How to Strengthen Your Business Plan Before Applying for a Loan
If you’re a small business owner or entrepreneur aiming to secure funding, having a strong, detailed, and compelling business plan is essential. But what does “strong” really mean in the eyes of a lender? To find out, we spoke with Tamara Jackson-Gatewood, Director of Lending at Michigan Women Forward. Drawing on her experience reviewing countless loan applications, Jackson-Gatewood offered valuable insights into what lenders look for and what common missteps can weaken your business plan and hurt your chances of getting approved for a small business loan.
1. Tell a Clear, Compelling Story
“The business plan has got to tell a story, plain and simple,” Jackson-Gatewood says. “What is the product or service you’re offering and what sets it apart in the market? How do you plan on making money from it, and how much are you personally invested?”
Too often, entrepreneurs devote too little time to describing exactly what they’re selling and why it’s unique. Don’t assume readers know your industry or product — spell it out clearly. Your story should let lenders quickly grasp your vision and recognize the gap your business fills.
Practical Tip: Develop a concise “elevator pitch” to insert into your plan. This short summary helps people — whether potential investors, partners, or customers — instantly understand your value proposition and why it matters.
2. Conduct a Thorough Market Analysis
“One of the biggest areas business owners overlook is market analysis,” Jackson-Gatewood explains. “We’re so close to our product or service that we sometimes think it’s the best in the market — or even that there are no competitors.”
Show lenders you’ve done your homework by detailing your target market, industry trends, competitive landscape, and any identified niches you can fill. This demonstrates you’re aware of potential challenges and have a plan to stand out.
Practical Tip: Reference reputable industry sources, research data, and local trends. Highlight how you’ll differentiate your offering in both a crowded and evolving marketplace.
3. Showcase the Right Management Team
Jackson-Gatewood stresses that lenders “want to see that your team can actually execute” what’s in your plan. It’s tempting to name friends or family as your management team, but avoid doing so unless they have specific expertise that benefits your operation.
“I see owners list CPAs, attorneys, or other professionals in their plans, but then the numbers don’t reflect that they’re actually paying for these services,” she notes. “The narrative has to match the financials.” In other words, if you claim you have seasoned executives or consultants, ensure your plan (and budget) support that.
Practical Tip: Include short bios that emphasize each team member’s relevant skills and experience. Show how their backgrounds or networks will help the company grow and meet its goals.
4. Present Realistic Financial Projections
Lenders ultimately want to know if you can pay back a loan. “We don’t expect you to be an accountant, but your numbers have to make sense,” Jackson-Gatewood points out. “Believe it or not, most lenders already assume most small business borrowers will have minimal profit the first couple of years, and that’s OK — that’s why you can’t quit your day job just yet!”
Accurate financial projections — balance sheets, income statements, and cash-flow forecasts — should reflect industry standards and be rooted in credible assumptions. Don’t inflate your figures to impress underwriters; you’ll lose credibility.
Practical Tip: Work with a trusted accountant or financial advisor to create or review your projections. Ensure any narrative about your anticipated growth aligns logically with your numbers.
5. Tailor Your Plan to Each Lender
Just as products and markets vary, so do lending institutions. “You might have a lender that only offers term loans, which is a fixed interest rate for a fixed period of time. And they may only offer that for specific reasons with specific collateral.,” Jackson-Gatewood says. “Others offer lines of credit or may finance certain expenses like inventory or marketing but not refinancing high-interest debt.”
Before submitting your plan, research the lender’s products, mission, and lending criteria. If they don’t refinance existing debt, you’ll weaken your pitch by requesting it. Adjust your plan so it reflects the lender’s policies and highlights the aspects of your business they typically fund.
Practical Tip: Use lenders’ websites or speak with loan officers to understand each institution’s focus. Then revise your plan to emphasize the points that matter most to that specific lender.
6. Include a Risk Management Strategy
A solid contingency plan can bolster a lender’s confidence in you. “Every business needs a backup plan if certain revenue streams dry up,” advises Jackson-Gatewood. “The pandemic showed us how quickly you might need to pivot.”
Address potential obstacles like inflation, supply chain disruptions, shifts in consumer demand or changes in the regulatory environment, and describe how you’ll mitigate them. Demonstrating foresight and flexibility can strengthen trust.
Practical Tip: List your plan B or plan C strategies clearly. If you’re an event planner, for example, mention alternative services like virtual consulting that could keep revenue flowing under challenging circumstances.
7. Build a Relationship with Your Lender
It’s smart to schedule time to meet with loan officers or business development managers well before submitting your application, Jackson-Gatewood says. Networking events, informational sessions, or introductory calls can help both sides assess fit. After funding, stay in touch by sharing updates, successes, and challenges.
Practical Tip: Treat lenders like long-term partners. A transparent, cooperative relationship can lead to future support — whether in the form of additional financing or helpful technical assistance services.
Strengthening your business plan isn’t about padding it with buzzwords or rosy projections, it’s about telling a clear, honest story that shows lenders you’re prepared and committed. As Jackson-Gatewood puts it, “We want to see how you’ll use the funds and be confident you can pay them back without jeopardizing your personal finances or your sanity.” By digging deep into each of these areas — storytelling, market analysis, team structure, financial projections, tailored proposals, risk management, and relationship-building — you’ll be far more likely to stand out and secure the financing you need.
At Michigan Women Forward, we don’t just stop at the loan closing,” Jackson-Gatewood says. “We have guardrails on either side — before you apply for a loan and after.” MWF offers technical assistance to help aspiring entrepreneurs and business owners with the loan process and connect them with services that can help them manage their loan and their businesses. “It’s a relationship. It’s not one-and-done,” Jackson-Gatewood says. “We want our loan clients to be successful.”
