Writing a business plan for a USDA commercial loan is a key requirement for qualifying for one of its excellent commercial lending programs offered under its Rural Development (RD) platform. These loans are an excellent way for rural entrepreneurs to launch or grow their businesses. By supporting loans to businesses with commercial loan guarantees, the USDA promotes economic development in areas throughout the country.
USDA commercial loans are collateral-backed loans for credit-worthy rural borrowers. In addition to being able to back the loan with collateral valued equivalent to the loan amount requested and possessing a minimum credit score of 680 with good payment history, applicants also must submit a business plan. Understanding how to write a business plan for a USDA commercial loan can not only increase your chances of qualifying but also maximize your potential funding amount. With that in mind, here is a seven-step guide for writing your USDA commercial loan business plan.
- Create an executive summary – This is exactly what it sounds like, a brief overview of your business plan. Even though it is the first page of your plan, it is usually better to write it last after you have pulled together all the information in the other areas of your plan. Keep it simple and concise (aim for one page). Include:
- Business name and location
- Products and services
- Mission and vision*
- Summary of growth plans*
- Loan amount and brief statement of planned use of funds
* For USDA commercial loans under the RD program, whether involving a new business, existing business, business acquisition, conversion, or business development, it is especially important to identify how your business will contribute to preserving or creating jobs and contributing to the overall economic prosperity and well-being of the community.
- Write a company description – In this section, you begin to describe your company in more detail:
- Corporate structure of your business (LLC, S-Corp, Sole Proprietorship, Partnership, etc.)
- Identify all owners, partners, or shareholders
- (Note: For all owners with a 20% equity stake, your USDA loan application will require Personal Financial Statements dated within the last 30 days, along with supporting documentation of assets – bank statements, W-2s, etc.)
- Identify key team members
- Provide a brief history of a pre-existing business
- Describe the nature of the business
- Market it serves (market demand it meets)
- How it supplies the market with its products and services
- How the business makes a profit
Wherever possible, include statistics that support your plan.
- Define your business goals – In this section, you succinctly spell out your short- and long-term business objectives. Specify your growth goals and identify in clear, specific terms, the need for funding: what it will be used for and how it will help you meet your growth goals. Describe how you expect your company to evolve and what will that look like in the short-term (1-5 years) and long-term (5-10+ years).
- Short- and long-term business
- Future growth goals
- Spell out the clear need for the funds
- Elaborate on the planned use of the funds
- Describe your products and services – This part of your business plan should go further into the details of your products and services. It should include:
- Detailed description of your products and services
- Benefits to the customer
- Any unique patents, processes, or other relevant information
- Provide a market analysis – A market analysis is a thorough assessment of the market within your specific industry. It is an analysis of the dynamics of the market based on things like potential customers, competitors, historical sales patterns, and other trends; and how these things, in tandem with the unique selling points of your products and services, will allow you the opportunity to be able to sell them successfully. This is where you will present any market research you have.
- Market research and statistics
- Historical or projected sales trends
- Industry outlook
- Identify competitors
- Product differentiation (What makes your products and services stand out?)
- Market opportunity
- Outline your sales and marketing plan – Explain how you will go about marketing and selling your products and services. How will you promote and grow your business?
- Promotional plans
- Plans for marketing and advertising
- Details about pricing, special promotions, upselling or special promotions
- Provide a business financial analysis that includes financial projections – This last section of your business plan may best be handled with the assistance of an accountant. It will provide the critical financial details that ensure your business plan is viable and that you will be able to repay your USDA commercial loan according to the agreed-upon terms. It will include historical financial information for existing businesses and projections for future business. Finally, for USDA Business Loans, it will provide information about the collateral being used to back the loan amount.
- Historical financial data – Financial data prepared according to GAAP
- Balance sheet: 2 years historical and year-to-date
- P&L Statements: 2 years historical and year-to-date
- Pro Formas: 2-3 years
- Realistic prospective financial information
- Forecasted income statement
- Cash-flow statement
- Forecasted capital expenditures
- Schedule of debt
- Historical and projected
- Collateral
- Estimate and breakdown of projected collateral
- Appraisals and Reports
- Appraisals
- Environmental studies, if applicable
- Feasibility studies, if applicable
Once you have developed your business plan and completed your documentation, your commercial loan application is complete. Before putting together a completed business plan, our loan representatives at North Avenue Capital (NAC) can help walk you through the pre-qualification process to help ensure that you meet initial qualifying criteria and that your time is used efficiently. NAC is America’s USDA Business & Industry Lender, serving clients, nationwide. Contact us for assistance in applying for a USDA commercial loan, today.
