The introduction section of the winning business plan written for a bank is often referred to as the Executive Summary. The main purpose of this is to emphasize the major benefits of the business plan to the bank or potential investor. After you have answered the questions that you are asked and have answered them in a logical sequence, you will be able to answer the question: What does this mean to me?
The answer to that question can almost be heard through their questioning. Yes, you can talk from stage 1 to stage 5 of the financial statement, as to what is happening now, however you have to include the business activities that took place, what the early business results were, and what has taken place in the past 12 months. The business activities are not just the business of the fiscal year, the year (or whatever period) that the company’s fiscal year is in, but also include staff, contracts that have been completed by the company’s current suppliers. It also includes all those activities where the company has received or sold assets, spent or invested cash, their retained cash, produced or acquired income from their independent or agency auditors, consulting firms that they have worked for or anything else that has taken place or not taken place in the last 12 months. The banker should be comfortable with the details that he or she is hearing while being able to provide quotes and raise other questions.
The next question that a bank will ask is: What is your business plan? In order to have this part of the business plan organized and researched, you will need to have an interview with the person the bank is asking you questions to help you establish facts and data. The person who is interviewing you will want to hear all there is to know about how your company is going to operate be efficient, how is it going to cost money to operate and what the payback period is.
Financial Information will answer some of these questions. This is where you will be able to show in numbers what the profitability is for your business, if all of the costs have been covered and what your net profit (if this was never a number in the business plan) will be for the Bank which you are applying for money, and for day-to-day operations of the business. The bank wants to be able to see if you did things in the past to achieve this profit and loss if you have enough cash to last until operations start running to profit and also at what rate from month to month due to the fact that some of the numbers should be easier to track through the year, and some would be harder to track because month-to-month cash flow is enterprise accessible since your business can only record transactions when one month is processed, while from day-to-day…
Controlling Activities will be one of the most important things for the bank. The bank wants to know that you have got some knowledge of how you are going to control all of the different areas of the company to help it run as smoothly as possible, because a cash flow is a very good indicator of the potential for a payback with the chosen investors, and what the budget behind the launch of the business will be. This is that bridge between your competitors and you, between where the company is coming from and where it is going to go-to for the whole next year and even the next ten years.
Last but not least is your strategy or business model. This is a major part of the plan that will show what your target market and the competition is, where you plan to go or where you plan on going, and how you are going to make money. The way you plan to do this will, again, be driven by the bank’s questions and needs. If you find that these necessities will not have been covered, you have to have a plan to address in the plan.
These are the basic stages of the business plan and will cover everything needed to present a business plan to a Bank Venture Capital Firm or Private Equity firm. The example below will generally represent the four phases of a business plan.
The executive summary is what a banker will have before he or she will formally request a loan. So you must include more information in the summary than just what your company does.
A business plan is how you execute your strategy or business model. This will cover where the company will be, who the company serves, how the company is going to do business, and ‘How’ it is going to do business. Also, this will cover each aspect of the company, in numbers.
Financial Plan details how you will run the business and how you will pay yourself, the potential capital raised, how you should receive financing for your business, how you will fund the company, and what the expected cash flow will be.