1-4-4-Business-Plans

Using a business plan to obtain finance

• A business plan is a document produced by the owner at start-up, which provides forecasts of items such as:

  • The business idea

  • The business aims and objectives

  • The target market

  • The forecast revenues, costs and profits

  • The cash-flow forecast

  • The sources of finance

  • The business location

  • The planned marketing mix

• The main aim of producing a business plan is to reduce the risk associated with starting a new business and help the owners to raise finance

  • Producing a business plan forces the owner to think about every aspect of the business before they start, which should reduce the risk of failure

Elements of a business plan

• Having carried out research to support the plan, the business will be well-informed about the potential problems and chance of success

  • The most appropriate source of finance can be selected, based on this information 

• A well-written business plan can help a business to obtain finance

  • Lenders (e.g. banks) and other investors will be able to explore the plan and make an informed decision about whether the business is credible and worth the financial risk

  • Investors (e.g. venture capitalists) will use the business plan to explore whether there is an opportunity to increase the value of their investment and make a worthwhile profit

  • The business, having carried out research to support the plan, will be well-informed about the potential problems and chance of success and can select the most appropriate source of finance based on this information

• A clear action plan provides direction for the business

  • It helps lenders and investors have confidence in the future success of the business 

• Most high street banks can provide a detailed template for business owners to complete when applying for finance.