March 22, 2023

Business Plans for SBA Loans

Zach Renta

Hey there, future business mogul! So, you want to purchase a business, but you need some financial help to make it happen? Well, have no fear, the SBA loan is here! But, before you go running to the bank, you need to have a solid business plan and financial projections in place. Even though it may seem like a waste of time since the business has clearly already been operating, you will need to show the lender and SBA that you have the knowledge, skills, and plan in place to keep things running as they have. Or even better, growing the business to somewhere it has never been.

Think of your business plan as the GPS that guides you from where you are to where you want to be. It should include details about your business idea, your target market, your products or services, your marketing plan, your competition, and your management team. Oh, and don't forget to tell the SBA how you plan to use their money! Having personally worked with the underwriting team at multiple banks, I can't stress how far a well laid out business plan can get you. Opening a file from a client and seeing a neatly prepared, content rich, business plan is a refreshing event.

Now, let's talk about financial projections. This is where you get to put on your fortune-teller hat and predict your business's future earnings. You need to consider your costs, your revenue streams, your market, and your competition. It's like a puzzle, but with money! In an acquisition, this is going to involve a deep dive into the seller's financials, and understanding different margins they've operated at in the past. Will you do the same, will the transfer of ownership automatically increase or decrease some expenses? 

When you're creating your financial projections, it's important to be realistic. Don't just pull numbers out of thin air (although that would be pretty cool if you could!). You need to have a good understanding of your industry and your business to make educated guesses about your future earnings.

Once you have your business plan and financial projections in place, it's time to submit your loan application to the SBA. They'll review your application, your credit history, your collateral, and your management experience to determine if you're a good candidate for a loan.

If you're approved for a loan, congratulations! You're one step closer to owning your dream business! But, before you go off celebrating, remember that you'll need to use the loan money for the purposes outlined in your business plan. And, you'll need to make regular payments to the SBA to pay back the loan.

In short, getting an SBA loan to purchase a business is like playing a game of Monopoly. You need to have a solid plan and a little bit of luck to come out on top. But, with a little hard work and determination, you can be the proud owner of your very own business in no time!

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