Many small businesses and entrepreneurs owners produce business plans quickly and without much reflection or analysis. While having an essential element when looking for bank loans, the content is even more important. This is often over-survey because most corporate owners are not familiar with which banks are really looking for.
The content of a corporate plan is of crucial importance for the banks lending decision process. It is not enough to have all the headers covered in the table of contents.
So, what are the banks really? In this article, we will discuss the importance of market analysis and competition in the content of a business plan. Which are both essential for the decision-making process of banks.
Demonstrated understanding of the key target market
The content of a business plan includes a detailed analysis of the industry and the market in which the business works. Beyond providing the estimated market size and a market share, banks are looking for an analysis in the relevant market.
The following list of questions will be placed on one form or another by a potential lender to better understand the segment of the market. The company works in:
What is the size of the market – what geographical area covers and what is the estimated turnover of the whole market in the area concerned?
Where is it in its growth cycle, that is to say. Start, mature, declining?
What is the estimated share of the market company?
How much will it cost for the business or competitors to enter this industry, that is to say. What are the obstacles at the entrance?
How is it competent?
Is it regulated?
Is their demand?
Who are direct and indirect competitors of business?
A potential lender will also focus on a detailed assessment of the company’s ability to:
Attract new customers
Attract and retain good employees
Completely use the operating capacity
Reaching its target customers
Keep existing customers
These attributes are the main factors of success for this company to work successfully on their target market and is generally included in the industry section and market analysis.
Understand and analyze competition
Banks will review and interview the content of a business plan covering the analysis of competition. The Competition Analysis section should show that the business owner includes an understanding of their strategy and business model and how they could meet any competitive behavior on the market.
Content must identify the strengths and weaknesses of the best competitors and identify the needs of the clientele that are not fully satisfied by competition.
Behaving the way in which competitors perform financially will also help support the feedback estimates that a business could do on the market it works. This feeds on the financial section as one of their key factors that will constitute the basis for realistic sales projections.
This analysis will also identify opportunities and threats to the business. Opportunities that can be capitalized and incorporated into a well-articulated commercial strategy and threats to be mitigated or managed.
What prospect do banks take up when assessing the merits of a business plan?
Banks are a fixed performance of small business loans, improbable equity investors who take the risk of loss of first loss and all rising benefits as awards for this level of risk. This is why banks will always focus on downward risks for a business in their content assessments of a business plan.
Business owners and entrepreneurs need to highlight and meet the existing and potential risks for their business in the content of a corporate plan submitted in support of a bank loan application. The risks associated with the drafting and mitigation of risks in this document will reassure the banks that management is fully aware of the related risks and has provided reasons why they are acceptable or