THE SOUTH CAROLINA

SMALL BUSINESS DEVELOPMENT CENTER

BUSINESS PLAN OUTLINE AND CLIENT LOAN APPLICATION

 The following forms are for your reference in preparing Business Plans and Loan Applications. Other samples and suggestions are available from your banker, library, bookstores, publications, etc. You are encouraged to use the forms that most fit your particular business and what your financial institution requires. The forms attached are presented for all types of small businesses. The more complex the nature of your business, or the greater the amount of your loan request, the more detailed your presentation must be. Please be prepared to expand your business plan and pro forma statements if it will present a better picture of your business or financial needs. Use this material as a guide. A formal business plan should be written in narrative form.

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CONTENTS

SUMMARY OF LOAN APPLICATION

LOAN REQUEST

STATEMENT OF SOURCES AND USAGES OF FUNDS

STATEMENT OF COLLATERAL

BUSINESS PLAN

START-UP COSTS (IF APPLICABLE)

FINANCIAL STATEMENTS

LEASE AGREEMENT

RESUME(S) OF KEY PERSONNEL

ATTACHMENTS

PROFIT AND LOSS STATEMENTS

CASH FLOW STATEMENTS

PERSONAL FINANCIAL STATEMENTS

Information contained in the financial statements and projections presented in this loan package are to be supplied by the client. The Small Business Development Center (SBDC) does not assume responsibility for their accuracy.

The SBDC IS NOT the SBA (Small Business Administration), whose South Carolina office is located in Columbia. We will assist clients in the preparation of a loan package for presentation to a bank and/or the SBA (if applicable), but have no authority to approve loans or disburse funds.

Copyright 1997. Duplication of this material without expressed written consent of the Small Business Development Center is prohibited.

DECISIONS AND DEFINITIONS REGARDING CAPITALIZATION

1. EQUITY: What the owner(s) put into the business, but also what relatives, friends, and nonprofessional investors contribute. This is also called "capital." In consumer lending it is called "down payment."

2.  

1. DEBT: Borrowed money that must be repaid with interest.

2.  

1. 5 C’S OF CREDIT: Banks, Savings and Loan, and all other lenders look at five (5) critical areas, often referred to the "Five C’s of Credit."

CAPITAL

COLLATERAL

CASH FLOW

CHARACTER

CONDITIONS

SUMMARY OF LOAN APPLICATION

APPLICANT:

BUSINESS:

TYPE OF BUSINESS:

SIZE OF BUSINESS:

NAME OF OWNER:

METHOD OF ACQUISITION:

AVAILABILITY OF FUNDS

FROM NET WORTH OUTSIDE

OF BUSINESS:

LOAN REQUEST

AMOUNT: $_________________

TERMS: ____________________(YEAR/MONTHS)

(State no prepayment penalty, when you request first payment to be due, terms of loan, line of credit, etc.)

INTEREST RATE: ________________(May be stated at rate indicated by your bank in a preliminary meeting, prime +1 or prime +2, current rate, etc. Final rate will be determined by current conditions, perceived risk of the industry, and perceived risk of the individual business and owner.)

COLLATERAL: Summarize assets itemized on page 4. (List assets currently free of debt.) These assets may be business assets or personal assets, as well as personal guarantees, etc., per attached. Loan to value percentages (Amounts commonly used in commercial lending) are generally as follows:

ASSET LOAN TO VALUE RATIO

Real Estate 75-80%

Undeveloped real estate 50-80%

* Inventory (Real) 35-50%

* Equipment - New 70-90%

* Equipment - Used 50%

Accounts Receivable 70-90%

(only good Receivables)

* Varies depending on type of inventory and equipment

OTHER CONDITIONS: (e.g.: life insurance for length of loan, financial statements provided every 1-3-6 or 12 months)

PURPOSE OF LOAN: PLEASE STATE THE PURPOSE OF THE LOAN. Purchase of the business, purchase of fixed assets, working capital inventory, line of credit, seasonal peak, growth, etc. Sources and Uses of Funds Schedule on the next page should support this answer.

STATEMENT OF SOURCE AND USE OF FUNDS

DESCRIPTION USE OF FUNDS SOURCE OF FUNDS

EQUITY LOAN

LAND & BUILDING _____________ _______ ______

INVENTORY _____________ _______ ______

FIXTURES AND EQUIPMENT _____________ _______ ______

CLOSING COSTS _____________ _______ ______

WORKING CAPITAL _____________ _______ ______

LEASEHOLD

IMPROVEMENT _____________ _______ ______

CONSTRUCTION LOANS _____________ _______ ______

GOODWILL _____________ _______ ______

START-UP COST

(See Page 23) _____________ _______ ______

TOTAL

Attach an itemized list to support totals in inventory, fixtures, equipment, leasehold improvements, etc. above. Supporting documentation is needed to let the lender know where the borrowed funds are going (i.e. bids from contractors, suppliers, etc.). This is to ensure from the lender’s perspective that funds borrowed will be used for the purpose requested.

STATEMENT OF COLLATERAL

INVENTORY - Attach schedule. (Please do not list out-dated inventory.)

ACCOUNTS RECEIVABLE - If existing business. (Attach aged schedule, be sure these are good receivables.)

EQUIPMENT AND FIXTURES- (Attach schedule which includes name of equipment, name of manufacturer, type of equipment, serial number, cost, present market value of equipment, and present loan balance(s) on equipment.)

LAND, BUILDINGS OTHER ASSETS - (Attach schedule of business and personal assets as necessary. These assets should be free of other debt or have substantial equity built up.)

TOTAL COLLATERAL

BUSINESS PLAN

NAME OF BUSINESS

State the legal name of the business.

Address

Business phone number

State owner(s) or prospective owner(s) names

Address

Phone number

State the legal form of ownership (Sole proprietorship, partnership-obtain copy of partnership agreement and percent ownership, or an S or C Corporation).

INFORMATION ABOUT THE BUSINESS:

Type of business:

State the general and specific nature of the business. State the type of business.

What do you sell? What product(s) do you produce? What service(s) do you provide?

Describe the products and/or services. State who buys the products/service and who the final users are (briefly).

Describe how the product and/or service is sold to the customers.

Describe how and where the buyers get the product/service.

Comment on the quality of the product/service.

Estimate the average price of the product/service. (Manufacturers will need to provide detailed manufacturing cost data later in the business plan.)

History of the Business:

If the business is new, say so. If existing, discuss the age of the business, subsequent owners, how it was acquired, and how long it has been operated by the current owner? If you are trying to buy an existing business, why does the current owner want to sell?

Include the following:

Image or reputation

Number of employees (estimate)

Last year’s sales volume and profit (Will need tax returns)

Any significant events that have affected the company’s development

Date the company was founded

Building and Facilities:

Give addresses and descriptions of the area buildings (include square footage). State if rented, leased or owned. If rented or leased, state from whom and under what conditions. A copy of your lease agreement would be helpful. For start-ups, it is recommended that you do not enter a lease until funding is provided. However, the lender will want to know the terms of your lease before you enter the agreement.

If renovations are required, bids from licensed contractors are necessary. For historic buildings or districts, some renovations may need to be approved by local city or town officials. Renovations for leased property can be difficult to finance because the lender can’t use it for collateral.

Describe the type of access to the building for customers: such as major roads, freeways, walking, parking, etc.. How many parking spaces are available?

Is the location good for customer convenience? Is location important to your customers?

What are your operating hours?

Personnel:

For the present and future, state the number of employees, type of labor, source of labor, and time of hiring. What is your expected pay rates? If you are purchasing an existing business, do you plan to make any personnel changes?

Provide job descriptions for key employees. What qualifications do they have? Provide a resume if available, especially for key personnel.

Economic and Accounting:

State how prices are or will be determined and by whom.

State what financial records will be kept and by whom. (If you have a CPA, give name and address.)

How do transactions take place? When do your customers pay you?

Inventory:

Describe what inventory, raw materials and/or supplies the business uses.

List your suppliers. Include names, addresses, type and percentage of supplies furnished, length of time you have been buying from each, reliability and frequency of purchase. How long does it take for you to get your inventory after you have placed an order (lead-time)?

How easy or difficult is it to get necessary supplies? If it is difficult, how will you deal with potential shortages?

Are the prices of your supplies steady or fluctuating? If fluctuating, how do you deal with changing costs?

How are purchasing decisions made?

Future Plans:

State your business goals and personal goals. They should be obtainable. Business goals could include sales over a period of time, number of customers, coverage of a certain territory, etc. Personal goals could include learning different functional areas of the business: mastering inventory control, financial management, etc.

MARKET ANALYSIS

Customer:

What is the market, who are your customers?

Why does this market need your product or service? Is your product a fad or a continuing need; being phased in or created by new technology?

List the characteristics of your average customer: age, geographic area, income, gender, lifestyle (family, single, divorced), working, etc.

What do customers like and dislike about your product or service? (If you don’t know, ask!)

Estimate the size of the market in terms of customers if possible. Ask suppliers, libraries, etc.

Estimate how much the total market will spend on this or similar products in the next year.

Have you surveyed potential customers? How often will they use your product or service? How much are they willing to spend for it?

Environment:

Discuss any environmental factors (economic, legal, social, or technological) that affect your market or product (e.g. interest rates for construction, Department of Health and Environmental Control (DHEC) regulations for gasoline tanks, regulatory concerns for your industry, etc.).

Environmental factors are those that have significant effects on your operation, but over which you have little control (county growth, rising energy prices, potential government environmental restrictions). These are things normally external to the business.

Competition:

List major competitors (names and addresses) and discuss their product features, price, location, distribution of products, reputation & image, market share, size, age, product quality, and market strategy. Have you visited your competitors? What can they do better than you? Why will a customer do business with you rather than them?

Discuss how your product meets market needs and how you compare with the competition in terms of product features, location/distribution, price, etc.

Compare your estimates of the market’s demand and the competition’s supply.

The relationship of supply and demand will affect your marketing and sales strategy, (high demand with low supply usually means less competition and less advertising). Conversely, low demand and high supply indicates a very competitive situation and a need for extensive marketing.

MARKET STRATEGY

Sales and Promotion Strategy:

Present the marketing strategy, including how you will get the edge on the competition and attract customers. This is the action plan for the business. The product will sell if one or more of the following is attractive: features, pricing (high, medium, low), distribution system, quality, and promotion. What are you going to do to get customers?

State how you will promote: advertising, direct mail, personal contacts, sponsoring events, or other (word of mouth, trade associations).

If you plan to advertise, state what media you will use: radio, television, newspaper, magazines, telephone book, etc. State why you consider the media you have chosen to be the most effective and the amount it will cost you to use it. Who will design your ads for you?

State the content of your promotion or advertising. (What is your product? Why is it attractive? Do customers know your business location, business hours, business phone number, etc.?) When you are designing your advertising, remember you are seeking to satisfy someone’s need.

MANAGEMENT

Why have you chosen this type of business? For key management personnel, include the following: resume, personal financial statement, tax returns for the last three years, and a personal family budget.

(Family budgets are used to determine if the business can support both family and business obligations and are very important for startup businesses.)

Describe prior experience that qualifies management to run this type of business. State why you feel you can run this business. State how much time management will devote to running this business. Discuss local contacts who may assist you in your business.

FINANCIAL STATEMENTS

STATEMENTS-HISTORICAL AND PROJECTED

If business is an existing one or a buyout, include business tax returns and financial statements for the last three years. Financial statements should include:

Balance Sheet

Income Statement

Accounts Receivable and Aging Schedule

Accounts Payable and Aging Schedule

Debt Schedule

Reconciliation of Net Worth

For existing and new businesses, project the following financial statements for at least one year (itemized monthly). Most banks require three years of projections.

Income Statement with explanations (Sales, expenses, profit)

Balance Sheet

Cash Flow with explanations

Personal Financial Statements should be completed for each owner, partner, or shareholder. Please include personal tax returns of each, for the last three years.

Projections and Start-Up Costs

Give your projections in terms of the number of customers, items sold or contracts obtained. Please give an explanation of how the numbers were derived. Projections should be monthly. Start-up businesses will need to provide a list of start-up costs. Financial sheets follow.

BALANCE SHEET

CURRENT ASSETS

CASH ___________________

ACCOUNTS RECEIVABLE ___________________

INVENTORY ___________________

OTHER ___________________

FIXED ASSETS

MACHINERY EQUIPMENT ___________________

FURNITURE & FIXTURES ___________________

VEHICLES ___________________

REAL ESTATE ___________________

INTANGIBLES ___________________

ACCUMULATED

DEPRECIATION (__________________)

OTHER ASSETS

LICENSES ___________________

GOOD WILL ___________________

TOTAL ASSETS ___________________

CURRENT LIABILITIES

ACCOUNTS PAYABLE ___________________

NOTES PAYABLE ___________________

(DUE WITHIN ONE YEAR) ___________________

LONG-TERM LIABILITIES

NOTES PAYABLE ___________________

(DUE AFTER ONE YEAR) ___________________

OTHER LIABILITIES ___________________

TOTAL LIABILITIES ___________________

EQUITY(CAPITAL, ASSETS-LIABILITIES) ___________________

OWNER’S CONTRIBUTION ___________________

OTHER EQUITY ___________________

RETAINED EARNINGS ___________________

PERSONAL

COST-OF-LIVING BUDGET

REGULAR MONTHLY PAYMENTS PERSONAL EXPENSES

Rent or Mortgage $__________ Clothing, cleaning,

(including taxes) laundry $__________

Cars (inc. Insurance) __________ Drugs __________

Appliances/TV __________ Doctors & Dentists __________

Home Improve. Loan __________ Education __________

Health plan __________ Dues __________

Life Ins. Premiums __________ Gifts & Contributions __________

Travel __________

Other Ins. Premiums __________ Newspapers, Magazines,

Books __________

Miscellaneous __________ Auto upkeep, gas &

parking ___________

TOTAL $ __________

Spending money,

allowances __________

HOUSEHOLD OPERATING EXPENSES

TOTAL $ _________

Telephone $ _________

Gas & Electricity _________ Personal Prop. Taxes __________

Water & Garbage _________ Other Taxes __________

Other household exp., TOTAL __________

repairs, maintenance _________

TOTAL $ _________ BUDGET SUMMARY

FOOD EXPENSES Reg., Monthly pmts. $_________

Food-at home $_________ Household Operations

Expenses _________

Food-away from home __________ Food Expenses _________

Personal Expenses _________

TOTAL $__________

Tax Expenses _________

MONTHLY TOTAL $ _________

STARTING COSTS

Fixtures and equipment $ Obtain estimate .

Decorating and remodeling $ Talk to a contractor .

Land & Building $ Talk to realtor or owner .

Installation of equipment $ Talk to suppliers of these items .

Starting Inventory $ Suppliers should help you estimate .

Deposits with public utilities $ Ask your public utility .

Legal and professional fees $ Lawyer, accountant, etc. .

Licenses and permits $ Ask city offices .

Advertising, etc. For opening $ Ask newspapers, radio TV stations, etc .

Accounting receivables $ Will you extend credit? Terms? .

Cash $ For unexpected expenses .

Other (Insurance, etc.) $ Make a separate list .

TOTAL ESTIMATED START UP COST $ .

ESTIMATED MONTHLY BUSINESS EXPENSES

ITEM

Salary of owner-Manager $ Do cost of Living Budget .

Other Salaries & Wages $ .

Payroll Taxes $ .

Advertising & Promotion $ .

Car & Delivery $ Is travel necessary? Freight? .

Depreciation $ .

Insurance $ Payment required by insurance company .

Laundry & Cleaning $ .

Legal/Professional $ .

Office Expense $ .

Rent or Mortgage $ Lease Agreement? .

Repairs & Maintenance $ How old is your equipment? .

Supplies, Operational $ .

Taxes & Licenses $ Contact City, County, State Officials .

Telephone $ Contact Phone Company .

Utilities $ Contact Power Company .

Other $ .

Miscellaneous $ .