Business plans are as diverse as businesses and usually necessary for obtaining institutional financing. There are various examples on the Internet and major banking institutions also publish examples of what information they are looking for in a business plan before they provide a loan. Provincial and federal governments also provide guidance on how to draft a business plan; for example, visit www.canadabusiness.ca. To be most effective, the business plan should be written by the entrepreneur. Nobody knows the business better than the person that is going to run it.
General components of a business plan include: brief introduction that will highlight the major features of your business proposal, title page, table of contents and executive summary. Busy business professionals may not read word for word your entire business plan, so make sure that your executive summary is not only succinct but gets to the heart of your business. To be sure, the executive summary should also outline the equity interest and security/collateral that you are offering.
Useful information to include in your business plan is a section on the current market of the industry. This deals with the supply and demand side of your business, which includes consumer analysis, as well as discussion with respect to your competition (i.e., size of the market, where it has been, where it is going and any trends that can be discerned from industry research). Once this background information is laid out, it will then be key to describe how your business can be differentiated from others that are currently in the marketplace. Of course, a lender will also be looking at business costs and whether you have a marketing plan and have assessed its cost.
There is lots of guidance out there to assist small businesses to access financing. And, getting to the heart of it, be prepared for key questions like, “How much money do you think you need?” The lender will want to know that you are being realistic, that you actually have some business experience or qualified education to make it a success. Do you have a good credit history? Are you going to provide a personal guarantee? Do you have a co-signer to secure the loan? Lenders love security and collateral. They are always looking to ensure that you have some “skin in the game.”
There are also non-traditional sources of funding that may be available to you right in your own back yard. For example, in Toronto, there is the ACCESS Community Capital Fund that helps small businesses obtain initial loans of up to $5,000 (www.accessriverdale.com). In Ottawa there is the Ottawa Community Loan Fund, which provides short-term loans of up to $15,000 (www.oclf.org). If you are a young entrepreneur, between the ages of 18 and 34, you may be able to receive financing through the Canadian Youth Business Foundation (www.cybf.ca). In addition, the Canada Small Business Financing (“CSBF”) loan may provide you that little bit of start-up capital to get your business off the ground. The CSBF is run by Industry Canada and hands out about 10,000 loans a year and each company can access up to $250,000 in financing.
In addition, credit lines from major credit cards are sometimes available for businesses. This can be up to $50,000 in start-up financing. No business plan is needed and usually no security is required. However, as with most term loans, you will likely share joint and several liability with that of the business. Other common forms of financing include venture capital financing and angel investors through such means as convertible debentures or a simple share purchase.