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Guide

How to Write a Business Plan Your Banker Can’t Resist

The right business plan can make a difference in getting the funding you need. View our tips on how to write a business plan that is irresistible to your banker.

If you’ve owned your company for any length of time, then you probably have read articles or heard discussions about why it’s important for you to have a business plan and what should be included in it.
 
But here’s something that you may not know: What is your banker looking for when he or she reviews your business plan as part of your loan request? We spoke with Cadence Bank Senior Vice President Andrew Smith to find out.

 

What’s Your Track Record?

“Track record is one of the first things we look at,” says Smith. “We generally want to see that a company has at least a two-year history of successful operations and profitability. We put a lot more emphasis on historical performance than we do on pro-forma financial projections, which need to be supported by empirical evidence.”
 
This isn’t to say, however, that projections aren’t an important part of your business plan from the bank’s perspective. “We like to see financial projections on the low, middle and high side so we can gauge how financial performance will impact your business in the future,” says Smith. “For example, if you hit your numbers on the low side, what is this going to do to cash flow and profits?”
 
The impact of projections on cash flow is especially important since it takes cash to repay your loan. “Cash is king so your business plan needs to quantify cash flow based on past performance,” says Smith.

 

How Experienced Is Management?

The experience and qualifications of your management team are another important part of your business plan. “Businesses are really about people,” says Smith. “We’re not lending to a business, per se, as much as we are lending to the people who are running the business. Therefore, we want to learn as much as we can about the ownership and management team.” For example:
 
  • What are the talents and skill sets of each member of the management team?
  • How much experience do management team members have in your industry?
  • Do managers have an extensive network of contacts and a good reputation in the industry and community?
  • Be sure to list personal references for members of your ownership and management team who your banker can call to get a better feel for each of them.
  • Your banker will also want to get a good feel for the competitive environment in which your company operates.

For example:Is your company a market leader, laggard or somewhere in between?

 

What makes your company different from (and better than) your competitors — or in other words, what’s your unique selling proposition (or USP)?
Do you compete primarily on price or on delivering a higher quality product or service experience than your competitors?
 
“Also, how do customers and prospects perceive your company and your products or services?” says Smith. “Do they view you favorably or unfavorably? Asking these types of questions can uncover hidden risks that many business owners aren’t aware of.”

 

What's Not Important to Your Banker?

Smith says that business owners shouldn’t waste their time and money trying to create a fancy looking business plan with lots of colorful pie charts and graphs. “These usually aren’t going to impress many bankers,” he says. “Anybody can tell a fancy story. We just want to see the facts, presented clearly and succinctly in an easy-to-read format.”
 
Keep these suggestions in mind when deciding how to write a business plan to present to your banker. By following them closely, you can feel confident that you provide your banker with everything he or she needs to analyze and approve your loan request.
 
Read about other great tips from our Cadence business bankers.
 
You may also be interested in Financial Ratios Your Bank Cares About Most.
 
Your Cadence Bank business banker can offer tips and guidance on the financing options that can help your business thrive. Contact us today to learn more.

 

This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.

 


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