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Business plan
Also called written plan, loan proposal.
The written case for the business and the use of funds, required for SBA and bank credit on startups and acquisitions and ignored entirely by cash flow funders.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
Where it is required, the plan is a credit document rather than a strategy exercise. The lender is testing whether the projections are internally consistent, whether the assumptions behind them can be defended, and whether the resulting cash flow services the debt with room to spare.
The parts that get read: use of proceeds line by line, the projections, usually monthly for the first year and annual for two to three, the assumptions page behind those projections, the owner's relevant experience, and for an acquisition, the seller's historical financials against the buyer's forecast. SBA lenders generally require projections for startups and for change-of-ownership transactions, and the requirements sit in the agency's operating procedures.
The assumption page is the document that decides the file. A revenue forecast with no stated basis is noise; a forecast built from capacity, pricing and a named pipeline can be tested, and being testable is the point.
For cash advance, revenue-based and most working capital funding, no plan is requested and none would be read. Those decisions are made from bank behavior. That difference is a fair summary of the two markets: one underwrites the future you describe, the other underwrites the last six months you actually had.
Where this one catches people
Hockey-stick projections do not read as ambition, they read as a file that has not been thought through, and they invite the underwriter to test every other number. Projections that show a modest ramp, an honest loss period and debt service coverage above the lender's threshold in a downside case are far more persuasive than a plan that clears every hurdle by a mile.
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Business plan — common questions
What does business plan mean?
The written case for the business and the use of funds, required for SBA and bank credit on startups and acquisitions and ignored entirely by cash flow funders.
Where does business plan catch people out?
Hockey-stick projections do not read as ambition, they read as a file that has not been thought through, and they invite the underwriter to test every other number. Projections that show a modest ramp, an honest loss period and debt service coverage above the lender's threshold in a downside case are far more persuasive than a plan that clears every hurdle by a mile.
Is business plan the same as an interest rate?
Business plan is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does business plan apply to?
Term Loan, SBA Loan, Equipment Financing.
Is there a worked example of business plan?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside business plan?
Annual revenue, Approval, Cash flow, Credit committee, Debt service coverage ratio.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.