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Plan fundamentals for a bank loan: the one reader and the decision
Write the bank loan plan for one reader and one decision: a credit officer testing repayment, collateral, equity and support, then reshape each section.
What to take away
- A business plan for a bank loan answers one reader and one decision: a credit officer approving, declining, or approving with conditions.
- Credit officers must document four thingsrepayment source, collateral, owner equity, and secondary support.
- Fix the loan term and the monthly payment before writing projections, then build the rest of the model around that payment.
- Name the rule set you are writing to, such as SBA 7(a), SBA 504, or the Canada Small Business Financing Program.
- Label every figure as counted, quoted, or assumed, as set out in plan fundamentals, which fixes the reader and decision before drafting.
The one reader: a credit officer with a form
Credit officer's four questions
How is the loan repaid?
What secures it?
What does the owner have at risk?
Your plan is the evidence pack for those fields. Everything else is background the officer cannot score. A strong mission statement does not move an approval committee.
Two people may read the file. The relationship manager sponsors you. The underwriter can overrule the sponsor, and the underwriter never meets you.
The Small Business Administration publishes a standard business plan outline because lenders and partners read plans in that order. Following that sequence keeps you inside the checklist.
What lenders look for in a business plan
What lenders look for
| Test | What the officer verifies | Where it lives in your plan |
|---|---|---|
| Repayment | Cash flow after owner pay covers the monthly payment | Monthly projections, debt service line |
| Collateral | Discounted value of pledged equipment, vehicles, or property | Asset schedule, balance sheet |
| Equity | Cash the owner already put in and can document | Sources and uses, bank statements |
| Support | Guarantors, insurance, or a government guaranty share | Loan structure page |
Under a 7(a) loan the bank makes the credit decision and keeps part of the risk, while the SBA guarantees a share of the loss. Officers still underwrite as if the guaranty will not pay. A plan that treats the guaranty as its repayment argument reads as thin.
Rewriting each section before you draft
Rewriting each section
- Write the decision sentence first. This loan is repaid from this source at this monthly amount.
- Set the term from the use of proceeds. Equipment amortizes short. Real estate runs long.
- Build the debt service line, then work backward to the revenue needed to cover it.
- Attach a source and a label to every assumptioncounted, quoted, or assumed.
- Delete any section that does not support repayment, collateral, equity, or support.
One reader, one decision. If a paragraph does not answer the officer's question, it belongs in an appendix or nowhere.
Example: a $250,000 equipment request at a community bank
Picture a machinist asking a community bank for $250,000 to buy two used CNC lathes. The owner drafts ten pages about craft and growth. The officer sees a five year request on machines with a seven year useful life and no appraisal.
The rewrite is short. Two appraisals, a purchase agreement, and a schedule listing the lathes as collateral. A cash flow page showing the lease payment the shop already makes and the loan payment that replaces it. Owner equity documented from a savings statement.
The officer now has four completed fields and a reason to recommend approval. That is the entire job of the document.
The Canadian route: lender-administered guarantees
In Canada the Canada Small Business Financing Program runs through banks and credit unions. The lender decides, registers the loan, and the program shares the loss. The borrower pays a registration fee, which can often be financed into the loan.
Write the same way for a Canadian lender. Repayment, collateral, and equity evidence still carry the file. Read the program rules before assuming a guaranty replaces a cash flow argument.
