Business newspaper Business & Power
The originality of the idea and the unconventional presentation of information in a business plan are quite important elements that always determine whether a potential investor or creditor will read it to the end or send it to the trash. However, in most cases, this becomes insufficient. "&" decided to ask bank representatives what they pay attention to when reviewing business plans.
Questions
- What key points should entrepreneurs focus on when writing a business plan?
- What business plans do you immediately discard and why?
- Are there any other details besides a well-written business plan that also influence your decision to grant or deny credit to an entrepreneur?
Stanislav Kosobokov, Deputy Chairman of the Board of JSC "People's Bank of Kazakhstan"
- The main indicator of a successful business plan is a promising business idea; therefore, the design and content of the business plan, which includes such parameters as market analysis, marketing plan, study of legal aspects, and economic calculations, are very important. Apart from the above, a realistic assessment of the possible risks associated with the project is crucial. Most businessmen with a budding business idea tend to be overly optimistic about its viability and overlook potential threats and risks. Therefore, it is important to include adjustments for different life situations in the economic forecasts of the business plan, not excluding a pessimistic development scenario. In professional business plans, this analysis is mandatory. The bank, as a creditor, also necessarily performs a comprehensive risk assessment of the project.
- Every business plan proposed by an entrepreneur is carefully examined by our specialists. It is only after thorough investigation by the bank as a potential creditor that the decision is made to finance or not finance a business project. I repeat, the bank considers every submitted business idea.
- In addition to the business plan, it is important who and how the idea will be brought to life. Here we are talking about the management of the company/organization, the team of specialists with experience in implementing similar projects. For the bank as a creditor, the credit history, the marketing part of the project assessing the market situation, both current and projected, as well as compliance with the main requirements of the bank's credit policy, are equally important.
Roman Goncharov, Director of the Small Business Department of DB JSC "Sberbank"
- When evaluating a business plan, we focus on the following key points: financial information, risk factors and advantages, markets and marketing, as well as planned sales volumes and expected profit, which, in turn, will be the main source for loan repayment. If we delve into the details... Financial information: we focus on financial forecasts for three years, considering sales volume, gross profit, net profit before taxes, capital expenditures. Regarding risk factors and advantages, we assess possible risks, measures to mitigate the impact of risks on performance, the effect of risks on profit and cash flow. For markets and marketing, we describe the market as a whole, prospects, statistical data, information on planned clients and competitors, territorial targets, price policy.
- The main reason for denial in further consideration of a credit application when analyzing a business plan is the absence of financial calculations, forecasts, as well as lack or unfamiliarity with key markets and not understanding the market situation.
Press Service of JSC "Nurbank"
- The main principle when drafting a business plan (i.e., planning) is transparency. The investor must understand the core essence of the business plan from its first lines, which provides an understanding of the main essence of the financing project. An effective business plan must be detailed and reveal information about the value of your enterprise, the appeal of the project to potential investors, the amount of startup capital, growth prospects, possible risks, and methods of combating them. Secondly, the business plan must be readable, as due to the abundance of charts, tables, diagrams, and figures, it may become overloaded with unnecessary information, making it difficult to read. Thus, the author's task is to make it easier to perceive and more understandable for the potential investor or business partner. Thirdly, the business plan must be based on current, reliable, and accurate information.
- As noted above, the business plan must be based on reliable information and real data. A large percentage of failures in business are associated with self-deception. A business plan should not reflect the appearance of the project, i.e., be fictitious. If the main part of the financing project planning is based on bare arguments and fiction, the result may be disappointing. Such a business plan is doomed to fail.
- When considering the issue of project financing, the bank primarily focuses on the project's viability and further development. However, the following factors can also influence a positive decision: the financial state of the enterprise, corresponding to key financial indicators (liquidity, profitability, profitability, adequacy of own capital, etc.). Presence of guarantees: the main ones include collateral (real/ movable property, money, etc.), guarantees from state funds (e.g., under the guarantee program of JSC "Damu Enterprise Development Fund"), guarantees or sureties from third parties plus a positive credit history (if available), a good reputation of the company in banking circles and a positive business reputation of the company's executives or owners.
"The Main Thing is Realism"
General Director of "Tenre-Aerolife" Vladimir Talanov about what to include in a business plan if the entrepreneur hopes to receive credit.
What do you think banks pay attention to when evaluating business plans, and which plans do they immediately discard?
I believe bank employees are interested in the realism of plans and financial indicators— the bank wants to be confident in the return on its investments; therefore, reliability is the main criterion.
It seems to me that banks primarily discard various "unique", "exclusive", and "super profitable" projects that are generally associated with huge risks and are poorly grounded in reality.
In your opinion, what information must be included in the business plan if the entrepreneur hopes to receive credit?
It is important here to simply and clearly explain the essence of business processes— either the sale or production of goods, or the provision of services. The profit margin must be indicated, outlining the main markets, key clients, and expansion paths.
What recommendations, based on the above, could you give entrepreneurs for writing business plans? How should they start and finish?
In my opinion, the most important thing is the realism of the project. It is necessary to foresee multiple courses of action, different risks, and possible development paths— from the optimistic to the negative scenario, and strive to detail and objectively outline the risks, as well as the strengths of the project. The cost of goods or services must be transparent and understandable to the bank, just like in a doctor's office— there should be no secrets or omissions.
