How to Write a Business Plan Lenders Want to See

When businesses apply to Reparo for funding, we do everything we can to understand the specific circumstances. As well as meeting the applicant, a crucial part of this process is analysing the business plan.

The business plan is an opportunity for a business seeking funding to lay out why it is a viable prospect for a loan. When applying for asset-based finance, a business should lay out details on the asset the loan is secured against and any charges on it. At Reparo any loan above £50,000 requires assets as collateral.

We have produced this guide to help those applying for a loan with Reparo, or other asset-backed lenders, make their case in a way that is most likely to result in a positive decision.

Writing a Business Plan

When a business plan is used for a loan application, it explains to lenders what your business plans to achieve, as well as how you plan to achieve it. Also, the plan should include details about how the loan will be repaid.

In this article, we are going to cover seven key sections of a business plan that you should include when applying for an asset-backed loan. They are the things Reparo’s experts look out for when analysing funding applications.

They are also things we have noticed often lacking in applications which can make it hard for us to understand a business and, ultimately, invest in the proposition. As a caveat we do understand that many businesses don’t have the resources to produce detailed business plans; your plan doesn’t have to be long or written in business jargon – short, sharp, simple language that is straight to the point all get a big thumbs up from us.

You should include:

• Executive Summary – This should include the major details of your business plan including why you need the capital, how you’ll pay it back, and the asset you are using to secure the investment.
• The Company – This section is a brief introduction to the business. It should include key information like when it was founded, who runs it, its main value proposition, and what it does.
• Management – Here you should provide details of the key people who run the business; include their past successes.
• The Investment – In this section, you’ll explain why you need the money as well as what you will use it for. This section aims to convince the lender that investing in your company is a safe investment.
• The Security – Reparo is an asset-based lender which means those who borrow from us are required to provide security. In this section, you should explain information about the assets as well as any charges over it.
• The Financials – An important part of the business plan is to show the financial structure of the business. You should include details such as profit and loss, balance sheet, and cash flow.
• Other Details – Other details you can include are market analysis, competition, and the external environment.

Other Tips for Reparo Loan Applications

At Reparo we look for applicants to make it clear how a company plans to use the loan and what their plan is to pay it back. We always take a personalised approach to applications and try to work with applicants to provide a solution.  

It isn’t necessary to produce a bloated document written in corporate-speak that contains every detail regarding a business. Instead, it should clearly and succinctly explain the business and the proposition. 

We understand the pressures SMEs are under and that, unlike larger companies, they often won’t have detailed projections about future performance or in-depth historical performance data. All we ask is that businesses understand where they want to be and how they will both secure and pay back the loan.

While an important part of the process, the business plan isn’t the only thing Reparo will take into consideration when making a decision. It is simply a document that helps us understand the proposition.

In Depth: Writing a Business Plan for an Asset-Based Loan

Here is an in-depth look at the sections mentioned above. By including all this information in your business plan, you will give yourself the best possible chance of receiving funding.

Executive Summary

The executive summary is the first thing the lender will read. It should be a snapshot of the other information included in the business plan and designed to capture the reader’s attention. It will provide an overview of the business as well as details about the application including what you’ll use it for, how you’ll secure the loan, and how you’ll pay it back.

While it may be the first thing on the business plan, it is often the last thing you write. This is because you’ll better be able to summarise the plan after you have written the whole document.

About the Company

Potential lenders need to know what makes the applicant’s business likely to be a success, as well as practical information about the business. This section is designed to provide both functions.

Particularly important is the value proposition: a one-sentence summary of your businesses that describes how the business adds value to customers.

The section performs a similar function to the About Us page on your website. Like an About Us page it can help to make it readable and succinct. Only include the important details:

• The company’s age;
• What it does;
• The product;
• The value proposition;
• Employees;
• Structure;
• Who runs the company.

Management

The management section should include information about owners and key employees. It should include their roles, responsibility, skills and experience.

Skills and experience is especially important for Reparo due to the correlation we see between past and future success.

Even if your team doesn’t have experience running a business, you could include success in other industries. For example, Reparo has provided business funding to successful athletes as well as those with strong corporate careers.

How You Will Use the Investment

Here you should tell potential lenders why you want the money and how you will use it. In this section, you will need to convince the lenders that providing you with funding is a good use of their money.

If you need the money to overcome a specific problem you are having, like capital issues leading to late payments, then here is the place to explain how the money will help alleviate the issues. Businesses that are in a turnaround or very distressed situation will need to be particularly detailed as the risk of non-payment is higher.

Alternatively, if you want to use the money to help your business grow, perhaps by buying new equipment or hiring new staff to cover upcoming projects, then you can go into further detail here.

You’ll want to spend a lot of time on this section as the clearer you can be about why you need the money, how you’ll use it and subsequently pay it back, the better it is for the application.

What You Will Use as Security

Businesses looking to borrow over £50,000 from Reparo are required to provide security for the loan. In this section, you can provide more information about your assets and any charges over them.

While Reparo’s experts will conduct their own due diligence if you can provide the key information it will help us review your case and find the best solution.

Financial Details

This is an important section to help lenders understand the financial health of your company. If possible, you should include your business’s most recent balance sheet to show the financial structure of the business, profit and loss to show performance, and cash flow predictions to show lenders how repayments will be made.

We like to see management accounts that have been prepared since the last filed accounts to get the most-up-date view on the financial situation.

Just as important are financial projections that cover at least the period of the loan repayment; this shows you have thought about how you will make repayments. It can also be helpful for lenders if you analyse risks and show how your business will perform if everything doesn’t go as expected.

If you can show that you have plans to continue debt payments even if things go wrong in the business, lenders will be more confident in providing funding.

We appreciate that for SMEs it isn’t always possible to provide detailed information, so we’re always happy to take a look at bank statements to get a picture of the financial health of a business.

Other Factors to Consider

The following categories are not essential, although they can provide extra information that could prove useful during the application process.

When writing these sections, you should back up any assertions with data and stay precise. For example, rather than stating you are a market leader, you could say how much of the market you have captured. You could also use graphs or tables to illustrate your points.

• Market Analysis – In this section, you should include details like industry trends, growth rate, and data on your target audience.  
• Competition – All businesses have competition. In this section, you should analyse the strengths and weaknesses of your competitors as well as how they could affect your business.
• External Environment – No business or industry operates in a bubble. Factors such as the global economy or political change can affect businesses in both positive and negative ways. Showing lenders you are aware of and taking steps to protect yourself from external factors can highlight to them that you are a strong loan proposition.

A Business Plan Helps Lenders Understand Why Companies Need Funding

Reparo always takes the time to get to know the businesses we work with. Unlike traditional lenders, we always meet with applicants, assess their business’s plan, and try to understand their proposition.

This means we can work around many traditional roadblocks to funding. These include newly formed companies with no existing accounts, startups that are yet to bring in revenue, businesses with adverse events or that fail lending requirements with traditional lenders due to not meeting highly-specific requirements. To discuss a loan of between £25,000 and £2,000,000, get in touch with one of the team on sales@reparofinance.co.uk or 0161 451 5710.