What is an SBA Business Plan?
A business plan is a document that outlines a company’s concept, structure, strategy, goals, target market, and financial projections. It defines the mission statement and business model for prospective investors, financiers, and buyers to understand the business’s value.
An SBA business plan refers to a plan required for SBA loan approval. In addition to being necessary for financing, an SBA business plan is a vital tool that helps business owners run their business effectively by providing structure and direction for daily operations and long-term growth. The SBA offers guidance on the specific formatting for SBA business plans, which generally adhere to best practices.
There are three types of plans:
- Startup: The plan for a new company about to launch or that has just launched.
- Operational: Usually, a year-over-year plan for established businesses that outlines a company’s goals and growth projections.
- Scenario-based: An agile plan for companies in rapidly changing industries that may need to pivot their focus as they scale up.
Business Planning
Business planning is a foundational step for small business owners who want to start, grow, and sustain a successful business. A well-crafted business plan serves as a roadmap, guiding the development and expansion of a new business by helping business owners create a clear vision, set achievable goals, and outline the steps necessary to achieve them.
The Small Business Administration (SBA) recognizes the importance of business planning. It offers valuable resources to help small business owners learn how to write a business plan, access funding, and expand their operations.
By taking the time to create a comprehensive business plan, business owners can increase their chances of securing funding from investors and lenders and build a business that is positioned for long-term growth and success. Whether you are just starting or looking to grow your business, a clear and detailed plan helps you stay focused, make informed decisions, and demonstrate the value of your business to potential partners and investors.
Why are SBA Business Plans essential?
Not every SBA loan request requires a business plan, but many do – especially when requesting higher borrowing amounts. Even if your specific loan request doesn’t need it, including one can still help your approval odds.
Startups and newer businesses often need a plan because they don’t have financial data. A well-thought-out plan can show projected financial performance and cash flow.
Established businesses often have a plan from when they launched, augmented with an operational plan. An operational plan can help bolster an established company’s SBA loan application.
Think of it like your financial statements show where your company has been and how it got there, while your operational plan shows how it will build on that history for a prosperous future. The two sources can create a powerful narrative as to why your company should be entrusted with a business loan.
Defining a business plan can help you identify and prioritize the company’s essential financial needs. It also enables you to determine the best ways to fund your business’s growth and operations by outlining how to obtain and manage the necessary funds. In doing so, you can also identify the SBA business loan package that will best help you meet those needs.
Defining Your Business
Defining your business is a critical first step in the business planning process. For small business owners, this means taking the time to clearly identify your mission, vision, and core values, as well as the products or services you offer, your target market, and what sets you apart from the competition.
A well-defined business model is crucial for crafting a business plan that distinguishes it from others to investors and lenders. Business owners should thoroughly research their industry, market trends, and competitors to ensure their business model is both unique and compelling. By investing time in this foundational area, small business owners can create a strong plan that guides every aspect of their business, from marketing to operations, and sets the stage for long-term success.
Business Model
Your business model is the blueprint for how your business will generate revenue and deliver value to your customers. It outlines the key elements of your business, including your products or services, pricing strategy, marketing and sales channels, and cost structure.
Small business owners should explore various business models, such as subscription-based, freemium, or pay-per-use, to find the approach that best aligns with their goals and industry. The SBA offers training and resources to help business owners develop a business model that maximizes value and supports sustainable growth. By carefully considering and selecting the right business model, small business owners can create a strong foundation for their business and increase their chances of success in a competitive market.
How do I craft an SBA Business Plan?
There are several essential categories to include when writing a plan for an SBA loan. The following aspects are primarily based on a startup plan, but you can also apply them to an operational or scenario-based plan. Some small businesses use business plan software.
A strong business plan demonstrates financial preparedness and the ability to repay the loan. The work involved in creating a business plan pays off by providing a clear roadmap for your business, and you can manage the work by breaking the process into manageable steps.
Executive Summary
The executive summary provides a concise overview of the business, highlighting key details such as the business name, location, and financial requirements. This introductory section should include what your company is and why it will be successful. You should consist of your main competitive advantage, USP, and the mission or vision statement.
The summary should also preview the upcoming sections by presenting the key information. You should briefly summarize your leadership team, sales and marketing goals, and financial projections. Lenders require a summary of management expertise, highlighting the leadership team’s experience and qualifications.
Company Description
In this section, you’ll drill down into what makes your company unique. You’ll want to expand your competitive advantages and the “secret sauce” to your success. Advantages could include having an expert on the leadership team, being in an ideal location, or bringing patented technology or IP to market.
Detailed descriptions in the business plan should include the lifecycle of the products or services and any intellectual property held. The description should consist of what problems your company seeks to solve. List the target segments your company plans to serve, including consumers, businesses, or organizations.
Market Analysis
In this section, you’ll use market and competitor research to demonstrate your knowledge of the industry and your target segment. You should expand on how your competitors operate and highlight their successful strategies. You’ll then showcase how you can improve or do things differently to compete in the market.
Organization and Management
The organization and management section describes your company’s legal and organizational structure. You’ll determine whether the company will incorporate as a general or limited partnership, an LLC, an S-Corp, or a C-Corp. You should also identify the owners.
You’ll include the organizational chart in this section as well. The organizational chart outlines who’s in charge of the company, typically comprising an executive leadership team and possibly a management team. Consider including the resumé or CV for each member of your leadership team.
Service or Product Line
You’ll use this section to identify what products or services you intend to sell. You should identify the market need for the products/services and how they will benefit your customers.
The products or services described should include any plans for IP copyrights or filing patents. Include any research and development plans as well.
Marketing and Sales
Your marketing and sales plans should outline your strategy to attract and retain customers and how you will process sales. There are numerous marketing and sales strategies employed across various industries, and your plan may evolve as your business expands. The marketing plan should outline a promotional strategy and a budget for targeting the target audience.
Marketing plans should include your branding strategy, your marketing channels (print, TV, social media, banner ads, SEO, etc.), and your target customers. Your sales strategy should include how you intend to collect and process payments.
For example, will you invoice customers or sell on credit? What point-of-sale system and payment methods will you accept if opening a store or physical location? If you’re selling online, how will your eCommerce platform operate?
Funding Request
You’ll only include this section if you are requesting funding for your business operation. The request should identify how much you need, how long the funds will last, and how you’ll use the money. There are different ways to fund your business, such as using personal savings, seeking investors, or applying for loans.
One of the critical decisions is whether you’re looking for equity financing or a business loan. In equity financing, you sell a portion of your company’s ownership for funding. In addition to selling shares in your company, equity financing might include a seat or seats on your board of directors. There are various ways entrepreneurs can secure funding for their business, depending on their needs and goals.
With a business loan, on the other hand, you don’t give up any ownership in the company, but you do incur debt. The funding request is most likely for a business loan if you’re preparing the plan for the SBA. When submitting loan requests, also specify your requested terms.
Financial Projections
This section aims to show that your company is viable and stable. The goal is to convince the reader that your company is or will be a success. Financial forecasts are crucial for demonstrating a business’s fiscal viability and typically require 3 to 5 years of projections.
Established businesses should include income statements, balance sheets, and cash flow statements for the previous three to five years. List any collateral you could offer for a business loan.
Startups and established businesses should provide a prospective financial outlook for the next five years. New companies should include quarterly projections for their first year in business. Future financial plans include projected income statements, cash flow statements, and balance sheets.
Appendix
The appendix of the business plan should hold all supporting documents that validate the information presented. You can use this section to list any requested information as well.
Examples of supporting documents:
- Credit histories
- Resumés or CVs
- Product pictures
- Reference letters
- Business licenses and permits
- Patents, contracts, or other legal documents
Implementing the Plan
Turning your business plan into reality requires careful execution and ongoing management. Small business owners should break down their plan into actionable, manageable tasks, assign responsibilities to team members, and set clear timelines and budgets for each step.
Regularly reviewing progress and updating the plan as needed helps ensure that your business stays on track to meet its goals. The SBA provides training and assistance to help business owners effectively implement their business plans and access the necessary funding to grow their businesses. By following your plan, staying focused on your objectives, and making adjustments as your business evolves, you can overcome challenges and achieve lasting success.
How to apply for an SBA Loan:
United Capital Source can help you apply to an SBA-approved lender following these steps. It is essential to have a well-prepared business plan submitted with your loan application, as submitting a comprehensive plan increases your chances of approval and demonstrates your readiness to lenders.
Step 1: Ensure You Qualify
You’ll need a credit score between 650 and 700, as well as a healthy and consistent cash flow. How you intend to use the money plays a significant role as well.
Step 2: Gather Your Documents
Be prepared to provide:
- Driver’s License
- Business license or certificate
- Voided Business Check
- Bank Statements
- Credit Reports
- Business Tax Returns
- Credit Card Processing Statements
- 3 Years of personal and business tax returns
- Personal Financial Statement
- List of Real Estate Owned
- Debt Schedule/Loan/Rent/Lease Documentation
- Deeds/Title/Ownership documentation for any collateral/Security
- Current Profit & Loss Statements and Balance Sheet Year-to-Date
- A/R and A/P Reports
- Business Plan
- United Capital Source 1 Page Application
Step 3: Fill Out the Application
You can begin the application process by calling us or filling out our one-page online application. Either way, you’ll be asked to enter the information from the previous section along with your desired funding amount.
Step 4: Speak to a Representative
Once you apply, a representative will reach out to you to explain the repayment structure, rates, and terms of your available options. This way, you won’t have to worry about any surprises or hidden fees during repayment.
Step 5: Receive Approval
SBA Loans through our network generally take 3-5 weeks to process. Once approved and your file is closed, funds should appear in your bank account in a few business days.
Frequently Asked Questions
Here are the most common questions about writing a business plan for an SBA loan request.
Does the SBA require a Business Plan?
The answer to this question comes down to the specific loan you’re requesting and the SBA lender you’re working with. Sometimes, the SBA might require a plan, and sometimes the lender might need it. It can help bolster your loan application even when it is not required.
Does the SBA help write a Business Plan?
The SBA offers various resources and tools to assist you in developing a plan. The SBA provides comprehensive guidance, samples, and interactive tools to help you create a business plan that meets the needs of lenders and investors.
The SBA’s Business Plan Tool allows users to work through the writing process at their own pace. Visit the SBA website for resources like the SBA business plan template.
If you need additional help, small business development centers are available to help you write a plan.
Small Business Administration Resources
The Small Business Administration (SBA) is a vital resource for small business owners at every stage of their journey. Through the SBA website (SBA.gov), business owners can access a wide range of free tools, including business plan templates, startup guides, and planning resources.
Local SBA offices offer personalized assistance and training on topics such as funding, marketing, management, and taxes. The SBA also provides access to capital through loans and grants, helping small business owners find the funding they need to start, grow, and sustain their businesses. By leveraging these resources, business owners can learn how to craft a comprehensive business plan, connect with potential investors, and establish a solid foundation for growth.
The SBA’s support extends to helping business owners stay informed about the latest updates, regulations, and best practices. For the most current information and tools, visit the SBA website, which is regularly updated and serves as a vital resource for small business owners seeking to start, grow, and succeed.
What is a Lean Business Plan?
A lean business plan is a shortened and streamlined version of a standard plan. Lean startup business plans focus on summarizing only the most critical points. Some lenders and investors may request additional information beyond what is included in a lean startup business plan.
It does not provide in-depth information and only outlines the key elements of the plan. Lean business plan sections include:
- Key partnerships
- Key activities
- Key resources
- Value proposition
- Customer relationships
- Customer segments
- Channels
- Cost structure
- Revenue streams
Should I write a Traditional or Lean Business Plan?
If you’re applying for an SBA loan, you should include a traditional business plan. The SBA and SBA lenders prefer companies with an in-depth strategy for success.
Traditional business plans tend to be comprehensive and may be dozens of pages long. The Small Business Administration identifies nine components of a conventional business plan. Traditional business plans are more common and require more work upfront.
Lean business plans are usually for startups, whereas traditional business plans are for any company. You might only need a lean plan if you’re applying for an SBA microloan, specifically for startups.
Traditional Business Plan Pros & Cons
Pros:
- In-depth analysis of the company and projected success.
- Sets specific goals and milestones to measure success.
- Keeps leadership, operational, marketing, and sales teams aligned and informed.
- It’s the standard plan requested for business loan applications.
Cons:
- More time-consuming and challenging to write.
- It might be difficult to project financials accurately.
Lean Business Plan Pros & Cons:
Pros:
- Typically, it only takes one page and takes only an hour to make.
- Summarizes only the most critical information.
- Ideal for startups, agile businesses, and companies in volatile industries.
Cons:
- Does not provide in-depth information about the company.
- Does not provide a detailed plan to achieve goals.
- Lenders and investors may request more information.
Can my Business Plan change over time?
Yes, it is common for a plan to change or evolve over time. Industries, trends, and your competitive market almost always change; therefore, your business plan should adjust accordingly.
It’s recommended to update your business plan at least once a year, or whenever you make significant changes, such as upgrading or adding products/services, changes in ownership or executive leadership, relocating, or pivoting into a new market segment or industry.
SBA Business Plan – Final Thoughts
Successful small business owners plan. A business plan helps clarify your company’s mission, products or services, financial goals, and other key aspects. A solid plan helps get everyone in the organization on the same page and working towards the same goals. A well-crafted business plan can also help turn your business ideas into a concrete, actionable strategy.
A plan is also essential when courting financing for your company, whether you’re looking for investors, buyers, or a business loan. A business plan is also valuable for helping your business recover from unexpected challenges or setbacks, as it provides a roadmap to restore operations and stability. Luckily, the SBA outlines its preferred plan format, which we discussed in depth. Preparing your business plan according to the SBA’s format is a vital step in preparing an SBA loan application.
Contact us if you need more guidance on business plan formatting or if you’re ready to apply for a small business loan. Our alternative financing experts can help you find the ideal financing options tailored to your business needs.
