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Lenders view the plan as having forced the business owner or entrepreneur to look carefully in a critical way into their business project. They feel that if the company needs to grow or be successful such a document will guide the business person to their goals. Ultimately the plan is a concise document which in effect communicates the business persons ideas to the lender.
In theory the business plan should identify areas of weakness or strength. If truth were to be known of course business plans tend to accentuate the positive. The writer of this article has a favorite saying - ' I never met a pro formal financial I didn't like '!
More about that last comment later, but suffice to say that in theory a good document geared towards financing should balance both the positive and negative aspects of the business and its financials. A solid business plan geared towards a lender will show you have ways of solving some of the business challenges raised in the business model and it's proposed financing.
We all know that stat's - half of new businesses fail within the first two years, 90 % within the next ten years. Why is that the case. Business guru's tell us its lack of planning. That is precisely why a business plan geared towards lending and the financials should be used as a critical follow up in the business. It should not be stored away! As we all have learned, ' tuition is extremely high in the school of experience '!
Most importantly though people that don't know you, or might not know your business model use a properly created plan to evaluate your business and lend you funds. The ' business plan ' in effect is really a financing proposal. That's how we look at it in our firm.
Let us remember how a lender, who you in many cases don't know, thinks. First of all he or she is hoping the information you have provided is true. Remember also that the lender works for someone, and they must communicate your idea to an underwriter of investment committee. If you haven't met the lender, trust me you definitely have not met the underwriter or investment committee.
Some of us also might think that we are the only business plan the lender is reviewing. That is not the case, our plan might be among 10-20 others in an given lending environment. And finally, people have biases - they will benchmark your own projections against their past experiences. If your business plan and financials make them think of Microsoft and Rim they will dig into the plan, if visions of Nortel come to mind that won't be the case!
Therefore business owners should put forth their plan on the basis that it will be ' attacked' by the lender, so the business owner must counter with ' real ' upside potential. The lender must genuinely feel some sort of enthusiasm about the business.
The biggest secret of business plans, and yes, we are revealing it here, is that they generally are not read in totality by the lender. The real world dictates they are given a 5 minute read, and more careful emphasis is generally only placed on the financials. The owner should never think that either quantity or finesse in fonts and graphs will gain the funding they require.
In summary, we do not infer that a plan is in fact not required for a lender or financing, in fact a business owner or entrepreneur with no plan is, outside of luck, guaranteed to fail.
Stan Prokop is the owner of 7 PARK AVENUE FINANCIAL, ( http://www.7parkavenuefinancial.com ) a Canadian firm which originates business financing and business bank and operating credit financing for Canadian firms. The firm works with it's clients who require business plans for financing purposes.
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Office = 905 829 2653
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.
Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.
Stan Prokop
Article Source: http://EzineArticles.com/expert/Stan_Prokop/432698
Article Source: http://EzineArticles.com/3464862
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