We discussed small banks and third party lenders last week in Part I.  This week in Part II we summarize 1-8 of the 11 things Lenders and Investors look for.

 1.  The Plan describes a marketable idea.

Lenders and investors want to see proof that customers want your product or service and are willing to buy it for a price that gains you a consistent profit.

2.  The Plan must show good profit potential in a short period of time.

Because new business ventures are so risky, they are expected to earn at least a 25% annual return, and preferably more.

3.  The Plan targets a clearly defined market with enough size and purchasing power to produce a profit.

 Lenders and investors look for businesses whose target markets are clearly defined. They also prefer large markets with high growth potential, but avoid businesses that try to be “everything to everybody.”

4.  The Plan explains clearly the “competitive edge” your product or service has in the marketplace.

The more unique your product or service is, the better.   Show how you offer the customer something the competitor doesn’t or can’t.

 5.  The Plan shows the company’s ability to control both the quality of the product or service and its delivery.

Dependence upon outside contractors and sales representatives can be considered a potential weakness when quality of delivery, installation, and service of the product is primary to the company’s success.

6.  The Plan shows that managers and employees have the skills and the experience to make the company a success.

Lenders and investors don’t put their money into a business; they put it into its people.  Skilled, experienced managers and employees can make a business work even when resources are stretched thin and conditions are tough.  Lenders and investors also know that experienced managers and employees will improve their chances of getting their money back.

7.  The Business Plan idea is not overly complex.

Trying to do too much too fast—and/or having to educate the consumer about a product’s or service’s benefits–can put a company under before it can even get started.  This applies to expansion plans as well as start-ups.

8.  The Plan shows a personal investment in the business.

If you don’t believe in your own venture enough to invest at least some of your own money into it, no one else will want to either.  “Sweat equity”–unpaid personal time and hard work–can be important, but lenders and investors prefer to see an entrepreneur motivated by a substantial financial stake in the business.

Next week in our Part III conclusion, we will summarize 9-11 and answer the question:   “BUT – What if you aren’t able to secure funding?”

 Compliments of Lew West Business Consultants 

 www.lewwest.com  Blog  www.MyNext30.com

First off, don’t write off the smaller banks too quickly.  A number of small banks have funds available and are often more willing to loan them, but you need to have been in business for over two to four years, depending upon the lending institution, and show proven profitability.  It isn’t easy, but if you have a sound company with a good plan you may be able to secure those needed funds.

Third Party Lenders are often a good source when banks decline your loan request. When you can show you have a healthy company they are usually able to be more creative than a bank. The criteria still includes showing a history for the business, and that it is capable of making a profit.

Potential lenders or investors are keenly aware of the risk and want a return matching that risk:  the greater the risk involved in the venture, the greater the return demanded.  There are a number of factors they will take into consideration when reviewing your Business Plan, however if you have a solid plan, your chances are greatly improved.  Some of those factors will be discussed next week.

Compliments of Lew West Business Consultants 

 www.lewwest.com  Blog  www.MyNext30.com