If you want to qualify for a small business loan, you’ll need to start with writing a business plan.
As promised, we’re continuing our discussion from last Thursday, “What You Need to Know About Qualifying for a Small Business Loan.” We thank Emily Sullivan, Relationship Manager in the Cleveland, Ohio office of the Economic and Community Development Institute (ECDI) for sharing her thoughts on the importance of writing a business plan and what you should include to make them super amazing.
BAAB Writing: What criteria does ECDI consider when evaluating loan applications?
Emily Sullivan (ECDI): What’s unique about ECDI is that we’re different from a typical bank as far as our criteria for applicants. So we do look at the business plan and financials to make sure that’s really thought out, but we really get to know the business and the person. While we do underwriting, we call ourselves a “character-based lender.” So we analyze the “horse and the jockey” where the horse is the business and the business plan and model. The jockey is the business owner.
BAAB Writing: What information does ECDI like for applicants to include in their business plans?
Emily Sullivan (ECDI): Obviously business plans vary based on the type of business and whether it’s a startup or existing business. Overall, we look for an executive summary, information about the product (or service) and the business model. We also look at the industry and market analysis and competition showing that the business owner knows what they’re breaking into and knows the market.
In addition, marketing should definitely be addressed – how they plan to market themselves and what type of marketing they’re already doing, a marketing budget, etc. It’s also important to include general operational elements in the business plan, such as staffing, owner and management information, production, working capital details, etc.
BAAB Writing: We’ve heard that lenders are not looking for applicants to submit a 100-plus page business plan? Do you agree, and if so, what would you say is the ideal length (recognizing that the content is much more important than the page length)?
Emily Sullivan (ECDI): I would say the longer is definitely not the better when it comes to business plans. We’ve received 75-page business plans with copies of research articles, etc. and that’s not really the voice of the business owner. We want to hear the entrepreneur come through in their business plan.
We’ve had five-page business plans that are awesome and we’ve had 20-page business plans that are just as awesome. People try to veer away from personalizing it and we think the personal side of it is great. Show your passion in your business plan … so if that does take 100 pages and it’s truly your passion coming through then we’re definitely not against that.
Bonus Tip: Proofread your business plan or have someone else proofread it for you. As we’re reading your business plan, it’s our first or second impression of you and if it includes grammar and punctuation mistakes, for example, we notice. So definitely have someone else look that over for you.
BAAB Writing: What does ECDI offer small businesses that a bank or other “traditional” lending institution may not?
Emily Sullivan (ECDI): Our niche is helping businesses that can’t qualify for traditional funding. That can mean a variety of things, for example we work with a great deal of startups. We’ll work with specific industries that traditional banks tend to steer away from, such as the food and trucking sectors – industries that are viewed as being a bit more risky for banks to take on.
We’ll also work with people who have credit issues. So if you have a foreclosure or bankruptcy in your past or your credit score is a little iffy, we’re unique in that we’ll work with you because we’re so hands on. We’ll try to help borrowers through these problems by asking for letters of explanation and bring in other resources to assist them. We bring them into our ECDI family of businesses.
What’s the Word: So there you have it folks – everything you need to know about making your business attractive to loan officers and investors. We’d like to thank Emily for taking the time to share this invaluable information with you.
Not sure where to start? Get our super easy guide on writing a business plan.