans at Lendio

Lendio , one of our favorite sources for business loans, requires borrowers to have a credit score of only 560 when applying for certain loans. It’s important to note that a 560 credit score is considered subprime, so most lenders will likely deny funding. But with Lendio, you can still get matched with lenient lenders.

If you have a solid credit score, we recommend the following funding options:

Data effective 3/24/23. At publishing time, amounts, rates, and requirements are current but are subject to change. Offers may not be available in all areas.

These loans are considered the holy grail of small-business loans thanks to their longer terms, great rates, and lower monthly payments. Mainly, keep an eye out for an SBA lender; loans backed by the U.S. Small Business Administration are easier to qualify for, and they often have low interest rates.

2. Cash flow and annual revenue

Cash flow can make or break your business. A steady and healthy stream of cash shows lenders that you’re capable of sustaining the loan payments. It’s essentially a representation of your business’s health.

In addition to annual revenue, lenders will most likely look at expenses to determine how profitable your business is. So if you’re new to business or lack sufficient cash flow, we urge you to explore our five favorite business loans for startups, where the annual revenue requirements range anywhere between $50,000 and $480,000.

If your company routinely deals with invoices, you’ve most likely experienced the headache of delayed payments. These unpaid invoices can seriously impact your company’s turnover or cash flow.

Fortunately, there’s a valuable financing option for business owners: invoice factoring . Commonly referred to as accounts receivable financing, invoice factoring is a financial transaction where a business sells their unpaid invoices to a third-party lender. So instead of waiting for your customers to pay their invoices, you’ll be provided with extra cash flow to help you achieve your business goals, meet payroll, and pay operating bills on time each month.

3. Age of business

About 20% of businesses fail within their first year. So it’s no wonder why most banks and online lenders require a minimum business age from borrowers. In most cases, the minimum business age requirement can range from six months to two years.

However, keep in mind that lenders look at how long the business bank accounts have been open, not how long the entity has been registered with the government.

Without two years of business history, you probably won’t get approval from traditional lenders and banks.

But have no fear—there are a variety of alternative online lenders that have more relaxed approval processes than traditional lenders, which makes them viable options for brand-new businesses or businesses with bad credit .

Age-of-business requirements for certain lenders

4. Current amount of debt

Next up, lenders look at debt-to-income ratio to measure the percentage of your monthly debt payments against your monthly gross income. Most lenders require a debt-to-income ratio of 50% or lower. As you may have guessed, small-business lenders are wary about lending to borrowers who already have other loans. To avoid the slippery slope of debt, create fail-proof payment plans and avoid high interest rates.

In addition to a debt-to-income ratio, lenders will want to see a balance sheet. This is a basic document that summarizes your business’s financial health, which includes assets, liabilities, and equity. Optimally, your total assets should equal the sum of all your liabilities and equity accounts. A balance sheet helps business owners determine if they can spend to grow or if they should reserve cash and save for a rainy day. While it may seem overwhelming, maintaining a balance sheet is crucial for every business. Plus, lenders will give your business bonus points if you come prepared with one.

To make your personal profile stronger, keep a low balance on credit cards and lines of credit (usually around 10% per account). A high credit card balance not only hurts your credit score but also impacts your personal financial health. So avoid spending mindlessly and racking up your credit card balance.

When companies lack a financial track record, lenders often require a personal guarantee from business owners. Even if you have an LLC or a C corporation, the lender can pursue you personally if you can’t repay the loan.

It’s important to note that not all debt is equal. For example, commercial real estate , lines of credit , business acquisition loans , and merchant cash advances all hold different weights with the lender. But if your debt is backed by assets, you’ll get approved more easily, no matter what kind of debt you have.

5. Collateral

For a loan approval, lenders may require collateral , such as invoices, equipment, real estate, and businesses—and the value of the item you collateralize will usually need to closely match the value of the loan. Believe it or not, business car loans can also require collateral. Collateral refers to tangible assets already owned by the business owner. Some lenders may require borrowers to pledge both business and personal assets to secure a business loan. We understand that this isn’t an ideal situation for startups. But we have good news: some business loans don’t require collateral. Certain business loans offer flexible term options and are easy to qualify for.

If you have to get into debt, be smart about it. When you can, use debt to buy income-generating assets. Creating multiple streams of income isn't just a means of survival, but it's also a strategy for building wealth. For example, when you buy an office complex or an existing business with a steady cash flow, your loan could and should pay for itself within a reasonable time frame. And smart management can increase the asset’s income even more.

Business loans that require collateral

6. Industry

The type of industry your business falls under can be a deciding factor for many lenders. And in some cases, they may lean away from certain industries that are considered risky―including businesses deemed to be socially undesirable or that have an unsteady cash flow tend to be rejected most.

For example, many lenders won’t offer loans to businesses in the marijuana, gambling, or adult entertainment industries.

But seasonal industries can run into trouble too. If you own a seasonal business, such as a golf course, landscaping company, or ice cream truck, you most likely understand the importance of ample cash flow to sustain your company during the off-season. Given the ups and downs of these types of businesses, getting approved for a business loan may prove difficult―but not impossible.

7. Business plan

Though this is not certainly a strict requirement for many loans—unlike revenue, time in business and creditworthiness—having a business plan at the ready during the loan application process can provide a ton of value (and instill confidence) for potential lenders.

This confidence is garnered through the lender's ability to gain clarity on your financial situation—past, present, and future. It also allows them to access the information they need to evaluate whether the financial projections you're making are accurate and achievable. They can do this by looking at the other information included in a business plan: your business strategy, market research, and overall goals and objectives. This will allow them to see if you've put in the planning and research needed to ensure your business is a success, and ultimately, profitable.

Now that you know what most lenders require, what comes next? We recommend taking these steps to help you secure the loan you need.

• Check your credit score using AnnualCreditReport.com .
• Find a loan provider that matches your credit score, annual income, and industry.
• Decide if you’re okay with collateral; if not, look only at unsecured loans .
• Assemble documents like bank statements, balance sheets, tax returns, and your business license.
• Create or polish an existing business plan.
• Calculate your origination fee, or what you’ll spend upfront to secure a loan.

Most lenders require an origination fee, which is a certain percentage of the total loan that pays the lender for assembling the loan in the first place. Think of it as a down payment; usually, an origination fee is 0.5% to 1% of the total loan amount.

Following these steps will help you approach your lender with more confidence—and remove surprises, financial or otherwise, from the equation.

More options: Credit cards vs. small-business loans

Do you need quick, convenient cash? Maybe in the hundreds instead of the thousands? Business credit cards have some of the same perks as personal cards: they give you instant cash to fund smaller projects (though we probably shouldn’t say “cash”—consider it a loan with an earlier repayment date and a potentially higher interest rate). They can also be useful if you want to build your business’s credit score so you can apply for a loan with better terms later on.

Of course, business credit cards have the same drawbacks as personal cards too. The temptation to keep racking up credit card debt can put your business in the red—permanently. Only use a business credit card for charges you can pay off before the next billing cycle, and remember what we said above about debt ratio: a business credit card can up your credit score, but it can also up your debt-to-income ratio.

Consider a business credit card instead of a loan if you need a smaller amount of cash that you can pay off before each credit card bill is due.

Good for: Small projects Building business credit

Bad for: Full business funding Increased debt-to-income ratio

Enter your loan needs and qualifications to get matched with a list of lenders best suited to you. Then, sort by the financing factor that you find most important. (Note: not all lenders allow personal loans for business use.)

The takeaway

There’s no one-size-fits-all answer when it comes to qualifying for a business loan. While you might think you need a perfect credit score and high annual income to get the best small-business loan, most lenders take a number of factors into consideration—if you’re lacking in one area, like a low credit score, you may be able to secure a loan through the strength of other areas, like a lower level of existing debt.

And with proper preparation and smart financial decisions, you can increase your chances of quick business loan approval.

The loan requirements above don’t just determine if you get approved for a loan―they can determine your interest rate too. Learn more in our guide to business loan rates.

Related reading

• Business Loan Calculator

Best Small Business Loans

• How Credit Scores Affect Small-Business Loans
• Best Small-Business Credit Cards of 2023
• Best Startup Business Line of Credit 2023

Business loan requirements FAQ

Traditional banks will have much higher requirements than online or alternative lenders, however, the same information will be looked at. This will include your personal credit score, business credit score (if you have one), time in business, tax return, EIN, proof of collateral, incorporation documents, bank statements, a business plan, and more.

The 5 C's of lending are: character, capacity, capital, collateral and condition.

Yes, it is possible, but you will have the most luck with a financing option that doesn't have a credit score requirement (or has a very low one)—like merchant cash advances or invoice factoring. 

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How to Write a Business Plan for a Loan

Business plans are often required when applying for funds from venture capitalists or other private investors, but even if you are seeking a bank loan for your company it is very helpful to prepare one since the lender wants to be confident that he is taking on an investment with growth potential so that you can repay the loan.

In this article, you will learn about the types of business loans, the importance of the business plan in your application for a loan, and how to write a business plan that will help you get the funding you need for your company.

Download our Ultimate Business Plan Template here

What Is a Business Loan?

A business loan is funding that is provided by a financial institution to a company for it to carry out its day-to-day operational activities. It also supports the purchase of equipment, refinancing of debt, and other purposes. Small businesses might need these loans because they may not have enough funds to buy equipment, refinance debt, or because they encounter financial difficulties.  

Your Loan Application

You can apply for a commercial loan with your local bank, credit union, Small Business Administration (SBA) lender, or community development financial institution like Capital Impact. You should expect that the lender will ask you detailed questions about all aspects of your business to ensure that he or she is lending you money that will be repaid.

In addition, if you are looking to purchase a business or commercial real estate, the lender may ask for additional information and documentation to assess your qualifications and ability to repay the loan.

Before applying for a business loan it can be helpful to research different types of loans so you understand what is available and what you will need to pay attention to in your loan proposal.

Common Types of Business Loans

There are many types of loans for small businesses, including:

• lines of credit
• commercial mortgages
• equipment financing

Contact different lenders in your area to see what kind of loan terms they offer and if their interest rates are within your budget.

What is a Business Plan?

A traditional business plan is a document that provides an analysis of the present situation and future financial projections for a company. It includes details about the owners, management team, customers, location of the business, finances, marketing plan, and other information.

A comprehensive and well-researched business plan will help lenders make informed decisions about providing a loan for your business.

To help you get started, you can download our sample business plan for bank loan pdf .

Why Do You Need a Business Plan to Get a Business Loan?

A loan proposal business plan is your opportunity to show the lender you understand your business, its capabilities, and how it operates within the industry in which it competes. By putting together a clear and concise document that outlines all of this information, the lender should have a much easier time understanding how you have arrived at your numbers and where you are going in the future.

A business plan is also helpful to the lender because it provides an opportunity for him or her to ask you questions, further clarifying details that might not be clear from your application materials alone. This way the lender can walk away from the meeting with a good understanding of what he or she is loaning money to and how likely it is he or she will see the loan repaid.

How to Write a Business Plan to Get Approved for a Loan

Different lenders may ask for different sections of your business plan, but most require some combination of the following key elements.

1. Executive Summary

The Executive Summary is the first section of your business plan that a lender will read, but typically the last section written. It is very important because it acts as a snapshot of your business plan and allows the person reading to get an overview of what you are proposing.

The summary should include:

• A statement about why you need the business loan
• Details on how much money you want to borrow, when you will repay it, and interest rates
• A description of how the proceeds from the loan will be used
• Your business’s historical and projected financial information (again)
• The expected impact on your company and the industry as a whole if you are successful.

2. Company Description

In the Company Description, you should include basic facts about your company such as:

• What is the business structure (corporation, partnership, limited liability company (LLC), etc.)?
• How long has your company been in operation?
• What is the size of your workforce?
• What accomplishments or milestones have you achieved within the last year?

This section should also include information about your future business plans.

• How do you plan to expand, if at all?
• Who are your main competitors and how is your company different from them?
• What changes will you make to excel against these competitors?

3. Industry Analysis

In the Industry or Market Analysis, you should include information about your industry in general.

• What are the strengths and weaknesses of your industry?
• How will your company compete in it?
• What trends within the industry affect its future success or potential struggles?

You may also include information about your specific niche in the market. If your company operates in a very specific area of the industry, be sure to highlight it.

4. Customer Analysis

The Customer Analysis section of your business plan helps a lender understand who your customers are and why they will buy from you.

In this section, you should include information on the following:

• Your target audience and the individual customer segments
• How many potential customers you have within your target market
• How much your customers typically spend, and how much you expect them to spend in the future
• What has caused these changes or trends to occur and how they will impact your business

5. Competitive Analysis

This section should show the competitive landscape and how you plan to compete against your competitors.

• What are their strengths?
• Where do they fall short?
• What changes will you implement to get ahead of them?
• What are your company’s competitive advantages over these competitors?

6. Marketing Plan

This section should include a detailed description of the marketing strategy you plan to implement.

• What is your customer acquisition cost? How much will it cost you to bring in one new customer?
• How will you reach these potential customers? Be specific about your marketing strategy, advertising methods and costs.
• Who is responsible for implementing each part of the marketing plan and how much it is expected to cost?

7. Operations Plan

Your Operations Analysis should describe the way your company currently operates and how it will operate with the help of the loan.

• What are your company’s strengths? Weaknesses?
• What have you implemented in the past 12 months that has led to increased revenue, decreased costs, or improved efficiency?
• How will you continue to operate efficiently with the proceeds?

8. Management Team

In the management section, you should describe your business in terms of its personnel structure.

• What are the responsibilities of each person on your team?
• Who are they? What are their qualifications?
• How will their roles change when you receive the loan proceeds?

9. Financial Plan

This section should include your company’s financial statements include the projected income statements, projected balance sheet, and cash flow statements for the next 3 – 5 years.

You can assume that you will receive loan proceeds in 20XX, so plan accordingly.

Include a five-year break-even analysis and an explanation of how you arrived at your income statement and cash flow projections. Don’t forget to include interest and loan payments in your financial projections.

10. Appendix

In this section, you will include the supporting documents for the claims within your business plan. This section should include:

• A loan agreement
• A list of all applicable business licenses, permits, etc. that your company holds or has applied for

You may also include:

• An organizational chart for your company
• The resumes of the members of your management team
• The resumes of any employees who will be making a significant impact on your business with the loan money
• Copies of contracts, leases, and other agreements that are relevant to your business plan
• Complete financial statements and projections if you only include a summary in the Financial Plan section

These documents should be attached to your business plan in a separate file if they are not included and may need to be submitted with the final small business loan application.

Tips for Writing a Business Plan for a Loan

To have a successful business plan and loan application, you need to know exactly what information your loan officer is looking for and how to find it.

• Before you submit your application, be sure to carefully edit and proofread it for errors. Errors in a business plan may lead a lender to question your attention to detail, so make sure it is polished and error-free.
• Always be sure to include an executive summary of the main points of your plan at the beginning, as some loan officers may not read all of the details.
• Be sure to keep your tone professional and business-like.
• Include detailed financials, market analysis, and other crucial information.
• Remember that any omission or inaccuracies will be carefully scrutinized by a lending officer, so be sure you have all of the necessary documents before submission.
• Finally, remember that lenders often appreciate creativity and outside-the-box thinking when it comes to business plans, but don’t let it distract from the necessary information for your application.

Writing a good business plan is one of the most important and necessary steps toward securing a loan or other source of capital.

Use our proven business plan template provided below, and you’ll be able to give your lender all of the information they need to make an informed decision.

The key is to do it right. By following the steps outlined above and including all of the necessary documents (and editing/proofing your application), you should significantly improve your chance of securing a loan for your business.

How to Finish Your Business Plan in 1 Day!

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How to get a business loan from a bank

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Key takeways

• Compared to other types of lenders, banks may offer larger loan amounts and lower rates
• Banks typically require a credit score of at least 670 for a small business loan
• Bad credit and subprime borrowers may have better luck applying for a loan with online or alternative lenders

If your business is ready to grow, you may be considering applying for a small business loan at a bank. Many small business owners lean toward bank loans because they may offer larger amounts, lower rates and more hands-on support than online lenders.

According to the 2024 Report on Employer Firms from the Federal Reserve Banks, small businesses looking for financing were likelier to seek financing at a bank. Of the credit sources applicants applied to, 44 percent chose a large bank, while 28 percent chose a small bank.

Banks approve a majority of the loans applied for, but small banks are the most likely to approve you. According to the Federal Reserve’s Small Business Lending Survey , small banks approved 88 percent of applications in Q3 of 2023. Mid-sized banks approved 68 percent, and large banks approved about 52 percent.

As your business needs to meet certain requirements for a bank small business loan, you’ll want to find the right bank to be your lender. Here’s everything you need to know about how to get a business loan from a bank.

1. Check your business and personal credit scores

The bank will likely check your business credit score and the personal credit scores of any business owners when you apply for a loan. Because they will look into your credit, it’s a good idea to check your credit score ahead of time. Three main business credit bureaus assess your business credit: Dun & Bradstreet, Equifax and Experian.

If your score is too low, consider taking time to improve your credit score before applying for a business loan from a bank. You could consider opening a business credit card or secured line of credit to start building a positive payment history to boost your score.

Most lenders look at your FICO score to assess your personal credit history. Typically, banks like Wells Fargo set strict credit requirements to apply, usually requiring a FICO score of at least 670. However, online lenders may grant certain loan types to businesses with personal credit scores as low as 550.

You can also find banks with loan programs that don’t focus on credit scores and consider other factors to assess your creditworthiness. For example, Bank of America offers a cash-secured business line of credit that approves startup businesses as long as you can put down a $1,000 security deposit. Huntington Bank ’s Lift Local Business loan is another option that doesn’t solely focus on credit score.

2. Calculate how much money you need — and how much you can afford to repay

When you apply, the bank will want to know how much funding you want. Calculate your business needs to determine the right loan size.

Think about how much you can afford to repay as well. You will have a monthly payment until you pay off the loan, so you should be able to budget for the monthly payment each month from your business finances. The monthly payment will include both interest and principal payments.

3. Choose a loan type

There are many small business loan types . Research and choose the best option for your needs.

4. For secured loans, choose your collateral

Any secured loan requires collateral to back the loan. Term loans and credit lines often have both secured and unsecured options. Just be aware that unsecured loans often have higher interest rates.

SBA loans usually have specific collateral requirements, though small loans under $50,000 may not require collateral. Equipment and commercial real estate loans are usually backed by the equipment or real estate purchased.

Your lender may allow you to choose your collateral. You can use any business asset to back the loan — some will even let you use personal assets. It could be a vehicle, property, equipment, cash or investments.

It’s not always needed, but sometimes you may want to get the collateral appraised. If you are in the midst of a business merger, acquisition or bankruptcy, the value of the collateral you use may be debatable. An appraisal can help you get an accurate value for your collateral. In addition, certain SBA loans have specific appraisal requirements. You can talk to your lender to find out more about these. Lightbulb Bankrate insight When getting a small business loan from a bank, you may be required to sign a personal guarantee . This statement guarantees that you will repay the loan from personal assets if you default on the loan.

5. Compare lenders

It’s a good idea to consider multiple lenders when looking at bank business loans. You want to consider the lender requirements for a small business loan to make sure your business qualifies. You may also want to consider whether you want to work with a large national bank or a small bank.

Small banks offer more personalized service, which can help you get approved for a loan based on your character and relationship with the bank. Yet, large banks can often provide the most competitive rates and large loan amounts.

When comparing lenders, you’ll want to assess each lender and the features of the loan offered. Compare interest rates and any fees charged and repayment terms offered. Some lenders also offer discounts if you pay off the loan early.

• Bank of America
• Wells Fargo
• Live Oak Bank

6. Meet the requirements and prepare any documentation

Every bank lender sets its own requirements that you need to meet at a minimum in order to qualify for its loan. Bank lenders tend to keep stricter requirements than other types of lenders, such as fintech companies.

Lenders will look at your personal and business credit score, time in business and revenue. Bank lenders often require at least a 670 FICO score, 2 years in business and $150,000 to $250,000 in revenue annually. These factors assess whether your business can handle the loan payments.

Once you meet the bank’s minimum requirements, you can apply and send in the correct documentation. Each loan application will have different documentation requirements , but typically, you will need to fill out or provide the following:

Required documents

• Resume of all business owners
• Business plan
•  Bank statements
•  Income tax returns from the last three years
•  Business tax ID number
•  Financial statement
• Accounts receivable and accounts payable statements
• Collateral (if the loan is secured
• Business license and registration
• Any lease agreements the business has

7. Apply online or make an appointment

Once you’ve made all your preparations, you are ready to apply for a small business loan. Find out the best way to apply from your lender. You may be able to apply online, by phone or in person. Some lenders offer all of these options, while some may only offer one.

Before you start the application, it’s a good idea to review your documents. Make sure everything is there and scan for typos. If you apply in person, dress professionally to make a good impression. Be prepared to answer questions from the loan officer about your documents or application.

What to do if your bank loan is denied

Once you submit your application, you may get an answer immediately, or the lender may take some time to decide. Even if you did everything right, the answer could be no. If your business loan is denied , you can take a few steps to apply again and attempt to get approved.

First, think about asking the lender why they denied your application so you can build a better application the next time. Look for other lenders who have a similar loan offering and have minimum requirements that your business meets. For example, you could try to find a lender that approves businesses with little time in business if you’re a startup.

It can take a few tries to get a lender to approve your small business loan application. But if you’re persistent and willing to shop around with different lenders, you can find lenders willing to accept businesses with less-than-ideal finances. In some cases, you may need to look into alternative business loans rather than getting a loan from a traditional bank.

If you don’t qualify for a bank loan, consider:

• Business credit cards
• Business lines of credit
• Small business loans from alternative lenders  

Bottom line

Small business loans from a bank allow businesses to get the funds needed for expansion, working capital, equipment purchases, inventory management and more. Banks may offer larger amounts, lower rates and a more personalized lending experience than other lenders, but expect stringent eligibility requirements.

If applying for a small business loan at a bank doesn’t seem like the best fit for your business, exploring alternative options can be beneficial.

Frequently asked questions

What do i need to get a business loan from my bank, how easy is it to get a business loan from a bank, how much of a business loan will a bank give me.

Article sources

We use primary sources to support our work. Bankrate’s authors, reporters and editors are subject-matter experts who thoroughly fact-check editorial content to ensure the information you’re reading is accurate, timely and relevant.

2024 Report on Employer Firms: Findings from the 2022 Small Business Credit Survey . Fed Small Business. Accessed on March 20, 2024.

Small Business Lending Survey . Federal Reserve Bank of Kansas City. Accessed on March 12, 2024.

Related Articles

How to get a first-time business loan

Where to get a business loan

How to get a business loan in 6 steps

How to get a startup business loan: 5 steps

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How to Write a Professional Business Plan for a Loan

• March 27, 2024

11 Min Read

So, are you thinking of getting a loan or funding to start an exciting business journey?

That’s great! But before you go any further, it’s very important to have a solid business plan in place.

Well, we understand that creating a successful plan for a loan can be a daunting task. That’s why we’re here to help you!

This investment-ready business plan template for loans will help you include all the essential elements in your plan, from summarizing your business concept to projecting the financial data. It not only impresses business loan lenders but also sets the stage for success.

Ready to get started? Let’s first understand how business plans will help you with loan proposals.

How business plans help in loan applications?

A business plan is a professional document that serves as a written loan proposal if you want to secure a loan for capital investment. It details every aspect of your business, including its concept, goals, market opportunity, and financial data.

Whether you’re a new entrepreneur or a small business owner, you’ll need a well-prepared business plan. It helps you persuade potential investors or lenders of its viability and potential for success.

Here are a few primary reasons why business plans are necessary in loan applications:

It helps you showcase your vision

A well-written business plan communicates your business vision effectively and allows you to demonstrate your clarity of purpose and strategic direction. It offers lenders a compelling narrative of what your business is aimed for and how it will achieve its goals.

It helps you prove your financial feasibility

Well, lenders need assurance that they’re making a wise investment. A detailed business plan presents them with realistic financial projections, along with how your business will earn money and repay the loan. This infuses confidence in lenders and convinces them that your business is a safe bet.

It helps you mitigate potential risks

Once you start your business, it naturally involves fair enough risks. However, a good business plan clarifies that you’re aware of those challenges and have backup plans or strategies to mitigate them. This shows lenders that you’ve considered different situations and keep contingency plans in place.

It helps you demonstrate your preparedness

A business plan shows lenders that you’ve carefully outlined every aspect of your business—from conducting market analysis to predicting finances. It assures that you’re serious about your business and well-prepared to manage the ups and downs of starting a business.

In short, having a solid business plan can be the cornerstone of a successful loan application that explains your business idea and how you plan to utilize the loan money to get started.

Now that you know how business plans help in a loan application, it’s time to check out and understand the key elements of a business plan for a loan template.

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Key components of a successful business plan for a loan

1. executive summary.

An executive summary is the first section of the plan, providing a concise overview of the entire business plan.

Generally, it is written in the last, as it summarizes the most important components you mentioned in your plan.

Since the potential investors or lenders would read this section first, make sure that you keep it simple, crisp, and compelling to build their confidence in your business. Also, it should not be more than 1 or 2 pages.

You may write your executive summary with a precise explanation of your business concept, the type of business you operate, and its status.

Here are a few primary elements you must add to your summary:

• Your company’s mission statement
• The product or service you intend to offer
• Market Opportunity
• Management team’s background and experience
• Growth plans or long-term objectives
• Financial projections and funding needs

2. Company Overview

As you’ll give a brief introduction in the executive summary, this chapter will expand on it, providing an in-depth understanding of your business.

Company description includes all the business-related facts, such as the startup concept, vision-mission statements, company location, etc. Also, it explains the problems or challenges you aim to solve.

In addition to that, consider answering a few questions that would help lenders to grasp the significance of your business:

• What is the legal structure of your business?
• Who is the business owner?
• Do you have any business partners?
• Why did you start this business, and when it was founded?
• What are your business accomplishments to date?
• Who will get benefits from your company’s product or service?

Note that the company overview section can be regarded as your extended elevator pitch.

So, it’s a good opportunity to present your business’s specific details and structural aspects that the financing partner needs to know.

3. Market Analysis

The market analysis section provides readers with a deep understanding of the specific industry or market in which you plan to serve.

This seems unnecessary but serves different purposes. Those who are looking to fund a franchise business should do some serious work for this section, as lenders will review it very closely.

To carefully draft this section, you should conduct thorough market research and industry analysis to define your target customers, industry trends, market demand, and competitors.

This will demonstrate that you understand the market dynamics and validate the demand for your products or services.

Here are a few elements you should include in your market analysis section:

• Ideal target market
• Market size and growth potential
• Customer segments
• Competitive analysis
• Emerging trends
• Applicable government regulations

4. Product or Service Offerings

In this section, you may provide a detailed description of your products and service offerings, along with their features, benefits, and pricing structure.

It helps you highlight what your business offers to its ideal customers, how your offerings will satisfy their needs and explains the value proposition of your products or services.

You may consider including these points in the product or service section:

• A brief description of your product & service
• Pricing details
• Intellectual property, copyright, and patent filings
• Quality measures
• Any additional offerings

5. Sales and Marketing Strategies

Your marketing and sales plan elucidates how you intend to market your products or services in greater detail. It helps you outline the marketing and sales strategies you’ll use to attract and retain potential customers.

The primary goal is to give a flexible and practical marketing and sales strategy that persuades the lenders you know how to advertise or develop a public relations campaign to reach the company’s revenue goals.

For a well-crafted marketing plan, you might consider adding the following details in your plan:

• Your target audience and brand positioning
• Detailed marketing strategy
• Sales and marketing goals and KPIs
• Sales and marketing budgets
• Customer retention plan

While reviewing your loan application, lenders would like to know how you plan to make money and how you overcome marketing and sales challenges, so ensure that this strategy is always relevant.

6. Operations Plan

The operations plan section provides a clear picture of your company’s day-to-day operations and activities. It is a detailed-oriented section that outlines how you’ll manage to run your business smoothly.

Also, operational excellence is necessary to achieve your goals, satisfy client commitments, and maximize results. So, try to mention your operational intricacies and showcase efficient systems and processes.

Here are a list of details you must include in your operations plan:

• Staffing & training
• Operational processes
• Inventory needs and supplies
• facilities & technology
• Regulatory compliance

By offering insights into these operational aspects, this section helps you instill confidence in lenders about your ability to effectively handle and grow your company.

7. Management Team

Your management team section introduces the key individuals who are responsible for driving your business ahead.

It helps lenders easily understand your team’s roles & responsibilities, educational qualifications, industry experience, and how you plan to compensate your leadership team.

Even this will assure lenders that your team is capable enough to navigate challenges, make informed decisions, and reach strategic objectives. Also, they feel confident giving you a loan—even if it’s your startup.

So, you may consider including the below information:

• Company owner profile
• Resume-styled summary of key executives
• Organizational chart
• Compensation plan
• Details of advisory board members(if any)

8. Financial Plan

A well-written and comprehensive financial plan is one of the most crucial sections of your plan, as it helps you prove to lenders your business’s financial health, growth potential, and ability to repay the business loan.

So, your financial analysis must include the projected financial statements for three years or more. The following are the key financial projections that you should add:

• Income statements
• Cash flow statements
• Capital expenditure budgets
• Balance sheet
• Break-even analysis
• Funding requirements

As well as you should also list hard or soft collateral if you possess it so that you can put it up to get a loan. Even lenders may request to add more granular data(such as cost of sales or cost per product/service).

Note that if you’re a startup and don’t carry enough data to highlight, consider including estimated costs, revenue streams, and other strategic future projections you may have.

9. Appendix

The appendix is the last section of a professional business plan that typically provides supplementary information and other supporting documents the lender may need for better understanding.

You may include the following details in an appendix:

• Business licenses and permits
• Contractual agreements or other legal documents
• Letters of reference
• Credit histories and tax returns
• Key managers’ resumes and certificates
• Product photos

By adding these details, you offer more detailed explanations or validation for your business plan, strengthening your discussions and claims.

What factors do lenders look for in a business plan

When you submit a business plan to secure funding, lenders will analyze it to evaluate the viability and creditworthiness of your loan application. Here are several key factors they look for:

Character of your management team

Lenders will assess a business’ character that includes subjective or intangible qualities like whether its owners or key executives are perceived as honest, competent, or committed. Also, they consider educational background, industry experience, skills, leadership capabilities, and credit histories. This can be critical for evaluating prospects as most lenders don’t wish to lend to whom they don’t feel trustworthy.

Your capability to repay loans

Loan officers also spend a lot of time analyzing the borrower’s ability to repay the loan. They will thoroughly examine the financial statements such as projected revenue, expenses, cash flows, growth plans, and loan payments. Further, lenders analyze the financial history to see how much revenue you have generated or how much profit you have made in the past.

The capital amount you’re seeking

While reviewing loan applications, lenders will go through your financial information that highlights how much funding you’re seeking, how much cash you carry on hand, and how much debt you have. Also, they assess your personal financial investments as a sign of commitment and seriousness. So, make sure your business plan clearly outlines your investment amount and funding needs.

Collateral or personal guarantees

In some cases, lenders may request collateral or personal guarantees to secure the loan. Thus, you should document any assets or valuable items you can offer as collateral or additional security. Even lenders may still approve your loan without collateral if you have a good credit history and a reliable business plan.

By understanding these key considerations, you can prepare a business plan that resonates with the lender’s interests and concerns. Now, let’s move to a few business plan examples for a loan.

Business plan examples for a loan

When you’re just venturing into your entrepreneurship journey, crafting a comprehensive business plan for a loan application can be overwhelming.

So, try to consider some sample business plan templates or resources to get started on the first draft of your plan. Here are a few business plan examples that you may find helpful:

• Sample business plan outline
• Small business plan template
• Comprehensive business plan writing
• Business Plan Workbook for Loan Applications

Start preparing your business plan

Finally, you understand the importance and key elements of drafting a business plan for securing a loan or funding. But it requires some extra effort to find success down the road.

If you’re still confused about where to start, Upmetrics could be a great choice. It’s a modern business plan app that helps entrepreneurs or small business owners create an actionable plan quickly.

With Upmetrics, you’ll get easy-to-follow guides, a library of business plan templates , AI support, a financial forecasting tool, and other valuable resources to streamline your entire business planning approach.

So, don’t wait and start preparing your business plan for a loan!

Build your Business Plan Faster

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Frequently Asked Questions

Do i need a business plan to get a loan.

Of course, most lenders or financial institutes require a solid business plan, even if you are a well-established business. A well-crafted business plan helps you highlight every essential information about your business and demonstrate to lenders that you have a realistic plan in place to generate income and repay the loan.

Can I write a business plan myself?

Definitely, you can write a business plan by yourself. Also, you can get help from various resources available, including business plan templates and guides, to create a comprehensive plan. But, if you’re unsure or need assistance, you may consider having a business plan software or hiring a professional writer.

How long should my business plan be?

The length of your business plan should be concise and focused, typically depending on its purpose. A one-page business plan is a single-page document, a lean or mini business plan comprises 1–10 pages, while a comprehensive business plan can range from 15 to 35 pages and beyond.

What's the most important element of a loan-seeking business plan?

The financial plan is the most crucial element of a loan-seeking business plan, as lenders want to check realistic and well-structured financial forecasts that present your ability to repay the loan. Also, this section can make or break a lender’s confidence and willingness to raise capital.

What format should I use?

It’s essential to select a format that can effectively convey your business idea, strategy, and financial projections to the lenders. Following are a few common options to consider:

• Traditional text-based document
• PowerPoint or Keynote presentation deck
• Executive summary or a pitch deck

So, whatever format you choose, it should align with your preferences, the lender requirements, and the complexity of your business.

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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• Best Personal Loans

Best Small Business Loans of June 2024

Our Loans Expert

Small business loans can be a great way to get necessary funding for your business. However, there are a lot of factors that go into picking the best loan, from the rates and fees to the repayment structure. In this guide, we'll discuss the different types of business loans and what to look for when comparing options. We'll also provide some of our top picks to help you start your search.

Best for businesses with high incomes but low credit scores

Credibly offers a variety of financing types to businesses that may not otherwise qualify with another lender. They offer the financing both directly and through a network of lending partners.

• Loans available to business owners with less-than-perfect credit scores
• Loan officers that emphasize the importance of only borrowing what you need
• Five specific types of financing offered
• Fast approval and funding
• Daily, weekly, and monthly payment options
• High annual income requirement
• Startups typically don't qualify for funding
• Risk of losing collateral

Best for SBA loans and businesses that need in-person assistance

First citizens bank.

First Citizens Bank is an excellent small business lender with a wide variety of loan types, including all of the major SBA loans as well as some proprietary small business loan products. It has excellent customer service through its vast branch network, and could be a great fit for businesses located within the states where the bank operates.

• Variety of loan products
• Large branch network
• Highly rated customer service
• Application isn't fully online
• Branches are available in fewer than half of U.S. states

Best for established business owners with average credit who can't find cheaper financing

OnDeck offers short-term loans to established business owners with at least average credit, provided they can meet the revenue requirement. Repayment terms cap at 24 months and APRs are very high, so these loans are best for owners without cheaper options who can repay the loan quickly.

• Multiple loan types
• Accepts average credit scores
• No prepayment fee
• APRs are extremely high
• High revenue requirement
• Personal guarantee required

Best for well-qualified, established businesses

Funding circle.

Funding Circle pairs businesses that have been in business for at least two years with individual investors for term loans, lines of credit, and SBA loans. Eligible business must have at least fair credit, with a minimum accepted credit score of 660.

• Competitive rates for highly qualified borrowers
• Funding in as little as two business days
• Costly origination fees
• Businesses must be in operation for a minimum of two years
• Requires a lien on business
• Minimum credit score may be higher than some competitors

Best for business lines of credit

Bluevine specializes in business lines of credit that are easy to apply for, and also offers term loans through banking partners. It can be a great choice for businesses that can meet Bluevine's income requirements and want access to working capital as needed.

• Quick access to funds
• Easy application process
• Up to $250,000 in funding
• Short repayment terms
• Not for newer businesses

What is a business loan?

A business loan is an agreement between your business -- or you, as the owner of that business -- and a lender for an agreed-upon amount. The lender will give you the money, and in return, you agree to repay that money at specific intervals. You will likely also need to pay additional interest fees, based on an APR (annual percentage rate) disclosed during the application process.

Types of small-business loans

There are a variety of small business loan options depending on your needs and qualifications.

1. Term loan

The simplest form of small business loan is a term loan. Think of this as similar to a basic personal loan. You'll receive a set amount of money, and you'll need to repay it in regular, equal installments. Your interest rate will be set at the time of disbursement and your payments won't change for the duration of the loan. Once you repay the loan, you're done and the account is closed.

2. Line of credit

A line of credit is sort of like a reusable term loan, or perhaps like a credit card. You can draw on the line of credit, then repay the amount borrowed to free up funds. You can then draw on the line of credit again at a future date. Exactly how often or how much you can draw at a given time will vary by loan and lender.

3. SBA (Small Business Administration) loan

An SBA loan is a term loan guaranteed by the Small Business Administration and offered by various banks and lenders. SBA loans are good for lenders because the guarantee from the SBA reduces the risk; if you default on the loan, the lender doesn't lose as much money. SBA loans are also good for borrowers, since the reduced risk allows lenders to offer better rates, lower down payments, and more flexible requirements.

4. Equipment loan

Business owners who specifically need a loan to purchase new equipment may want to look into dedicated equipment loans. These loans are typically structured like a regular term loan, except the equipment you buy will act as collateral for the loan . This often means lower rates and fees, though a down payment may still be required in some cases.

How to choose a small business loan

Here are a few factors to consider when deciding on a business loan:

• Structure: Do you want a one-time loan or a recurring line of credit? What type of collateral, if any, do you want to put up? Are you willing to personally guarantee the loan? All of these questions will factor into which type of business loan you choose.
• Repayment: Each loan and lender will have its own repayment structure. You may need to make daily or weekly payments, or get away with monthly ones. Consider how often you want to make payments before choosing a loan.
• Cost: Interest rates and other fees can all impact the cost of a loan. These costs will depend not only on the type of loan you choose, but on the specific lender, your credit history, and even your business's revenue. It's best to compare multiple loan offers to ensure you get the most affordable loan.
• Timing: When you urgently need a loan, you may be more concerned with how quickly you can get funding over other factors. Just make sure you aren't letting haste lead you into a bad deal.

Alternative business funding options

If a small business loan isn't right for your company, consider these other ways to finance your business.

Small business credit cards

I love using small business credit cards as a source of short-term funding for three reasons:

• It can be free. If you pay off your balance in full before the due date, most cards won't charge you interest. If you need to carry a balance, you can get a card with an intro 0% APR deal to avoid interest fees on that balance, too.
• They're reusable. Credit cards are like a line of credit; as long as you keep paying them off, you can use them again and again. In fact, using and paying off your card on time every month is a great way to build credit.
• You can earn rewards. When the business budget is tight, earning that 2% to 5% cash back on your big expenses can go a long way.

Check out our best small business credit cards to find the right fit for your business.

Outside investors

Many businesses grow with the help of financing from investors. This could be as simple as taking on a business partner, or as complex as finding an angel investor or venture capitalist. Just keep in mind that most investors will want some sort of say in how your business is run. At the very least, you'll need to repay your investors with regular dividends or a percentage of your revenue.

Fundraising and crowdsourcing

Plenty of small businesses get off the ground with a little help from friends and family. (If you're not going to pay that help back, then they're donors, not investors.) In today's digital age, you can also look for donations from the world at large on a crowdsourcing platform like Kickstarter or Indiegogo.

Personal loans

If your business revenue isn't great but your personal credit is , you could potentially qualify for a personal loan even if a small business loan isn't an option. Most personal loans are term loans that typically range from 24 to 60 months, though shorter and longer loans are available. Interest rates will depend heavily on your credit and income.

Merchant cash advance (MCA)

A merchant cash advance is very similar to a personal cash advance. It's an extremely expensive type of short-term financing that promises a portion of your sales revenue as repayment. The pro of this type of financing is that your personal credit isn't much of a factor. The downside is that your interest rates can easily hit triple digits. This should be considered last-resort funding, and only if you have absolutely zero other options.

Fees and terms you can typically expect

The terms and fees you get with your loan will depend on a lot of factors. However, here are some general points to consider when comparing your options.

Fees to watch out for

• Origination fee: Many loans, especially term loans, come with an origination fee . It's generally considered to be for the administrative costs of the loan. Not all loans charge this fee.
• Interest fee: The main fee you'll pay on any loan is the interest fee. This will depend on your interest rate. The higher the interest rate, the more fees you'll pay.
• Factor rate: Some financing products, like MCAs, don't provide an interest rate. Instead, they provide the factor rate. Multiplying the factor rate with the principal amount tells you the total you'll need to pay back. From there, you (or an online calculator) can determine your APR.
• Prepayment fee: Some lenders may charge you a penalty fee for paying off your loan early. That's because paying your loan off early usually cuts down on how much interest you pay overall.
• Application fee: This isn't a super common fee, but a few lenders may charge a fee just to apply for a loan. (I'd personally avoid these lenders.)

Figuring out your repayment terms

Broadly, the loan terms are all the terms and conditions that apply to your loan agreement. More specifically, we usually use the phrase to refer to the repayment terms, including the APR and payment frequency.

How long you have to repay your loan will vary based on a lot of factors, starting with the type of loan. An SBA loan could have a long repayment term of 10 years or more. Many small business term loans will have shorter repayment periods of around two years. A line of credit could have an even shorter repayment period of a year or less.

Your business loan agreement will spell out all of the repayment terms. Be sure to read through it carefully. You want to pay attention not just to your payments or how long the loan will last, but also to your total overall payment and your total interest.

What you need to apply for a small business loan

The specifics of a loan application will depend on the kind of loan. In general, though, you'll need this information:

• Owners' personal information: If you're the only business owner, then you just need your personal info. If there are multiple owners, the lender may want everyone on the application. In many cases, the owner will need to undergo a personal credit check.
• Business tax ID number: Depending on the structure of your business, this may be your EIN (Employer Identification Number) or your personal Social Security number (if you're a sole proprietor).
• Business checking account info: The money you borrow will need to be deposited into a business checking account . Most lenders will also require payments to be made via debit card or ACH transfer from a small business bank account.

Business banking statements: You may need at least three months' worth of bank statements to prove your company's annual revenue. Depending on your business and the lender, you may require more in-depth profit-and-loss documentation.

Top picks for best small business loans

• Businesses with high incomes but low credit scores: Credibly
• SBA loans and businesses that need in-person assistance: First Citizens Bank
• Established business owners with average credit who can't find cheaper financing: OnDeck
• Well-qualified, established businesses: Funding Circle
• Business lines of credit: Bluevine

Brittney started her writing career in the world of science, putting her physics degree to good use. Her journey into finance started with building her personal credit, but soon grew into a borderline obsession with credit cards and travel rewards. For the last 7 years, she has enjoyed the ability to share her expertise with readers, as well as the opportunity to interview companies and individuals making an impact on our financial lives. She wholly believe most problems can be solved with the right research -- and a good spreadsheet -- and she specializes in translating complex financial topics into actionable advice to help educate and empower readers.

We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. The Ascent has a dedicated team of editors and analysts focused on personal finance, and they follow the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.

The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.

Copyright © 2018 - 2024 The Ascent. All rights reserved.

Use This Simple Business Plan Outline to Organize Your Plan

12 min. read

Updated April 10, 2024

When starting a business, having a well-thought-out business plan prepared is necessary for success . It helps guide your strategy and prepares you to overcome the obstacles and risks associated with entrepreneurship. In short, a business plan makes you more likely to succeed.

However, like everything in business, starting is often the hardest part. What information do you need? How in-depth should each section be? How should the plan be structured?

All good questions that you can answer by following this business plan outline. 

• What is a business plan outline?

A business plan outline is similar to most business plan templates . It lists the common sections that all business plans should include.

A traditional business plan typically includes an executive summary, an overview of your products and services, thorough market research, a competitive analysis, a marketing and sales strategy, operational and company details, financial projections, and an appendix. 

• Why is a business plan outline important?

Starting with a business plan outline helps ensure that you’re including all of the necessary information for a complete business plan. 

But, depending on what you intend to do with your plan, you may not need all of this information right away. If you’re going to speak with investors or pursue funding, then yes, you’ll need to include everything from this outline.

But, if you’re using your plan to test an idea or help run your business, you may want to opt for a one-page plan . This is a simpler and faster method that is designed to be updated and used day-to-day. 

If you’re unsure of which plan is right for you, check out our guide explaining the differences and use cases for each plan type . 

• 10 key sections in a standard business plan outline

No matter the type of business plan you create, these are the ten basic sections you should include. Be sure to download your free business plan template to start drafting your own plan as you work through this outline.

1. Executive summary

While it may appear first, it’s best to write your executive summary last. It’s a brief section that highlights the high-level points you’ve made elsewhere in your business plan.

Summarize the problem you are solving for customers, your solution, the target market, your team that’s building the business, and financial forecast highlights. Keep things as brief as possible and entice your audience to learn more about your company. 

Keep in mind, this is the first impression your plan and business will make. After looking over your executive summary, your reader is either going to throw your business plan away or keep reading. So make sure you spend the time to get it just right.

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2. Products and services

Start the products and services section of your business plan by describing the problem you are solving for your customer. Next, describe how you solve that problem with your product or service. 

If you’ve already made some headway selling your solution, detail that progress here—this is called “traction”. You can also describe any intellectual property or patents that you have if that’s an important part of your business.

3. Market analysis 

You need to know your target market —the types of customers you are looking for—and how it’s changing.

Use the market analysis section of your business plan to discuss the size of your market—how many potential customers exist for your business—and if your potential customers can be segmented into different groups, such as age groups or some other demographic.

4. Competition

Describe your competition in this section. If you don’t have any direct competitors, describe what your customers currently do to solve the problem that your product fixes. 

If you have direct competition, detail what your strengths and weaknesses are in comparison, and how you’ll differentiate from what is already available. 

5. Marketing and sales

Use this business plan section to outline your marketing and sales plan —how you’ll reach your target customers and what the process will be for selling to them.

You’ll want to cover your market position, marketing activities, sales channels, and your pricing strategy. This will likely evolve over time, but it’s best to include anything that clearly details how you will sell and promote your products and services. 

6. Operations

What’s included in the operations section really depends on the type of business you are planning for. If your business has a physical location or other facilities, you’ll want to describe them here. If your business relies heavily on technology or specific equipment or tools, you should describe that technology or equipment here.

You can also use this section to describe your supply chain if that’s an important aspect of your business. 

7. Milestones and metrics

In a business, milestones are important goals that you are setting for your business. They may be important launch dates, or a timeline of when you’ll get regulatory approval—if that’s something you need for your business. Use this section of your plan to describe those milestones and the roadmap you are planning to follow.

You can also describe important metrics for your business, such as the number of sales leads you expect to get each month or the percentage of leads that will become customers.

8. Company overview and team

The company and team section of your plan is an overview of who you are.

It should describe the organization of your business, and the key members of the management team. It should also provide any historical background about your business. For example, you’ll describe when your company was founded, who the owners are, what state your company is registered in and where you do business, and when/if your company was incorporated.

Be sure to include summaries of your key team members’ backgrounds and experience—these should act like brief resumes—and describe their functions with the company. You should also include any professional gaps you intend to fill with new employees.

9. Financial plan and forecasts

Your financial plan should include a sales forecast, profit and loss, cash flow projections, and balance sheet, along with a brief description of the assumptions you’re making with your projections.

If you are raising money or taking out loans, you should highlight the money you need to launch the business. This part should also include a use of funds report—basically an overview of how the funding will be used in business operations. 

And while it’s not required, it may be wise to briefly mention your exit strategy . This doesn’t need to be overly detailed, just a general idea of how you may eventually want to exit your business. 

10. Appendix

The end of your business plan should include any additional information to back up specific elements of your plan. More detailed financial statements, resumes for your management team, patent documentation, credit histories, marketing examples, etc. 

• Detailed business plan outline

If you’re looking for greater insight into what goes into specific planning sections, check out the following outline for a business plan. It can help you develop a detailed business plan or provide guidance as to what may be missing from your current plan. 

Keep in mind that every business plan will look a bit different because every business is unique. After all, business planning is to help you be more successful, so focus on the sections that are most beneficial to your business and skip the sections that aren’t useful or don’t apply. 

To help, we’ve marked sections that are truly optional with an *.

Executive summary

Company purpose / mission statement.

A very brief description of what your business does and/or what its mission is.

Problem We Solve

A summary of the problem you are solving and an identifiable need in the market you are filling.

Our Solution

A description of the product or service you will provide to solve the problem.

Target Market

A defined customer base who will most likely purchase the product or service.

Briefly describe who is behind the business.

Financial Summary

A short overview of revenue goals and profitability timeline.

If you’ve already started selling your product or service, highlight important initial details here.

Funding Needed*

If you are raising money for your business, describe how much capital you need.

Products & Services

Problem worth solving.

A thorough description of the problem or pain points you intend to solve for your customer base. 

A thorough description of your proposed product or service that alleviates the problem for your customer base.

Describe any initial evidence that your customers are excited to spend money on your solution. Initial sales or signed contracts are good signs.

Intellectual Property/Patents*

If this is important for your business, outline it here.

Regulatory Requirements*

If government approval is required for your business, explain the details and timeline.

Future Products and Services*

What products and services might you offer in the future once your initial products and services are successful?

Market Size & Segments

How many potential customers do you have and what potential groups of customers are separated by specific characteristics?

Market Trends*

How consumers in your target market tend to act including purchasing habits, financial trends, and any other relevant factors.

Market Growth*

The perceived potential increase or decrease in the size of your target market.

Industry Analysis*

If your industry is changing or adjusting over time, describe those changes.

Key Customers*

If your business relies on certain important customers, describe who they are here.

Future Markets*

A snapshot of the potential market based on the last few sections and how your business strategy works within it.

Competition 

Current alternatives.

A list of potential competitors. Identifying the competition isn’t always obvious and it may take some digging on your part.

Our Advantages

The strategic advantage(s) that makes your target market more likely to choose you over the competition. 

Barriers to Entry*

If there’s anything that makes it more difficult for other people to start competing with you, describe those barriers.

Marketing & Sales

Market positioning.

Where do your products or services fit into the market? Are you the low-price leader or the premium option?

Unique value proposition*

What’s special about your offering that makes your customers want to choose it over the competition.

Marketing Plan

An outline of your marketing and advertising strategy including costs, advertising channels, and goals.

How do you sell your product or service? Self-serve or with a team of sales representatives?

Pricing Strategy*

Describe your pricing and how it compares to alternatives in the market.

Distribution*

Describe how your product gets in front of customers. Are you selling in stores and online? Which retailers?

SWOT Analysis*

Strengths, weaknesses, opportunities, and threats.

Location & Facilities

If you have a physical presence, describe where and what it is.

What technology is crucial for your business success?

Equipment & Tools

If special equipment or tools are needed for your business, describe them here.

Sourcing and fulfillment*

If you purchase your products or parts for your products from somewhere else, describe that sourcing and supply chain.

Partners and Resources*

If you have key partners that you work with to make your business a success, describe who they are and what services or products they provide.

Milestones and metrics

A detailed roadmap of specific goals and objectives you plan to achieve will help you manage and steer your business.

Key metrics

Performance measurements that help you gauge the overall performance and health of your business.

Company overview and team

Organizational structure.

An overview of the legal structure of your business. 

Company history and ownership

A summary of your company’s history and how it relates to planning your business.

Management team

The team that is starting or running your business and why they are uniquely qualified to make the business a success.

Management team gaps

Key positions that your business will need to fill to make it successful.

Financial plan and forecast

Projected profit and loss.

How much money you will bring in by selling products and/or services and how much profit you will make or lose after accounting for costs and expenses.

Projected cash flow

How and when cash moves in and out of your business. This also includes your overall cash position.

Projected balance sheet

Expected balances for business assets, liabilities, and equity.

Use of funds

If you are raising money either through loans or investment, explain how funds will be used. This is typically meant to be shared with investors or lenders.

Exit strategy

A brief explanation of how you intend to eventually exit from your business. This could include selling the business, going public, transitioning the business to a family member/employee, etc.

A repository for any additional information, including charts and graphs, to support your business plan.

Business plan outline FAQ

How do you organize your business plan?

There’s no real established order to business plans, aside from keeping the Executive Summary at the top. As long as you have all of the main business plan components, then the order should reflect your goals. 

If this is meant solely for your personal use, lay it out as a roadmap with similar sections grouped together for easy reference. If you’re pitching this to potential investors, lead with the stronger sections to emphasize the pitch. Then if you’re unsure of what order makes sense, then just stick to the outline in this article.

Should you include tables and charts in your business plan?

Every business plan should include bar charts and pie charts to illustrate the numbers. It’s a simple way for you, your team, and investors to visualize and digest complex financial information.

Cash flow is the single most important numerical analysis in a business plan, and a standard cash flow statement or table should never be missing. Most standard business plans also include a sales forecast and income statement (also called profit and loss), and a balance sheet.

How long should your business plan be?

There’s no perfect length for a business plan. A traditional business plan can be anywhere from 10 to 50 pages long depending on how much detail you include in each section. However, as we said before unless you intend to pursue funding, you likely don’t need a lengthy business plan at first.

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

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• Business Loans

How To Get A Startup Business Loan In 5 Steps

Updated: Dec 25, 2023, 11:03pm

How To Get a Startup Business Loan With No Money

Getting a business loan is more challenging for startups than for established businesses—but it’s still possible. New business owners can improve their approval odds by choosing the right type of financing, familiarizing themselves with their credit scores and identifying the most competitive lending options available. Here’s how to get a startup business loan .

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1. Evaluate What Kind of Loan You Need

Many small business owners opt for financing through traditional banks and credit unions. However, there are several types of business financing that can help startups get off the ground. Common types of startup business loans include:

• Online term loans . Term loans are generally issued by online and traditional lenders, and involve a bank extending a lump sum of cash, repaid over a set period of time, at a set interest rate. Annual percentage rates (APRs) on the best small business loans start around 9%, and maximum limits typically extend from $250,000 to $500,000. That said, startup owners may not qualify for the highest loan amounts and most competitive interest rates.
• Business lines of credit . With a business line of credit , a lender extends funds up to a certain amount and the business owner can access the financing on an as-needed basis. Interest only accrues on the portion of the credit line accessed from month to month. Furthermore, the borrower can access funds repeatedly after making payments during the draw period.
• SBA 7(a) loans . The 7(a) loan program is offered through the U.S. Small Business Administration (SBA) and extends business loans up to $5 million to eligible applicants. Funds can be used to cover working capital, equipment purchases and business expansion expenses, and interest rates range from 2.25% to 4.75% plus a base rate.
• SBA Microloans . SBA Microloans are available to eligible business owners up to $50,000. Loans are typically offered to startups in disadvantaged areas and to those owned by minorities and women. Repayment terms may be as long as six years, with interest rates ranging from 8% to 13%, depending on the lender.
• Asset-based financing . Asset-based financing is a form of secured business financing that lets startup owners borrow against valuable assets like inventory, machinery and equipment, accounts receivable and real estate. This type of financing is less risky for lenders, so the terms are often more competitive than other types of loans. However, secured financing means the bank can repossess the collateral if the borrower defaults.

2. Check Your Business and Personal Credit Scores

Lenders evaluate an applicant’s credit score to gauge the amount of risk they pose. Applicants with a higher credit score are more likely to make on-time payments and, therefore, have higher approval odds. Business credit scores are typically available after six months to one year of operations, so new businesses may not have one, especially if the startup is brand new.

That said, loans are often personally guaranteed—meaning the borrower legally agrees to repay the debt with their personal funds if the business fails to repay—so lenders also look at the applicant/business owner’s personal credit score.

Prepare for the application process and gauge your approval odds by requesting copies of your business credit reports and checking your personal credit score before applying for a loan.

3. Gather and Prepare Required Documents

The exact documents required to get a business loan vary by lender. However, there are some documents that most lenders use to assess and verify an applicant’s identity and a business’ existence. For example, lenders often request tax returns going back at least two years, as well as financial records like bank statements, accounts receivable, credit card sales and outstanding invoices from the past four months—at a minimum.

As a startup founder, you can also improve your approval odds by drafting a comprehensive business plan. This can demonstrate to lenders that the business is financially stable enough to repay its debts based on future revenue and expense projections. Lenders also may request copies of business licenses and registrations applicable to your business or industry, as well as banking information for direct deposit.

4. Research and Compare Lenders

Depending on your personal and business qualifications, you may qualify for a startup loan through multiple lenders. To identify the best startup business loans for your needs, consider these factors when comparing lenders:

• Annual percentage rates . In general, business loan APRs start around 9%, but rates may be higher for startup business loans, and they can even be lower for the most qualified applicants. Visit each lender’s website or contact a customer support representative to determine available APRs.
• Fees and other costs . Business lenders often charge origination fees ranging from 3% to 5% of the total loan amount to cover the costs of handling paperwork and verifying application information. Others also charge prepayment penalties for borrowers who pay off their loans early or late payment fees for those who miss their due date. These fees can increase the overall cost of borrowing, and some lenders eliminate them to remain competitive.
• Lender reputation . Even if a lender looks good on paper, take time to read online reviews to evaluate its reputation among current and past borrowers. Likewise, reach out to other members of your business community to learn about others’ experiences with the financial institution. Consider choosing another lender if your research reveals any red flags, like negative customer support experiences.

5. Submit Your Application

Once you choose a lender, familiarize yourself with its application process and make sure you compiled the correct documentation. Application and underwriting processes tend to vary by lender, so look into whether you can apply online or via telephone—or if you’ll need to visit a branch. After you submit your application, a lender representative may contact you to request additional documentation such as proof of collateral or further financial records.

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How To Get a Startup Business Loan With Bad Credit

You’ll first have to be able to demonstrate a track record of financial success to get a business loan with bad credit. That said, lenders will still often look at the owner’s and business’s credit history.

Here are a few things you can do to boost your chances:

• Improve your credit. Check your personal credit report for inaccuracies. Pay down your credit card debt and focus on other ways to increase your credit score quickly.
• Look for SBA lenders. Some SBA partner lenders offer certain SBA loans to businesses that haven’t yet launched, such as microloans.
• Seek out nonprofit assistance. Volunteer-run programs like a local Small Business Development Center or SCORE offer one-on-one assistance for new entrepreneurs and may be able to give you more specific individualized advice.
• Take advantage of special programs. If you’re part of an underrepresented group, such as a minority or rural resident, you may be eligible for special startup business loan programs.
• Apply through a CDFI. These financial institutions focus on underserved communities and may be better aligned to help with your business and personal lending needs.

Pros and Cons of Startup Business Loans

As you’re considering taking on debt for your new business, consider these points.

• Maintain ownership of your company
• Predictable monthly payments with fixed-rate loans
• Spread the cost of starting a business over several years
• Improve your credit score if you make on-time payments
• May be difficult to qualify for
• Loan costs from fees and interest may be very high
• May need to provide loan collateral
• High loan payments can put your business at risk of failure
• May need to repay the loan from your personal funds if the business fails

What Do I Need for a Startup Business Loan?

When you apply for a startup business loan, lenders can require a broad range of documents to evaluate whether or not to lend you and your business money. Ultimately, lenders need to determine if your business can repay the loan.

If you apply for a loan, you’ll often need:

• A robust business plan. If your business has been recently formed, a business plan with financial projections will be crucial for lenders to determine your ability to repay a loan.
• Business and personal credit scores. A lender may use both the credit score of the business and your own score to see how you’ve managed debt in the past.
• Collateral. As a new business, lenders may require you to back the loan with collateral or an asset that a lender can take possession of if you fail to repay the loan.
• Business revenue. If your business has any revenue, lenders will use this information to evaluate your application.
• Time in business. For most lenders, regardless of how recently formed, you’ll need to provide documentation showing your time in business.

Although your business may have been recently formed, many of the requirements for a standard business loan will also be necessary.

What Factors Do Lenders Consider in Business Loan Applications?

Small business lenders consider a wide range of factors when considering a business loan application, including your credit score, collateral, revenue, time in business, business plan, experience in the industry and more.

What If I’m Rejected for a Startup Business Loan?

If you’re rejected for a startup business loan , there are a number of things you can do to fund your new business. Start by contacting the lender directly to find out why your application was rejected. This information can provide insight into changes you can make to improve your credit profile and future approval odds. Then, continue to develop your business’ finances until it is established enough to qualify for a startup business loan or other financing.

If you don’t have time to improve your credit score or build your business before reapplying for a business loan, consider an alternative form of financing .

Startup Business Loan Alternatives

Startup business loans can help cover the costs of getting a new venture off the ground—or growing it into a larger operation. However, strict qualification requirements can make it difficult to get a traditional business loan. These are some popular startup business loan alternatives.

Business Credit Cards

Business credit cards let business owners access financing on a revolving, as-needed basis. Funds can be used for a wide range of purposes—including everything from buying furniture and other office supplies to larger purchases like equipment—and the application process is more streamlined than for business loans. Because lending decisions are based solely on the borrower’s personal credit score, it’s often easier to qualify for a business card than a loan.

APRs range from around 13% to 25%, but some cards offer introductory 0% APRs that let business owners make interest-free purchases for up to two years. What’s more, cardholders only pay interest on unpaid balances that carry over to the next billing cycle. So, credit cards can help startups cover monthly operating costs while avoiding interest.

Personal Loans for Business

Startup founders who are unable to qualify for a business loan may have better luck applying for a personal loan. Not only is the application process often less rigorous than for business loans, but personal loan qualification requirements are also generally less robust.

And, while loan amounts may be lower than those available through business lenders, qualified applicants may qualify for lower APRs with a personal loan than a business loan—as low as 3% for the most creditworthy applicants.

These characteristics make personal loans an excellent option for startups without established revenue or financial projections. However, some personal loan lenders don’t allow borrowers to use funds for business purposes, and borrowers are personally liable for repaying personal loans—though this is also the case for many business loans. Finally, commingling business and personal loan funds can complicate bookkeeping, tax and legal matters.

Related : Best Personal Loans

Personal Savings

For some, borrowing is not the only way to finance a new business. Business owners who have sufficient personal savings can use those funds to start or grow their businesses. Not only do personal savings eliminate the need to pay origination fees and interest, but using cash to finance a startup can help a business owner avoid giving equity to investors.

That said, investing personal money can be a risky move and may result in a business owner losing their savings if the business fails. Many startup founders also lack the spare cash to invest in their ventures—much less enough to start or grow a business without additional funding.

Friends and Family

Alternatively, startup owners may consider borrowing money from friends or family to get their business off the ground. Borrowing cash from family eliminates the need to meet traditional qualification requirements, but the approach does come with its own challenges. Before asking someone for a loan, a business owner should consider whether they’re comfortable entering into that kind of relationship.

Borrowing money from friends and family can complicate existing relationships, so it’s important to ensure all parties understand the terms of the loan. To reduce future conflict, startup founders should get the loan agreement in writing, including the loan amount, interest rate, repayment terms and other factors.

Crowdfunding

Crowdfunding offers startup founders a way to raise funds for their business without having to borrow from a traditional financial institution or friends and family. Business owners can start a crowdfunding campaign using an online fundraising platform like Kickstarter or Indiegogo.

Once the campaign is set up, users can donate funds that become available to the business at the close of the crowdfunding round. The business owner doesn’t need to meet any traditional qualification requirements, and donors do not receive any business equity in exchange for their generosity.

Find the Best Small Business Loans of 2024

Frequently asked questions (faqs), is it hard to get a startup business loan.

Getting a startup business loan can be more difficult than getting approved for financing as an established business. This is because most lenders gauge their risk of borrowing based on the financial stability and history of an applicant’s business. When considering a new business’ application, financial institutions must instead base lending decisions on business plans, revenue projections and other theoretical information.

Therefore, it is imperative that startups take time to draft a comprehensive business plan that demonstrates their ability to make on-time debt payments. Startup owners also can increase their approval odds by waiting to apply for a loan until after they can demonstrate established revenue.

How do I qualify for a business startup loan?

Lenders typically look at a business owner’s personal and business credit scores to evaluate whether they qualify for a business startup loan. Many startups, however, are too young to have an established credit score, and financial institutions must rely solely on the applicant’s personal score.

In addition to credit scores, lenders look at a range of documents to gauge the business’ financial stability and the risk of nonpayment it poses. Common requirements include tax returns and other financial records, as well as a business plan and necessary business licenses, registrations and legal documents.

Is it possible to get a startup loan if I have bad credit?

It is possible to get a startup loan with bad credit, but it’s more difficult than for better-qualified applicants. Prospective borrowers can bolster their loan applications by developing a comprehensive business plan that specifies how the company plans to make money and describes the business’ marketing strategy. Some financial institutions also specialize in lending to low-credit borrowers, but these loans may come with higher interest rates and origination fees.

How much can I get for a startup business loan?

Some small business lenders may be willing to issue microloans of $50,000 or less to startup businesses. Other lenders may be willing to offer you a larger loan, but it can be difficult to find those lenders.

What credit score do I need to get a small business loan?

Small business lenders generally require a credit score of 620 or higher to be approved for a loan. Banks often have stricter credit score requirements of 680 or higher.

Get Forbes Advisor’s ratings of the best lending platforms and helpful information on how to find the best loan based on your credit score.

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Kiah Treece is a small business owner and personal finance expert with experience in loans, business and personal finance, insurance and real estate. Her focus is on demystifying debt to help individuals and business owners take control of their finances. She has also been featured by Investopedia, Los Angeles Times, Money.com and other financial publications.

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• Long-term payment plan (installment agreement): You owe $50,000 or less in combined tax, penalties and interest. You have filed all required returns.
• Short-term payment plan: You owe less than $100,000 in combined tax, penalties and interest.

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• Caller ID from the taxpayer's notice or POA's signature date on Form 2848
• Balance due amount
• Secondary taxpayer’s SSN or ITIN (if applicable)
• Adjusted Gross Income for most recent return on file
• Tax year examined (if applicable)

Note : The POA must be authorized for all balance due periods in order to represent the taxpayer for a payment plan. Not all POA authority designation levels can represent the taxpayer for this purpose (including level “h”) or use the online system (including level “k”).  See the Instructions for Form 2848 for more information.

Apply/Revise as Individual Apply/Revise as Individual POA

Business payment plan

Your specific tax situation will determine which payment plan options are available to you. Payment options include full payment or a long-term payment plan (installment agreement) (paying monthly).

You may qualify to apply online, if:

• Long-term payment plan (installment agreement): You have filed all required returns and owe $25,000 or less in combined tax, penalties, and interest.

Note: Setup fees may be higher if you apply for a payment plan by phone, mail, or in-person. Get more information on other payment plan options and fees .

What does my business need to apply?

To apply as a business, you need to log in with your IRS username or ID.me credentials (See What do you need to apply for a payment plan? )

You also need:

• Your Employer Identification Number (EIN)
• Date the business was established (MM/YYYY)
• Your Caller ID from notice
• Business address from most recently filed tax return
• Tax form filed or examined
• Tax period filed or examined

Get more information on other payment agreement options and fees.  

If your new monthly payment amount does not meet the requirements, you will be prompted to revise the payment amount. If you are unable to make the minimum required payment amount, you will receive directions for completing a Form 433-B Collection Information Statement for Businesses PDF  and how to submit it.

Power of Attorney (POA) for a business

To apply as Power of Attorney (POA) for a business, you need to log in with your IRS username or ID.me credentials (see What do you need to apply for a payment plan? )

• Taxpayer's Employer Identification Number (EIN)
• Business address of most recently filed tax return on file

Apply/Revise as Business Apply/Revise as Business POA

More Information

Answers to common questions

Video: Avoid Interest and Penalty Charges

System Availability

Monday to Friday: 6 a.m. to 12:30 a.m. ET

Saturday: 6 a.m. to 9 p.m. ET

Sunday: 6 p.m. to 12 a.m. ET

The system will only be available during times above; please return to the system during system availability to use the Online Payment Agreement application.

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• Business plans

Develop your business plan

On this page

Why you need a business plan

Use our business plan tool, download a detailed business plan template, tips to help you write your business plan.

Whether you've just started out or have been running your business for years, business planning can be the key to your success. Having a business plan:

• helps you to prioritise – it gives your business direction, defines your objectives, maps out how you'll achieve your goals and helps you to manage possible bumps in the road
• gives you control over your business – the planning process helps you learn about the different things that could affect your success. If you're already in business, it helps you to step back and look at what's working and what you can improve on
• helps you seek finance – if you're seeking finance for your business, you'll need to show banks and investors why they should invest in your business.

It will help you to develop a shorter business plan to:

• evaluate a new business idea
• set some goals for the year ahead
• keep your business on track.

Use this template if you are seeking finance for your business or want to include more detail in your business plan.

Business plan template

1. Determine what your plan is for

Does your business plan have more than one purpose? Will you use it internally, or will you share it externally, for example with potential investors or banks?

Deciding what the purpose is, can help you develop your plan for the right audience. If the plan has been developed for third parties, you will need to determine what they’ll be most interested in.

2. Prepare your finances

Use our detailed business plan template if you are seeking finance.

Lenders and investors will want to know if your finances are in order and your business is in a strong financial position. They'll want to know how much money you currently have, how much money you need and how much you expect to make in the near future. While a bit of extra funding will help you ensure you’re covered for unexpected costs, be realistic and avoid asking for more than you need.

If you're starting out and don't have financial information yet, our template provides resources to help you get your finances ready.

3. Write your summary last

Summarise the main points of your business plan using as few words as possible. You want to get to the point but not overlook important facts. This is your opportunity to sell yourself, but don't overdo it. The summary should include details about your business, market, goals and what makes you different from other businesses.

4. Get help

Don't leave your business plan to the last minute. It takes time, research and careful preparation to develop an effective business plan.

If you aren't confident in completing the plan yourself, consider getting a professional to look over it and provide advice.

There are a number of government services available to help you plan, start or grow your business. These services can provide general advice, workshops, seminars and networking events, and can even match you with a mentor or business coach.

Get expert help from a business adviser in your area .

5. Review your plan regularly

As your business changes, your plan will need to change to ensure your business is still heading in the right direction. Having your plan up-to-date can keep you focused on where you are heading.

It's a good idea to keep a record of each version of your business plan.

6. Protect your plan

Having an understanding with third parties when distributing a plan could be enough protection for some businesses. But if you have innovative business practices, products or services, you may want people to sign a confidentiality agreement to protect your innovations.

It may also be a good idea to include some words in your plan asking the reader not to disclose the details of your plan.

Start writing and developing your marketing strategy.

Find out what you need to register for when starting a business., was this page helpful, thanks for sharing your feedback with us..

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