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  • Writer's pictureDel Chatterson

A Good Business Plan is Not Enough

Entrepreneurs often find themselves working hard to prepare a Business Plan, because the bank asked for one.  So they spend a lot of time and effort, and sometimes a lot of money, to prepare a very elaborate documented business plan with all the supporting facts and figures and extensive financial projections.  And the bank still says no.

It's a painful lesson: a good business plan is not enough.  It is necessary, but not sufficient, to get financing.

The first question most potential investors and lenders ask is, "Can I see your Business Plan?" And usually the entrepreneur needs help with the strategizing, documentation and financial analysis to put one together. But I always ask entrepreneurs to confirm that they can meet all the other requirements before committing time and resources to a Business Plan.  Too often after we have spent time and effort together to prepare a solid business plan that confirms the prospect of a viable business and the potential returns to investors and lenders, we then discover that the owners cannot deliver on the other requirements that we should have known from the start. So what else is required?

Lenders and investors have a checklist. It includes more than the request for a Business Plan. Be sure you are aware of the whole list and that you can meet all the other requirements before delivering your Business Plan.  Remember the first requirement is to invest sufficient cash yourself (or from the three F's  - friends, family and fools) before you ask for more cash from the cold-blooded banker or investor who is neither friend, family, nor fool.

Here are some more observations from experience with borrowers, bankers and investors:

1. They will not get it.

Start by accepting that your lenders will never fully understand what you do for a living or why, your motivation, your challenges or your circumstances. But you do have to try to get them to understand enough about you and your business plans that they can be confident that working with you will be good for them.

Remember their objective is to earn a return on their investment and limit the risk of losing any money. Learn to speak their language and address their needs.

2. It's only for the money.

You will need to prove that their money is all you need; because you have already looked after everything else.


The banker or investor does not want to worry about your customers, your management team, your sales and marketing efforts, your operating efficiencies, your health, your marriage or anything else except the financing you need.

3. They do have a checklist.

When you meet and fill in all the forms, remember the banker wants to be satisfied on these five criteria:

  1. Character – do you have a reputation of integrity and responsibility on prior financial obligations?

  2. Capital – do you have enough personally invested in your business to also be at risk?

  3. Capacity – does your business have the ability to support the cash flow requirements?

  4. Collateral – if your business cannot support the loans, what assets are available to cover them?

  5. Conditions – is your industry in good economic condition or in a downturn?

Good answers on these points will provide the start to a good relationship with a confident and willing partner instead of tentative support from a cautious and reluctant partner.

So be prepared to meet all the requirements in addition to a good Business Plan and you are more likely to get the green light for GO!

Good luck. That also helps.

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