How To Write a Business Plan For a Loan

When it comes to securing a loan for your small business, having a well-crafted business plan is not just an option—it’s a necessity. Lenders want to see a clear roadmap of your business vision, detailing how you plan to utilize their funds and turn that investment into a profitable venture. 

A strong business plan not only demonstrates your commitment and professionalism but also helps you think through essential elements like market analysis, financial projections, and operational strategies. This documentation can be the key factor in differentiating your business loan application from the rest, showing lenders that you’ve done your homework and are serious about your business’s future.

With the steps below, learn how to write a business plan for a loan in order to fund your business. 

Do you need a business plan for a loan?

• Small Business Administration (SBA) loans
• Term loans
• Personal business loans
• Business lines of credit

Most business loan lenders require a business plan when you’re filing a loan application. It’s often a mandatory part of applying for Small Business Administration (SBA) loans, term loans, personal business loans, and business lines of credit. Even where it’s not a requirement—which could be the case for microloans or merchant cash advances—having a well-thought-out business plan can still help you present your business case efficiently and effectively. 

It should also prove to yourself, as well as your potential lender, that your business will be able to pay off the loan. This is a crucial step in the process, because you shouldn’t enter into any loan agreement if you’re unsure whether you’ll be able to make on-time payments through the entirety of the loan term.

You’re also not legally bound by your business plan after you’ve secured a loan. You’re bound by the loan terms, but your business plan is a flexible document. In other words, you can always make changes to your business plan as your company evolves.

Below are the common loan types you might apply for, along with more information on what lenders will expect of your business plan:

Small Business Administration (SBA) loans

The Small Business Administration recommends that you adapt your business plan both to the specific type of business you’re planning to run and the size of the loan you’re seeking. There is a standard template available on their website to help you get started. 

They offer two template options: traditional business plan and lean startup plan. Traditional business plans are comprehensive, multi-page documents that cover business aspects like market analysis, financial projections, and organizational structure and are ideal for lenders and investors. Lean startup plans are concise overviews built for speed, simplicity, and frequent iteration.

Term loans

Term loans are among the most popular forms of business financing: You pay back a lump sum of borrowed cash with fixed payments over a set period of time. Term loans often allow you to borrow more money than other types of business loans, but frequently require you to provide collateral.

Traditional banks offering term loans expect a detailed business plan; online lenders might not require a business plan at all. Ultimately, the length and detail of your business plan comes down to the size of the loan you’re seeking and the institution’s requirements. 

Personal business loans

Taking out a personal loan for business purposes can be an alternative pathway for new founders, especially those whose companies may not yet have an operating history. In those cases, a strong personal credit history can stand in for the business’s lack of a track record. However, unlike with any of the other types of loans on this list, your personal credit score will be affected if you’re unable to repay the loan. 

The level of detail you’ll need in your business plan is dependent on the lender and the amount you’re seeking. Generally speaking, and especially for a startup loan, lenders expect a comprehensive business plan that speaks to the company’s viability.

Business lines of credit 

Business lines of credit are more flexible than term loans because they offer revolving access to funds up to a certain amount, similar to a credit limit on a credit card. They can be helpful for businesses in need of short-term financing. 

You pay interest on the money you draw from the line of credit, and you can draw up to the limit again once you’ve paid off your balance. So you might have a $10,000 line of credit, but if you’re carrying a balance of $8,000, then you would only be able to access an additional $2,000 until you paid that balance down. 

Many lenders will expect a detailed business plan that outlines how you plan to use the money and when, especially if you’re operating a seasonal business or covering short-term financing needs.

How to write a business plan for a loan

• Executive summary
• Company description
• Market analysis
• Products and services
• Marketing plan
• Logistics and operations plan
• Financial plan

Shopify’s free business plan template can help ensure you cover the essentials needed to start your business and communicate your plan to others. Check with your potential lender to see if they have their own business plan template, require specific details, or have a preferred structure you should follow. 

When you’re writing a business plan to secure a loan, always keep your audience in mind. A loan officer wants to see that there’s a market opportunity for your business and that you’re a capable operator who understands their business and cash flow needs. Below are the key elements of a business plan template.

Executive summary 

The executive summary is an introductory overview of your business. It should concisely lay out your mission statement and your business model, along with brief descriptions of your products and/or services, and details on your leadership team. The exact components will vary by business type, but your executive summary should capture your core business goals. While this section comes first in your business plan, it’s often best to write it last, after you’ve completed all the other sections.

Company description

The company description or company overview is a detailed description of your business and why it exists. It should expand on your executive summary, and include the following key information.

• Business name. Choose an authentic, memorable business name. 

• Location. Indicate where you intend to set up shop. Do you plan to have a storefront? Are you renting warehouse space? Note any property that’s directly relevant to your business here.

• Mission statement. Explain why your business exists by describing the problem you aim to solve, and why your business is well positioned to do just that. 

• Business structure. Decide on the legal structure of your business according to your needs. A sole proprietorship offers the fastest setup, while an LLC provides liability protection, and a corporation allows you to scale with multiple employees. Your choice will impact everything from your financing options to how your business is taxed. 

• Business model. In short: How will your business generate profits? Before getting into the full financial plan later on, briefly explain your main expenses and sources of revenue. 

• Target market. Describe the most promising potential customers for your business, and if relevant, incorporate demographics, location, or lifestyle. 

Market analysis 

Market analysis should include your research into the industry and your target market. This is where you can show potential lenders how your business fits in the broader market. Provide market research that supports your sales plan, industry trends relevant to your business, and competitive analysis that identifies competitive advantages your business can leverage.

Products and services 

This is where you can expand on your company’s products and/or services and how you plan to differentiate them from competitors. If you’re a newer business, explain the product line you’re launching. If you’re an established business, explain what product lines and categories you’d like to expand into. Product pictures can be a helpful way to convey your vision.

Marketing plan 

This section should outline your marketing and sales plan. Include your marketing strategy, first outlining the higher-order strategy of how you plan to attract customers to your business, the value proposition you’re going to lean on, and how you envision your brand messaging.

From there, be prepared to provide a more detailed account of how you’ll execute. That could include how you’ll build out your website and the main marketing channels you foresee focusing on, such as local SEO, influencer marketing, guerrilla marketing, or pay-per-click advertising.

Logistics and operations plan 

The logistics and operations section should cover everything that happens in the background to make your business function, such as your supply chain, production timelines, inventory requirements, and shipping and fulfillment needs. Your goal here is to demonstrate that you have a comprehensive understanding of the necessities that will underpin how your company operates. 

Financial plan 

Your financial plan specifies the capital you need to get started and your path to profitability. This section is where you should present the greatest detail on your company’s financial projections. By providing realistic estimates for profitability and growth plans, you can help potential lenders understand how you plan to use the loan to start or grow your business.

Start with the following fundamentals:

• Projected revenue. Estimate the income you expect your business to earn. If you’re just starting out, base these numbers on sales forecasts. If you have an operating history, use your historical sales data.

• Projected expenses. Account for the amount of money you expect to flow out of your business. 

• Business capital. Explain the amount of capital you already have on hand (for example, if you’ve already taken initial investments from friends and family or are self-funding the business) as well as the amount of capital you plan to raise. 

If your business has been operational for a while, you’ll also want to include the following statements:

• Balance sheet. A record of your business’s assets and liabilities.

• Cash flow statement. The cash coming in and out of your business over a certain time period (usually monthly, quarterly, or annually).

• Income statement. Also known as a the profit and loss statement, this statement gives an overview of the company’s income and expenditures over a specific period of time.

Regardless of how long you’ve been in business, consider creating forecasts that go several years into the future—up to the next five years.

*Shopify Capital loans must be paid in full within a maximum of 18 months, and two minimum payments apply within the first two six-month periods. The actual duration may be less than 18 months based on sales.