Regardless of industry, location, or any other factor that defines your small business, you need a strong business plan. A business plan is like a guide to your business. It helps you set goals, create a budget, and implement marketing strategies. Not preparing a business plan is one of the biggest mistakes made by small businesses. In addition, a business plan is particularly important when it comes time to apply for funding. Randall Castillo Ortega, the founder of RACO Investment, discusses how to prepare a business plan properly before seeking funding.
A business plan is a guide that includes detailed information about your business, your future plans, your expenses, and more. It typically includes several sections, the executive summary, a company description, marketing strategies, market research, finances and financing. Explains Castillo, “The finance and financing sections are especially important when it comes to obtaining funding. These sections will show your lender what your projected expenses are, your projected revenue, and how much financing you need for your projects.”
It is your responsibility to prove to lenders that you are a responsible borrower and that you can pay your debt as agreed. Providing a business plan is a great way to do it. This can help your business demonstrate its financial capabilities so you can get the capital you need. Your company’s business plan should include all the information lenders may need to make their final decision. Anything related to your company’s finances and the potential to increase revenue or profits can be of interest to lenders, so it’s important to be detailed when preparing your plan.
One of the main difficulties that entrepreneurs routinely manifest is the problem of access to financing, which is usually related to either lenders and their own limitations to give credit, or with the inability of the promoter of the idea to present a reasonable business model to the financial institution.
Get the business plan ready in advance. Going to a lender involves talking about you to you between two professionals, one as a future entrepreneur, who is you, and the one who will finance the start-up of your business. This professional conversation requires you to be prepared with what they want to see, and among other things, it becomes essential that you have the business plan document fully ready and finished.
With the business plan, the drafts are over half-finished. It must be clear, concise and error-free. Asserts Castillo, “Take care of key aspects such as the image and presentation of it, make a good executive summary, develop and explain perfectly your business model, explain the feasibility calculations and accompany it with budgets of the whole investment.”
You know how important it is to show that the project is excellent, but it is equally important to make it clear to them that you are the ideal person to give you the financing and start that business. The lender should see three things. First, that you have the training, experience and that you are an expert in your sector. Second, that you have a proper financial profile, this is that it is not risky to invest in you as a manager, and for this, the level of risk cannot be high, which happens when you have a lot of indebtedness or it is estimated that the project will not generate enough. Third, have an evaluation in the room. If you don’t get this together, it’s not a matter of cheating the lender, you’ll be cheating yourself and you may be facing of failure.