Poor Business Plans Get Poor Funding Outcomes: What Underwriters Know That You Ignored

Business plans cost a lot of money.  In 2016 we were in the due diligence cycle regarding our real-time underwriting and analytics roll-out for the CRE vertical and found a statistic published by the U.S. Small Business Administration that stated more than 4 out of 5 companies seeking capital financing failed to get it.  The average business loan is around $757,000 so that could represent a huge loss of opportunity and poor business plans are the culprit that quietly conspire to make lives of entrepreneurs an absolute misery.  They have this incredible idea and opportunity but nobody seems to care.business-plan-capital-financing  Sound familiar?  Look at your business plan.  Ten bucks says your business plan isn’t even the right document the underwriter really needs to see.  When we onboard an underwriting transaction and request the production of the company’s business plan, we almost always get a capital funding proposal they are using to solicit capital investment and not the plan of operations that demonstrates how the business is going to proactively manage execution risk for the benefit of the capital investors.  Spoiler alert: the underwriter doesn’t care about the amount of funding or the great things you are going to do at this stage; the underwriter is worried about what happens if you are removed from the picture and the next person has to pick up the ball and not fumble it.  If it takes weeks or months to get things running smoothly again that is going to cost the investors and lender money they do not have to throw away.  If you do not have a comprehensive business plan of operations that takes the business all the way down to the employee-class level, then be prepared to be routinely rejected for serious capital investment consideration.  The rejection notices are going to stack up, the phone calls and texts will go unanswered and nobody will care about your great invention one wit.  It’s an ugly truth but it also creates an incredible opportunity.

If you go that extra mile by creating a comprehensive business plan of operations (or business plan of operationshave a professional create one for you) you will automatically differentiate yourself from the crowd and immediately garner serious underwriting attention because, you my friend, are a serious player who understands the investment of capital has risks and you are serious about managing those risks and mitigating the potential for investment loss for the benefit of the people who are putting up the money.

 


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