U.S. Lagging Badly Behind in Entrepreneurship

Did you know that the U.S. is not even one of the top 10 countries in the world interested in entrepreneurship?

According to Google Trends, the top 10 countries searching for "entrepreneurship" on Google are:

Regions
1.	Kenya
2.	Nigeria
3.	Philippines
4.	Pakistan
5.	India
6.	South Africa
7.	Singapore
8.	Malaysia
9.	Indonesia
10.	Hong Kong

Now you might think "What's the big deal? Searching for entrepeneurship information on the internet doesn't mean Americans aren't interested in entrepreneurship." Maybe so... but maybe not.

People use the internet for just about everything these days, but especially for communication, research, and learning. What this data from Google Trends tells us is that people in countries like Kenya, Nigeria, and Indonesia are hungry to learn about entrepreneurship. They're reading every website, blog, and business article they can find to teach them how to become entrepreneurs.

Contrast Kenya's interest in Entrepreneurship to the top 10 most googled topics in America:

1. usain bolt

2. unemployment

3. ufc 117

4. the other guys

5. taylor swift mine

6. prop 8

7. pregnancy

8. motorola droid

9. mosque

10. mark hurd resigns

Apparently more Americans are interested in unemployment data and unemployment benefits than they are in starting a business.

In 2007, Fortune Small Business did a study and ranked countries on their friendliness to entrepreneurs - based on factors like how easy it is to start a business, regulations, and laws that protect business owners. Not surprisingly, the U.S. came in 2nd place just after New Zealand. In America it takes about a week to start a business in the U.S. while it takes as much as 152 days to launch a business in Brazil. That's a big difference!

We all know that it's EASY to start a business in America. But if it's so easy.. why aren't more Americans interested in entrepreneurship and why aren't more Americans starting businesses? Why are people who live in countries where it's HARD to be an entrepreneur so interested in becoming business owners?

Want more articles like this? Subscribe in a reader

The Law of Success by Bill Bartmann

I recently received this letter from Mr. Bill Bartmann who was at one time the 25th richest man in America. He has a lot of wisdom to share and I think you deserve to read it:

The Law of Success

 

Your success or failure is not determined by your genetics, where you live, your environment or even your culture. It isn’t a function of race, religion or creed. While I will concede that some situations and some environments make it more challenging than others- it isn’t those factors that will ultimately determine a person’s success or failure. If that were so, then no one from a challenging environment would ever succeed...yet they have! Some people even have an easier path to success than others based on their family heritage (the silver spoon theory), but that’s not true for the majority of us. Instead, our successes and/or our failures are most often determined by the “Law of Success”. There are few truths more self-evident than the Law of Success.

If you’re not familiar with the Law of Success it goes like this; “To be successful you must take risks.” The dictionary definition of taking a risk is; to expose oneself to the chance of injury or loss; put oneself in danger; hazard; venture. Every one of us has seen countless examples of this Law in action. When we look at people who we think of as successful (whether it be money, fame or power) we can easily and quickly see the risks they had to take in order to achieve their success. Many failed early in their careers, but got back up and tried again, taking yet another risk toward achieving their goals, and ultimately becoming successful.

Likewise, when we look at people who we think of as unsuccessful – it is equally easy to see that they were unwilling to take risks in their lives. They don’t have the desire to expose themselves to the chance of injury or loss, regardless of how rewarding a positive outcome would be. What is the major difference between these two types of people? SELF-ESTEEM!

Self-esteem plays a role in our success. Once analyzed, the cause of success and failure is easily identified. The logic is simple and inescapable. To succeed you must take risks. To be willing to take risks – you must be unafraid of failing. To be unafraid of failing – you must not be concerned with other people’s opinion of you. To be unconcerned about other people’s opinion of you – you must have high self-esteem.

The proof of the hypothesis is that the reverse is equally true. Unsuccessful people are afraid to take risks. They are afraid to take risks because they are afraid to fail. They are afraid to fail because they worry about other people’s opinion of them. They worry about other people’s opinion of them – because they have low self-esteem. If the Law of Success is accurate and if the logic is clear, then this is good news for everyone who is not satisfied with their current status and would like to have more success in their life. All you have to do is find a way to raise your self-esteem. As your self esteem rises, you will become less concerned with someone else’s opinion of you and more comfortable with your own opinion of yourself.

Once you are unconcerned about the opinion of others, the fear of failure will be reduced. You will then become more comfortable taking calculated risks and by doing so will increase your likelihood of achieving the success you desire.

I'm wishing you the greatest of success!

Want more articles like this? Subscribe in a reader

Your Job is Not an Asset

Your job is not an asset!
You don't own it.
You can't sell it.
You can't pass it on to your heirs.
You can't trade it.
You can't give it away.
You have to show up every day to keep it.
It can be taken away from you at anytime.

What would you do if you suddenly lost your job? Would you realize it's not an asset? Would you have a backup plan? Would you have another source of income to rely on?

Times are changing and so is the economy. The 90% of Americans who rely on a job for their sole source of income are soon going to find out that it's a risky way to live life.

Gordon Hester recently wrote an article about the economic changes that are coming and how families who rely on a job for their income will be struggling even more in a few years as taxes and costs rise with little to no increase in salaries.

They say "knowledge is power..." but it's not true! Knowledge acted upon gives you power. Knowledge without action - no power!

First, seek the knowledge. Then take action to create a better life for yourself. It's not enough to understand that relying solely on the income from your job is risky, you must DO SOMETHING about it!

Start a business, sell something on eBay, join a network marketing company, engage in capitalism! You will help yourself only by helping others and make this a better country and a better world.

Want more articles like this? Subscribe in a reader

How to Write a Business Plan for Success

Want to Write a Winning Business Plan? 

 

We will cover the most important sections of a business plan and how to address them properly. We'll also cover some "tricks" that will help you write a business plan that will be more effective in helping you get a commercial loan or raise money from private investors.

If you're still wondering why you should write a business plan, then feel free to read my last article on the benefits of writing a business plan.

Tips on Writing a Business Plan

 

1. Keep it short. Do not exceed 25 pages on your business plan. If you write any longer, readers will get bored and either skim through it or throw it away. You will get better results with a shorter business plan (assuming it is well-written and includes the most essential information about your business).

2. Keep it Professional. Keep your writing professional. Make sure to check for any typographical or grammatical errors. Most investors or bankers will say "no" immediately if they see your business plan is not written professionally.

3. Always be Improving. Your business plan should be a living document. You should constantly be thinking of ways to improve it and revise it accordingly, especially when you get the same feedback about the business plan from multiple sources.

4. Be Meticulous in Citing Sources. Always cite sources for your statistics and figures (Use footnotes). This will show investors that you did your research seriously and thoroughly. Furthermore, by citing your sources you will look professional, you will be able to refer back to those sources for more information later on, and your investors will be able to look at those sources and verify your figures and learn more about the industry.

5. Use it Regularly. Your business plan is a marketing tool. You should be using it on a regular basis! If you are a new start-up business, you should be sending that business plan to at least 100 people in the first year. I'm not saying send out a mass e-mail, but make a concerted effort to send your plan to those people who may be able to help make your dream a reality.

The Key Sections in a Winning Business Plan

There are some sections that are universal to all business plans, and other sections that may not apply to your particular business. Thus, you must be sure to include only the sections necessary for your specific business.

Having said that, these are the typical sections that most business plans will need to include:

1. Executive Summary

The Executive Summary should highlight only the most important aspects of the business plan. The Executive Summary should never exceed two pages! I've seen some executive summaries that were more than 10 pages! No one wants to read that much.


As Mark Twain said, "I would have written a shorter letter had I had more time." Take the time to make your executive summary (and ever section of your business plan) as concise and useful as possible!

You executive summary should include:

A description of your business and industry

A description of the management team

Your operational strategy

What makes the business unique (your competitive advantage)

What you want (for example, if you're looking to raise $100,000 in exchange for 10% ownership of the business, you should include that in the executive summary so that potential investors know right away what you're looking for).

2. Business Description

The business description should include:

Name of the business

Nature of the business - what industry are you in?

History of the business

Stage of Development (If the business is a start-up, let it be known here).

Unique Features of the Business - list any patents, trademarks, intellectual property, or any other unique advantages or assets your business has.

3. Marketing 

Your marketing segment is crucial. You must be able to show readers of your business plan that a large market exists, that your company can attain market share in that business, and that you will be profitable in doing so.

Your marketing section must include:

Market Size

Projected Market Share

Projected Sales for one to three years

Your Market Niche

Potential Customers

Target Market or Target Customers

Market Trends (socioeconomic trends, demographic trends, sales trends, industry trends, etc.)

Projected Industry and Company growth rates

Pricing Strategy

Marketing Strategies

Advertising Plan

4. Competitive Analysis

You must objectively look at the industry and your competitors and be able to identify their strengths and weaknesses and where the opportunities in the industry lie. You must also show that your company will be able to take advantage of these opportunities.

You should compare competing products or services based on prices, performance, service, warranties, availability, and other pertinent features. You should especially note how competitors may not be meeting the current needs of the market and how you plan to meet those needs and capture market share.

You should also focus on the profitability of your competitors and the trends of their profits and of the industry. If you can show that competitors that focus on one niche are trending to be more profitable and that you can join in on that market and create your own niche there, that will show that you are aware of these trends and able to take advantage of them. If, however, the industry you're entering into is in a long-term trend of declining profitability, you must be able to justify why it would be wise to enter that industry and how your business will be uniquely profitable.

5. Operations

Here you will list the location of your business and, if applicable, explain how that location is favorable in terms of wages, availability of labor, taxes, zoning requirements,  proximity to suppliers and potential customers.


You should also list all the needs of your business including storage space, real estate needs, equipment, supplies, machinery, and any other operational or logistical details. You should also detail the costs of all operational expenses including shipping, production, purchasing, delivery, and other expenses.

Optional: If the business is a start-up, you may prefer to list your "milestone schedule" or operational plan in this section which will detail the necessary steps for starting the business and achieving profitability.

6. Management

Management is one of the most important and often overlooked sections of the business plan. You must be able to show how the management team will be able to take advantage of the opportunities in your industry.

If there are glaring holes in the skills and abilities of the management team, potential investors will be unwilling to lend money as this will be a huge risk. For example, if you're starting an internet company and no one on the management team has experience in that industry, it's unlikely you will be successful. To overcome this, you must either recruit an experienced person in that industry or hire a consultant who has experience in that industry so that you have the expertise required to overcome the inevitable hurdles that all businesses present entrepreneurs with.


It is absolutely unnecessary to provide complete resumes for each member of the management team. Simply provide a brief summary of their experience and how that relates to their functions in the business. One to Three short paragraphs should be sufficient to explain each member's background and skills as it relates to this business venture.

The key here is to let investors know

a) who the management team is

b) what their experience is

c) what their role will be in the business

d) that they have the skills to perform that role well.

7. Finances

You financial section must show that financial viability of the business. You must be able to show your business can make a healthy profit and can afford to pay interest or profits to investors or lenders.

Most business plans should include a full pro forma balance sheet, income statement, and statement of cash flows. Generally, creating projections for three years is acceptable. Don't go over three years as it will take up too much space and it will be unbelievable (who can predict such things as the profitability of a start-up business 5 years from now?)

If you are unsure how to create the financial statements, you can find templates online that are useful. However, it would be best to hire an accountant to compile the statements and projections with you if you are unfamiliar with accounting and financial statements. Your statements should be flawless. Any mistakes will be noticed by experienced investors and will force them to conclude that you don't know what you're doing. Better be safe than sorry - hire an experienced business accountant to help you with your financial projections and financial statements.

In addition to financial statements, you should include some sort of assumptions section that lists all the major assumptions you have made about the businesses' expenses, sales, and profits. For example, if the industry is growing at 20% a year and thus you expect your business to grow that fast, simply list that assumption as well as a reliable source for the growth rate.

8. Critical Risks

This section is optional, but it should include the main risks involved in the business. This section is especially important for you as an entrepreneur to prepare, if not in your final business plan, at least for yourself to understand the risks of the business.

This section will force you to think about the industry trends, cost projections, sales projections, macroeconomic trends, and other risk factors which could affect your business. It will force you to plan the "What ifs" of the business and to come up with potential problems ahead of time and strategies to overcome those problems before they come up. Critical thinking about the critical risks is key to growing and sustaining a business.

9. Harvest Strategy (Exit Strategy)

This section is primarily for investors to let them know how they will be paid. Do you plan to go public? Do you expect to be acquired by a larger company? Or do you want to just grow the business and benefit from the future cash flows? What's the plan for the business 3 years, 5 years, and 10 years down the road?

You should also include management succession strategies and other business issues in this section.

10. Milestone Schedule

In this section you should include a timeline of the business operations plan and profitability. If you're starting a restaurant, you'll want to list such dates as initial funding, property selection, remodeling of the location, opening day, break-even, and so forth.

This section lets investors know the operational plan of the business in detail and helps them (and you) keep track of your progress. If you fail to meet your milestones, investors should be concerned. You should meet your milestones! However, if you fail ot meet a milestone always remember to explain to investors what happened and how you're taking the proper steps to get back on track to reaching profitability.

11. Appendix

This section is optional. Personally, I don't use an appendix as I find it simply adds too many pages to the plan and is unnecessary. I put all my sources in footnotes and let investors know that if they wish to see more information, I can provide it to them. However, if there are specific charts, graphs, or documents that are necessary for investors to understand your business, you can include them in the appendix.


There you go! You now know the key sections of a winning business plan. Your job now is to continue researching and writing your business plan!

Feel free to comment with any questions, suggestions, or ideas about writing a winning business plan.

Want more articles like this? Subscribe in a reader

Why You Should Write a Business Plan for Success

Why Write a Business Plan?

Writing a business plan is something every serious business owner should do. There are 8 major benefits to writing a business plan:

1. Clarity

Writing the business plan will give you clarity. It will force you to think through all of your options and to choose the best for you and your business. Clarity is what separates successful business owners from unsuccessful business owners.

2. Planning

Writing a business plan forces you to plan your business strategies and goals. Successful entrepreneurs plan more and plan better than unsuccessful entrepreneurs.


3. Collaboration

While writing your business plan you will naturally need to collaborate with others. You'll need to do some in-depth research and due diligence on your industry and business model. You'll need to make phone calls, read articles, talk to potential customers, suppliers, and competitors. This will allow you to take other peoples' ideas and use them to your benefit.

When you talk to others' in your industry or about your business, always be thinking, "How could this be done better?" This will keep you objective when you analyze what's going on in the industry and allow you to see unmet needs in the market and opportunities for growth.

4. Raising Capital

It's very hard to raise money for a business without a well-written business plan either from private investors, banks, or other institutional investors. The business plan should provide a potential investor or lender to the business to learn enough about the business to make an informed decision as to whether or not they would consider investing in the business.

5. Financial Projections

Creating pro forma financial statements for your business will force you to think through all your assumptions about the business. This will help you view the profitablity and potential for the business objectively and critically.

6. Guidance

Your business plan should give you guidance as you grow your business. It should have an "Operations Plan" or "Operations Schedule" that details the steps you need to take to get the business off the ground. As an example, if you were starting a restaurant you would have a timeline of when you would lease the building, how long renovations would take, opening day, and then the day you break-even, just to name a few of the steps you would take.


7. Measuring Results

One of the major differences between successful entrepreneurs and unsuccessful entrepreneurs is that successful ones measure results. Your business plan should provide you with a financial projection that you can use to measure your results against. If you beat your projections, then you're doing well. If you fall short, you either made bad projections or you're failing to execute the business properly.

8. Marketing

This is one aspect of the business plan that most people don't understand. Your business plan is a marketing tool. You need to use it that way! You should send a copy of your business plan to anyone who could potentially invest in your business and anyone who might be remotely interested in learning about your business.

Now, I'm not telling you to solicit strangers and make them read your business plan. But if you know someone who may be interested in what you're doing, then it's only kind and appropriate for you to give them a call or send them an e-mail explaining that you're starting a business and that you'd appreciate it if they gave you feedback on your business plan. Often, you will find your best investors and advisors come from those in your circle of influence whom you send your plan to (and you never know who they might share your business plan with).

Write Your Business Plan!

Now that you know the 8 major benefits to writing a business plan, it's time to get to work! Stay tuned for our next article which will detail how you actually write the business plan.


Want more articles like this? Subscribe in a reader

How to Write a Personal Financial Statement Your Banker Will Accept

How Do I Write a Personal Financial Statement?

Yesterday we talked about how to write a winning loan proposal. As you know, including a personal financial statement is a must for any loan proposal. The following is a template I've used successfully for the past several months. You can access a Google Doc version of this personal financial statement template that you can edit and print out for your personal use.

Make sure you are as accurate as possible with all your financial figures and do not leave out anything! Make sure to include all debts and loans outstanding, including credit cards and student loans.

Also, make sure to add a personal note which explains anything unique about your personal financial situation. This makes sure the banker has 100% of the information so they can make the right decision for you and for the bank.

How Do I Write a Personal Financial Statement for an SBA Loan? 

 

If you're going for an SBA Loan, then you don't have to use this personal financial statement template. Just use the SBA's template which is available online here in PDF.

If you want to get an SBA loan, I highly recommend finding a local SCORE chapter in your area and asking for an appointment to meet with an advisor who can help walk you through the process. Meeting with a SCORE advisor is free and can help make the process much easier, quicker, and more productive.

In addition, your SCORE advisor may be able to introduce you to potential investors, bankers, customers, or suppliers. All for free!

PERSONAL FINANCIAL STATEMENT

Date Prepared:

Name:                                      
Employer:                                
Phone Number:                        
Number of Dependents:                       
Property/Address:                    

ASSETS:

Cash:                                       
Investments (Stocks/Bonds):                                        
Real Estate (Equity):                 

MONTHLY INCOME:

Borrower’s Gross Monthly Income:        
Borrower’s Monthly Net Income:            
Other Income:                                      
                       
MONTHLY EXPENSES:

                                    Monthly Payment                                  Monthly Payment                      Balance Owed
Mortgage Payment:          $ 0                                2^nd Mortgage                $ 0                                            $ 0
Child Care:                     $ 0                                Other Mortgages           $ 0                                            $ 0
Alimony/Child Support:      $ 0                                Rent Paid:                     $ 0                                            $ 0
Telephone:                     $ 0                                Doctor Bills:                  $ 0                                            $ 0
Cell Phone/Pager:            $ 0                                Hospital Bills:                $ 0                                            $ 0
Gas/Oil:                         $ 0                                Auto Loan Pmt:             $ 0                                            $ 0
Electricity:                     $ 0                                Auto Loan Pmt:             $ 0                                            $ 0
Trash/Sewer:                  $ 0                                Homeowner Ins:            $ 0                                            $ 0
Food:                            $ 0                                Property Taxes:             $ 0                                            $ 0
Water:                           $ 0                                Chapter 13 Pmt.            $ 0                                            $ 0
Auto Insurance:              $ 0                                Trans/Gas:                    $ 0
Life Insurance:               $ 0                                Cable/Internet:               $ 0
Prescriptions:                 $ 0                                 Other Expenses:          $ 0

TOTAL Monthly Expenses:                   $ 0


OTHER MONTHLY EXPENSES (Example: Department Store Cards, IRS Liens, Judgments):


Personal Note:

Explain here any special situations you may have regarding your personal finances. For instance, if you’re receiving support from a family member of $ 2,000 a month make sure you note that.

_________________________________________                        _____________________________
Borrower’s Signature:                                                                Date:

Borrowers Printed Name:
           
Want more articles like this? Subscribe in a reader

How To Write a Loan Proposal That Works Every Time

Want to write a Loan Proposal that works every time you need a loan?

Well, that may not be possible... But you can dramatically improve your chances by crafting a very professional and powerful loan proposal that will force the bankers to pay attention to you because they will see you as a highly professional, organized, and serious business person.

Your loan proposal is your secret weapon for getting the banker to say "yes!" to your small business loan (and large business loans too). Unfortunately, most small business owners use their loan proposals poorly and this makes bankers afraid. Always remember, a banker's biggest fear is that you are a risky person. Being unorganized or unprofessional throws up huge red flags for a banker.

Don't give them an opportunity to say "no" to you! I'm going to teach you how to craft a winning loan proposal that will dramatically increase your chances of getting a "yes" from your banker!

Remember, when you go to present your loan proposal to a banker, they're usually not the person who makes the final decision on whether your loan is approved or not. This means they CAN'T say yes to your loan on that first meeting, but they CAN say no! Don't give them that chance!

Since using this loan proposal, I haven't had a single banker say "no" before presenting the loan proposal to the loan committee or persons in charge of analyzing the loan package.

I've had several bankers say things like...

"Wow this is impressive!"


"You've really done your homework!"


"I'm very impressed with what you've done here!"

The 5 Strategies for Making a Loan Proposal

Remember these key points to crafting and presenting a masterful loan proposal:

1) Be concise. Bankers are busy and Less Is More!

2) Be Professional. Check and double-check for all typos or inaccurate statements.

3) Be Positive. No one wants to work with a downer. Put a smile on your face.

4) Expect a yes! You get what you expect in life.


5) Persistence is key. If you get negative feedback, learn from it and improve!

Supplies for Your Loan Proposal

Here are the supplies you're going to need to craft an amazing loan proposal that will blow the banker away:

• A 1/2" plain white 3-ring binder
• A 3-hole punch
• Printer, paper, ink
• A highlighter
• A 12 tab 3-ring binder separator

The 12 Key Loan Proposal Sections

You're going to want 12* tabs (sections) in your loan proposal.

Here they are:

1) Term Sheet
2) Executive Summary
3) Relationship With Lender*
4) Credit Report
5) Photos of Operation
6) Board of Advisors
7) Significant Professional Relationships
8) Acknowledgments
9) Financial Statements
10) Business Plan
11) Employee Handbook
12) Employee Training Manual

* This section should be removed if you do not have a significant relationship with the lender.

Let's go over each section in more detail so you know exactly what to put in your loan proposal (and what to leave out).


1) Term Sheet (1 page maximum)

The term sheet is the simplest and one of the most important sections. It shows the banker you know exactly what you want! Most bankers see wannabe-clients who don't know how big a loan they want or what terms they're looking for.

In your term sheet you MUST include:

Amount of the loan -How big a loan do you need for your business?

Type of loan - Do you need a 5 year structured note, a line of credit, or something else?

Interest rate - Go for prime plus 2 if you're a new or risky business, or prime plus 1 or just prime if you're a business with a good operating history.

Method of repayment - How are you going to repay the loan? Be specific. What amount of proceeds will you set aside to repay the interest and principal on the note?

Collateral - Bankers want collateral. They want lots of it. What do you have to offer? If you don't have business assets you can offer, consider other sources such as personal investments or home equity.

Personal guarantors - Bankers always want you to personally guarantee the note. I always put "none" under personal guarantors because I want them to bring it up and then I'll say "If I personally guarantee the note, you'd be interested, wouldn't you?"

2) Executive Summary (1-2 pages maximum)

The Executive Summary should be a brief summary of the business and the business owners and how you are going to repay the loan.

You should include the following sections:

Brief financial description of business - Is this a start-up or existing business? How long have you been in business? What industry are you in?

Use of Proceeds - What are you going to use the loan for? Be specific. You must know EXACTLY what you'll be using the proceeds for, otherwise the banker will say no reflexively.

Management Experience - List your experience in that industry or business. If you don't have experience, list any training courses you've taken, books you've read, or other information that shows you've spent time, effort, and energy learning about the business.

3) Relationship With Lender*

List your relationship with the lender. If you have any checking, savings, or investment accounts or any other loans with that bank, list them here. Let them know you're a loyal customer and that you want to continue doing business with them.

If you are close friends or business partners with a key customer of the bank, explain that as well. Let them know that if they say "no" to your loan, your big shot friends will find out about it which may hurt that bank's business.

*Remember, if you have no relationship with that lender, remove this section from your loan proposal.

4) Credit Report (Page length in this section will vary based on your personal credit history)

Go to www.freecreditreport.com and sign up and get your free credit report (really, it costs $1 and then there's a $15 a month charge if you don't cancel. Just sign up and then cancel).

Save a copy of your credit report and then print it out and insert it into this section of your loan proposal.

If you have ANY negative marks on your credit report, get out your highlighter and mark up EACH and EVERY negative mark on your report.

Why would you point out the negatives on your credit report?

Because the banker is going to see them anyway! Point it out so they know that you know what's on your report!

Now here's the key: Write a VERY SHORT explanation of why your credit report is messed up.

For example, if you invested most of your cash in the stock market and lost it all in the crash in 2008 and were unable to pay some bills then, just write something simple like:

"I had invested all my savings in mutual funds and in 2008 when the market crashed I was unable to pay my creditors. I learned to diversify my portfolio."

That last sentence is key! Write down WHAT YOU LEARNED. Bankers want to know that you learned from your past mistakes so that you won't make the same mistake again! And remember to keep this explanation short - do not give a long, sad, sob story. Just keep it short, simple, and to the point.

If your credit report is excellent, with no negative marks, don't write an explanation but BE SURE to point it out when you present your loan proposal to the banker.

5) Photos of Operation (1 to 2 pages maximum)


Insert photos of your business in this section. If you have an existing business, just take some photos of your employees, offices, workspace, and building.

If you are a start-up and have no photos of operation yet, just use professional photos (or at least good-looking photos) of the key management team members.

This section is purely a psychological play. You want this loan proposal to be human. You want the bankers and the members of the loan committee to see your face and your partners' faces and your employees' faces so that they know saying "no" to this loan would hurt all of those people.

This is a vital section in your loan proposal! Don't leave it out!

6) Board of Advisors (1 to 2 pages maximum)

If you're serious about being in business, then you need a board of advisors. Please note, this is NOT a Board of Directors. A Board of Directors hires and fires the management team and decides how much to pay them. A board of advisors simply advises the managers of the business and helps them make good decisions.

To keep your board of advisors legitimate, you MUST NOT pay your board of advisors members ANYTHING. You cannot compensate them in any way. You can, however, feed them at meetings, send them thank-you cards and give them small gifts to let them know you appreciate their support and advice.

When choosing your board of advisors, try to get a diverse group of people on the board. You want people with backgrounds in various areas of business including (but not limited to):

• Insurance
• Finance
• Marketing
• Sales
• Distribution/Logistics
• Human Resources
• Public Relations
• Investing

Your board of advisors can and will vary in size, but an ideal group would be 6-10 people. If you are a start-up business, don't feel like you have to have a full board of advisors. If you just have 1 or 2 strong professionals on your board of advisors to start off with, that shows the banker you're serious and have some serious support in the community. Just write a short note that says you will be expanding your board of advisors as the business expands.

7) Significant Professional Relationships (1 to 2 pages maximum)

Here you will list your Accountant and Attorney and any other important professional relationship you may have (such as a mortgage broker if you're in real estate).

Make sure your accountant and attorney are highly qualified. You don't need the most expensive professionals on your team, but you need qualified ones. You want to impress the banker with this. If you know your bank uses a certain law firm, you should use that law firm (assuming they can handle your needs).

Don't just list Uncle Jerry as your accountant if he does not have the necessary credentials and training to service your business. It makes you look unprofessional and risky to the banker.

8) Acknowledgments (2-3 pages maximum)


Here you want to list various acknowledgments, awards, and achievements you or members of the management team have had that relate to the business, to your personal character, or to your community service.

If you've been in the newspaper as a top real estate agent and you're starting a real estate company, that would be a great article to put in this section.

For me, I graduated from the Kelley School of Business with an Entrepreneurship degree and passed the "Spine Sweat Experience" Entrepreneurship Course which was named by Inc. Magazine as the "Best Entrepreneurship Course in America" so I always show that article and picture of my holding the plaque in my loan proposal because it's very impressive to a banker.

If you don't feel like you have any accomplishments to put in this section, then a) think harder about what you've accomplished and b) get to work!

Even if it's just a local newspaper clipping of you growing the largest zucchini in the county, at least put that in there. It's better than nothing.

9) Financial Statements

This is the section the banker will spend the most time looking at (after the business plan, of course).

You should include:

• Copies of the last two years' tax returns for yourself personally and for the business (if applicable)
• A Personal Financial Statement for each of the managers of the business
• Full Financial Statements for the business itself, preferably prepared by your accountant

If there are any negative marks on your personal financial statement, or if there's anything about your personal finances that you need to explain, write a brief note at the bottom of your personal financial statement explaining it. For example, if your parents pay for your housing, then let the banker know - it's good because it lets them know your monthly expenses are lower than they would otherwise be, thus reducing the lenders' risk. And in the end, the name of the game is reducing lender risk to get your loan approved.

If your business is a start-up, then just show projected (pro forma) financial statements of cash flow and a pro forma Income Statement.

10) Business Plan (15 to 25 pages maximum)

This is the most important section of the loan proposal. You must have a well-written, complete business plan included in your loan proposal. Most banks will not even consider giving you a loan without a business plan.

I believe 25 pages is the maximum for a good business plan. Most entrepreneurs write way too much in their business plan. This is bad for two reasons:

1) It makes your loan proposal too big, thus scaring away the lender from reading it
2) It's so long that almost no one will actually read it all, and if they do, they will probably miss out on the important parts.

Keep your business plan brief and no longer than 25 pages. This will force you to focus on the most important aspects of the business and only explain those details. For instance, if you're starting a business cleaning homes, you don't need to spend 5 pages talking about how exactly you clean mirrors and your exact dusting techniques. They're just not important to the lender or potential investors, even though it may be very important to operating the business.

I will write an article shortly in the future with more details on how to write a winning business plan.

11) Employee Handbook (Just include the table of contents, 1 to 3 pages max)

You need an employee handbook because this helps remove the lender's second biggest fear which is this:

If the business is successful, will this person be able to handle the business growth?

By having a complete employee handbook, this lets them know you are prepared for future growth and for bringing on new employees.

Do not include the entire employee handbook in your loan proposal! Only include the table of contents and cover page. If the lender wants to see the full employee handbook, let them know you have it available and can hand them a physical copy or e-mail it to them.

12) Employee Training Manual (Just include the table of contents, 1 to 2 pages max)

The employee training manual also helps remove the lender's second biggest fear. Show them that not only do you have employee rules and regulations well thought out and put into a handbook, but you also know exactly how you are going to train them.

Be sure to include all the key areas in which your employees will need training and how long each area will take.

For example you might have some training areas like this for a restaurant business:

Proper Sanitation                      15 minutes
Food Prep                                   60 minutes

 

How to Masterfully Present Your Loan Proposal

Now that you have your 12 sections of your loan proposal written, proof-read, and complete and put together neatly in your 3-ring binder, it's time to learn how to present your loan proposal for maximum effectiveness.

Here's what to do:

1) Connect with the Banker and get an appointment

Just call the bank and ask for the commercial loan office who is in charge of small business loans. Once you talk to the loan officer, explain briefly (in 30 to 60 seconds) what your business is, and how big a loan you need. Make sure that your desired loan amount is within their lending limits.

Then, ask for a 5-minute appointment to present your complete loan proposal. Let them know you are 100% prepared to meet with them and present your loan proposal in just 5 minutes.

2) How to Present your Loan Proposal

Show up ON TIME and present your loan proposal in 5 minutes. Just go over each section very briefly and explain one key point about each section.

Then, let the banker know you appreciate them taking the time to meet with you and that you look forward to hearing from them. Be prepared to get up and walk out. If they ask you to stay and answer questions, great! That means they're interested.

If not, that's ok too. Just thank them for their time and walk out. Let them know they can call you and you'll be happy to answer questions over the phone. They will likely call you and ask more questions.

3) Go over the terms of the loan with the banker and sign the note

When a banker is interested in giving you the loan, they'll call you and let you know and have you come in to review the note and sign it. Make sure you read the entire loan document. You'll want to be familiar with every term and detail of the loan. If you're unsure about anything, either ask the banker (if they're not busy) or ask your attorney.

Don't be in a rush to sign the loan. Let your banker know you need time to review it with your business partners or attorney. They will understand, and in fact they will respect you for not rushing into signing the contract.

Don't delay too long though! If you wait any longer than 2 or 3 days, the banker will think you're not interested, or at worst, that you're unprofessional and a slow decision-maker. This may actually cause them to invalidate the contract and say they no longer want to do business with you.

Take your time to review the loan, but don't take too much time!


4) Celebrate!

Congratulations on your new business loan! You deserve it!


If you would like a sample of this loan proposal template, a business plan template, or a personal financial statement template, post your comment here or follow me on Twitter @JuiceTom

Want more articles like this? Subscribe in a reader