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November 11, 2005
Small Business: Business plan can be helpful even when it is not necessary
Wednesday, November 09, 2005
By Don Hammonds, Pittsburgh Post-Gazette
The once requisite business plan may no longer be required by banks and lending institutions for small companies, but experts say entrepreneurs would still benefit by preparing the plans.
Business plans generally aren't necessary if you are forming a small, home-based business needing little cash; have large amounts of collateral to protect the loan; or have an existing business with a track record and are seeking an expansion loan, bankers say.
"A lending agency is a business. With many business loans, they are going to base their decision on the borrower's collateral, whether it's home equity or some other sources," said Diane Sandstrom, consulting manager at Duquesne University's Chrysler Corporation Small Business Development Center. "When there's lots of collateral, they really don't care about the business plan. If the business fails, they'll have the collateral as a backup.
"Banks will say, 'Give us a one page summary on what you intend to do,' and they will also do a thorough background check and the normal things that are done for any business loan, such as your credit score, credit worthiness, net worth and other factors."
Even so, there are many reasons business plans are still worthy documents for small-business owners.
Posted by Jon at November 11, 2005 2:29 PM
Comments
It is a great idea to have a plan for motivational purposes as well.
-Bryan
Posted by: Bryan at November 17, 2005 9:03 PM