How to write a business plan for a loan

Do you need a business plan to get a loan?

Usually only for a bank or SBA loan. Banks and SBA lenders typically ask for a business plan when the business is under two years old, is being bought, is opening a location, or is borrowing more than its history supports. Online lenders, cash advance companies and most equipment lenders decide on bank statements and credit, and rarely read a plan.

So if you are applying for an SBA 7(a) loan or a startup business loan, write one. For a short term online loan, spend the time on the document checklist instead. When in doubt, ask the lender.

What are the nine sections of a business plan for a loan?

Lenders expect these nine sections, in this order, and most fit on a page.

1. Executive summary. What the business does, the request, and how it is repaid.
2. Company description. Legal structure, ownership, location, history, licenses.
3. Market. Who buys, how many are within reach, who else serves them.
4. Products and services. What you sell, at what price, with the margin on each.
5. Management and ownership. Who runs it, experience in years, who owns what.
6. Operations. Location, equipment, suppliers, staffing, hours.
7. Marketing and sales. How customers find you and what it costs to win one.
8. Funding request and use of funds. Amount, product, term, and where the money goes, line by line.
9. Financial projections and repayment. Historical statements, a 12 month cash flow, three years of profit and loss, and the debt coverage.

What does an underwriter actually read first?

The funding request, the projections, the debt coverage and your experience, in that order. An underwriter opens the plan looking for four answers: how much, for what, can the cash flow carry the payment, and has this person done this before. The market section comes last, if at all.

Debt coverage decides most files: annual cash available for debt payments divided by annual payments on all business debt including the new loan. Most banks want 1.25 or higher and SBA lenders typically accept 1.15; see DSCR explained. Put that ratio on the first page of the financial section with the math shown, and give your experience in years and roles, not adjectives.

How long should a business plan for a bank loan be?

Ten to twenty pages for a bank or SBA lender, including the financial tables; five to ten for an online lender or a microloan intermediary. Longer is not better. Underwriters handle many files a week, and a 40 page plan signals that you could not decide what matters.

A practical split for a bank loan business plan: two pages for the summary and company description, three to four for market, products, operations and marketing, one for management, two for the funding request, and the rest for financials. Resumes, leases and quotes go in an appendix. If a lender gives you its own outline, follow it. The SBA business plan template covers the structure most SBA lenders use.

How do you write the funding request and use of funds?

State the amount, the product, the term, and a line by line list of what the money buys. This is the part of a loan business plan that lenders copy into the credit memo, so make it precise. "We request a $250,000 SBA 7(a) term loan over ten years" is right; "we are seeking growth capital" is not.

The use of funds should add up to the loan plus your own contribution: equipment with quotes, improvements with an estimate, working capital with the months it covers, closing costs. Lenders typically want an owner injection of 10% or more on startups and acquisitions, so show it as its own line. Then give the monthly payment, from the business loan calculator, and the cash flow that covers it.

What mistakes get a loan business plan set aside?

Numbers that do not match your tax returns, and growth no one can explain. Those two cost more plans their credibility than everything else combined. The rest of the list:

• Projections that start above last year's tax return with no reason given.
• Year two revenue that doubles with flat costs.
• No debt schedule, so the lender cannot calculate coverage.
• A use of funds that does not add up to the request.
• Market sizes with no source, or a national market when you serve one city.
• Titles instead of years of experience.
• Different numbers in the plan, the application and the personal financial statement.

Each is an hour or two to fix; why loans get denied covers what happens when they are not.

How do you use AI to draft it, and what do you check by hand?

Use AI for the writing and the structure, and keep the numbers and the facts yours. Start with our free business plan builder, which produces a lender ready outline and a prompt to paste into Claude or ChatGPT with your financials, or use the prompts guide one section at a time. Build the projections in the financial projections builder rather than asking a chat model to invent them.

Then check by hand: every number against your tax returns and bank statements, every lender or program name, every market size and its source, every competitor named. When the plan is done, apply here, or ask your AI assistant to apply for you through our MCP server; it attaches the plan with your documents and submits with your approval. See the agents hub.