Believe it or not, there are a lot of people that go into business believing that they will not need a loan. These people need to stop deceiving themselves. Sooner or later, all businesses will need extra funding to stay competitive or expand. If a person does not have a business plan in place, he will not be able to get a loan when he needs it the most. Why do lenders put so much stock into a business plan? The following information will explain why.
The Bottom Line
Honestly, most lenders do not care about the type of business you have unless it is some type of endeavor they would rather not be associated with. High risk activities such as selling firearms, opening a sky diving business, or running a pornography operation might not be the types of activities that a lender would be willing to support. However, if a person has a business that is credible and has a low risk factor, then chances are, they will be willing to lend money to help him start and to keep it going.
If a person or an organization does not have a business plan for a lender to observe, they will not receive the funding that they will eventually need. Lenders need verifiable financial information to ensure that they can get a return on their risk. If a person does not have a plan for them to quickly access this information, they will not even bother with that person. Honestly, they will consider an individual or person in this type of situation as incompetent or unskilled in their ability to run a real business. Sorry, but that is the view that most financial institutions have.
Financial Information Must be Accurate
Lenders not only require a person to have a sound business plan in place, they also want the financial information to be accurate. It can be difficult to draft up sound financial projections about a business’s ability to generate realistic profits. You will probably need to hire an accountant or a financial adviser to help you with your financial data. These professionals typically have the equipment, knowledge, and experience for creating realistic projections.
Entrepreneurs should use a professional to help them create their plan. This will definitely increase their chances of receiving a loan. So remember, if you do not have a business plan, you can forget about getting a loan and there is usually no exception to this rule.