There are three models of business financing: at own expense, at the investor’s expense or at the expense of the loan. In this article, we will consider financing a business plan at the expense of credit funds.
Excel model of a business plan for a bank loan
Lending, as an opportunity to finance capital, is more acceptable to businesses. The task to make enough money to pay off the debts and continue a free, financially independent activity is the most acceptable for entrepreneurs.
It should be noted that lending can be carried out not only by banks, but also by other parties like organizations or individuals. The main purpose of lenders is to return money and obtain an economic benefit, i.e. a percentage from the loan amount.
Loans for business development is quite common in the United States. In order to start a project, you need to contact banks that are able to offer a loan for five years. Interest rate varies in different countries. In the USA, for example, you can take a loan at 10% per annum.
Things to be emphasized in a business plan for a lender
It is necessary to guarantee the business is stable and profitable in order to have a chance to obtain a loan. It should also have a transparent organizational structure and a complete list of all investors. Credit history is of great importance too.
A free cash flow is calculated in the business plan, which enables to show the company has enough money not only for the development, but also for the repayment of loans. If you calculate the net free cash flow, the creditor will be able to verify whether the funds will remain after financing the costs of developing and repaying the loan. The positive value of this indicator means the company has good prospects and is solvent. Indicators of cash flow should be emphasized in the business plan.
Types of bank lending for businesses
Overdraft is the type of lending allowing make payments even when there is not enough money on the current account. After the funds are received, the overdraft debt is written off automatically.
However, if the amount of revenues is not sufficient to write off the full debt value, a loan is provided for an amount that is insufficient to repay the debt. As a rule, in order to obtain a bank overdraft, it is necessary to provide a credit support. This may be a pledge of real estate.
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