Business Plan Credit
Businessplan.org – professional business plan writing service for credit requests
Capital is often the main input factor for growth processes. In almost every professional business plan, the business activity is the creation of value by means of the best possible allocation of resources and production factors according to business management.
But the founders must lay the foundations for all this. Hardly any business operation can simply be started off the cuff – without investments it is not possible.
Even the so-called home office or activities in e-commerce can not exclusively operate professionally with existing private devices, terminals or programs.
Successful participation in online marketing requires a high technical standard – founders can get hopelessly lost from the start. This is because the data volumes in the business unit reach a multiple of the usual capacities. The online entrepreneur is not only challenged by his own data management, but also by the user. Slow loading times, poor usability, inadequate accessibility, limited payment possibilities or unclear navigation quickly lead to potential customers jumping off and trying their luck in a modern established shop one click further away.
Participation in the market is also an obligation in terms of legality and legal certainty. Unauthorized software can quickly become a problem, as does the non-compliance of the legal standards on the web. And even the cheap online marketing costs four-digit amounts if it is to be successful.
For more information on what you need to know about loans, how we can help with business plans, and how to help yourself, read the following overview.
The e-commerce example illustrates what many founders like to underestimate: investment needs.
This is not only about the technical basis of the planned business activity, but also about marketing, personnel costs and ultimately one’s own income.
In order to secure the liquidity of a company – particularly in the first year of its existence – a from hand to mouth attitude is absolutely counterproductive. The founder has to deal with the professional and organizational questions of the company’s development, not the constant procurement of money in small bills.
A loan ensures that the head remains free for essential tasks and the foundation becomes a success. The business plan must therefore also be designed in such a way that it is accepted as a financing basis by potential providers.
This is immediately apparent to a manufacturing company, as the classical microeconomic production factors can immediately identify labor, resources and capital. There are significant deviations in the service sector, but the basic principle remains the same. In many cases, an entrepreneur must initially invest in production factors in order to build up a sustainable and profitable business operation. In many cases, startups can not provide the required startup capital to its full extent, the financing of the initial investment through a credit from the home bank of the entrepreneur is an often-used way of capital accumulation that is to be taken into account when creating a business plan for a bank loan.
The word stem comes from the Latin word credere, which means to give trust to. In practice, the borrower is given money by the lender in the form of cash or deposit currency for a certain term. The borrower commits himself to repay the loan, for which purpose a fixed redemption rate is agreed to as well as an effective annual rate. This represents the borrowing costs for the borrower. Mutual security is provided through a credit agreement. A credit is usually granted by a business, private or promotional bank as well as the savings banks and co-operative and agricultural credit unions.
With faith, the bank lending has not much to do. Credit approval is executed at a bank in fixed steps, and the application documents are examined on at least two different occasions. Also, legal regulations govern lending. More detailed information will be available in a later section.
Credit types – which are possible?
- Provision and
There are short-term loans (less than one year), medium-term (between one and four years) and long-term loans (more than four years).
The most famous and at the same time most important lenders are surely the credit institutions, often referred to as bank credit. There are still supplier loans and public loans for corporate finance.
Public loans are mostly provided by the development banks to small and medium-sized enterprises and freelancers in order to finance the start of self-employment or to promote the sustainable expansion of the company in order to secure economic success. Supplier credit is a short-term credit from the supplier, which gives the creditor a longer payment goal.
The loans are provided as cash advance, credit or loan. The supplier’s credit is provided as a commodity credit, which means that the supplier grants his creditor a specific payment destination for the payment of the goods surrendered. In the case of credit lending, no money is transferred but vouched for creditworthiness. A cash advance is the classic form of a loan, but in most cases cash does not change hands, as the name suggests, but as deposit currency.
The investment loan and working capital loan are of particular interest. The investment loan is a loan for the financing of fixed assets. An operating loan is often granted as a credit line on the business account. This cash advance is used to finance working capital and to compensate for short-term liquidity bottlenecks. The working capital loan is also generally referred to as current bank overdraft.
A credit comparison is worth a look – online credit calculator
Banks are in competition with each other. As in your market, offers differ in price. In the case of credit, the price indicator is the effective annual interest rate. These are the borrowing costs borne by you as a borrower. A market comparison is worthwhile. Thanks to the comparison portals on the Internet, you can get a good market overview of the current conditions for your capital requirements and maturity. With these, you will meet your principal bank on the same level in the bank negotiations and receive favorable loan offers.
Tip: The term of the loan should correspond to the useful life of the investment goods in order to avoid overstating the company’s liquidity through excessive interest charges.
Credit application – How does it work and what does the bank pay attention to?
Business Plan Credit
Credit is only available when the bank plays along. To help you finance your business plan, Businessplan.org has compiled a step-by-step guide for the credit application.
Step 1: Preparation. The most important tip for a successful bank discussion sounds quite trivial. Never go into the conversation unprepared. Preparation includes the professional business plan, as well as obtaining market information on the loan amount, repayment and subsidies. Practice presenting your business idea and summarize it for the bank consultant in a short presentation. The bank talk will not take so long, there is no time to go through the whole business plan in its details. Also, consider what critical questions the bank advisors might ask. Check the comparison portals for the current interest rate on the market.
Step 2: Complete documentation. Before the bank meeting, you should have completed the necessary documents for the credit application. This includes the credit form with personal data and information on the financial situation. A professionally designed business plan with financial planning is important and if you are already self-employed, you should provide proof of income on income tax records, sales tax pre-registrations and account statements. The lender will, with your consent, obtain information on your creditworthiness. Bring a valid passport for legitimization and set up your collateral. Also, the amount of equity compared to debt is an important cornerstone for the consultant. When the loan is granted, a credit agreement is concluded.
Step 3: Timing. Arrange the date for the bank meeting for a morning when both parties are still fresh and not yet in the closing time mood.
Step 4: Conviction. You must convince the bank consultant of the business idea and, above all, its economic success. This includes your personal appearance. Convince the bank consultant that you are competent, businesslike and personable for the management of the company. If you have convinced your bank consultant, half the battle is won. Then internal risk controlling is to be assured, which your consultant can use. Be self-confident but not arrogant.
Step 5: Conditions. You are not a petitioner at the bank and can talk with the consultant on the same level. Communicate clearly and objectively what you think of their terms. Stay realistic.
Step 6: Negotiation. The negotiations are all about the conditions and modalities, nothing else. Mention that you would like to work with his bank. Comparative offers may be worth an argument.
Step 7: Questions. If you do not understand something, ask. In preparation, however, you should learn to understand the most important bank terms. Ultimately, you want to be convincing.
Step 8: Protocol. The bank is obliged to issue a consultation protocol. Please keep a note of the facts so that you can follow the most important agreements before the binding credit agreement comes into effect.
Step 9: Do not rush. There is a lot of money in the loan, and with financial questions you should not overlook anything. This can have a negative impact on your future.
Step 10: The decision. Do not sign up directly at the appointment. Take all the documents home and sleep on it for one night. If you are still completely convinced, then sign the binding credit agreement.
The business plan for a loan
The business plan for a loan must convince your banker. In this case, you want to convince the bank of the economic potential of your business idea. The bank approves the loan for covering your determined capital requirements.
Why do you need a business plan?
Your business plan costs money, and you probably can not pay the entire sum out of your own funds. For the realization of the company foundation, an expansion plan or the company succession, the procurement of funds is the reason for the business plan creation. The bank needs a reliable basis for approval during the credit check. This is your business plan, with the important financial planning.
The main contents of the business plan for a loan
There are no generally binding guidelines for the content of the business plan for a loan. It is important that the bank understands your business idea and understands the market. Your project must be convincing and comprehensible. The bank consultant is less interested in your visions and what ifs. Only the facts and corresponding figures count. Therefore, you should pay close attention to financial planning and market and competitior analysis as the basis for the figures.
These chapters should include a credit business plan:
- the capital requirement and investment plan
- the disclosure of current assets, such as raw materials, consumables and supplies, inventories, reserves, cash
- the identification of the fixed assets, such as land and buildings, technical equipment, machinery, IT and operating equipment, financial assets and intangible assets (for example, licenses, patents, concessions)
- startup costs
- operating resource plan
- the personnel cost plan (including own salary)
- the running costs
- the marketing plan with budget
- the profit and loss account
- the liquidity plan
- Return of Investment
The financial plan does not only result in the capital requirement, which is to be covered as far as possible by the desired credit. At the same time, for example, the details of the company’s identity as well as the identity of the current and fixed assets also serve as collateral for the donor.
A bank as a lender usually has fixed criteria for lending, the consultant accordingly makes a little leeway, at their own discretion. A carefully prepared business plan to be submitted with the credit request is a condition for the successful application of a bank loan to finance a business startup. The fewer questions the formulated concept raises, the faster the assessment process can be completed and the credit decision can be communicated.
For banks, the quantitative models included in the business plan are particularly relevant for the examination of the credit request. When drawing up the business plan, particular attention should therefore be paid to the clear and plausible (provided with suitable documents and sources) preparation of the elements of cost structure, investment calculation, revenue and profitability planning, as well as existing or promised funds. If the entrepreneur has appropriate collateral, it must be appropriately proven, for example, in the form of a land register or an appraisal by an expert in the case of a property.
Presentation of key figures for the banker
Another important feature of the credit business plan is that it is designed for the specific activity of financial services providers. The operational key figures are therefore also presented in the manner they are evaluated by the bankers.
As a result, the decision is shortened and positively influenced as the presentation of these key figures shows a high degree of professionalism.
The most important key figures are:
- Capitalization ratio (percentage of total assets). It should be rather low because it describes bound capital. In the case of founders, it is in any case the essential indication of the investment needs.
- Circulation rate (share of current assets in total assets). The higher this rate, the better the liquidity is estimated.
- Working capital (current assets minus current liabilities). The operating result should be achieved with as little working capital as possible – the founders should strive for this after the first year of operation. For comparison with other companies, this figure is also related to sales.
- Equity ratio (share of equity in total capital). 25% equity is generally considered good security
- Leverage ratio (external funding sources in relation to total capital).
- Asset coverage by equity
Here, there are the variants I and II. The latter includes long-term debt.
Liquidity 1. Degree (liquid funds in relation to current liabilities)
Liquidity 2. Degree (own claims are included in the calculation)
Liquidity 3. Degree (determines the right relationship between short and long-term in both financing and use of company resources)
Apart from accurate and plausible figures, qualitative aspects also play a role. In particular the market environment, the personal suitability of the founder and, if necessary, feasibility studies, which are also part of a business plan for submission for an intended loan, have to be looked into (see our business plan guide).
Both for the formulation of the business plan for credit as well as for personal discussions with the principal bank the following applies: Entrepreneurs should be honest and open with themselves as well as with the bank consultants when it comes to analyzing and communicating realistic framework conditions. The relationship with the principal bank is very important for entrepreneurs and should build on the basis of mutual trust. Both qualitative and quantitative assumptions and strategies should be presented in the business plan from the outset and should be proven with appropriate sources that these are easily comprehensible to the lender.
If you need help with business plan creation
Businessplan.org specializes in professional business plan creation. Our business plan specialists are experienced merchants and have long-term expertise and industry expertise. As a business plan company offering professional business plan writing, we pay close attention to quality. Our excellent consultants see themselves as specialists and write business plans exclusively. You know exactly what the bank is doing to lend, and what business plan chapters are important. Please contact us here or let us make an individualized offer:
We would be glad to assist you with the preparation of your business plan for applying for a loan.