Why Not to Skimp on Market Research in Your Bank Business Plan

When you are preparing your bank business plan to apply for a bank loan or line of credit, it is imperative that you do not skimp on market research. Market Research is a very powerful aspect and tool of any business plan but, this is especially true when you are applying for outside funding through the likes of a bank or investors.

Loan officers will be reviewing your Bank Business Plan with two questions top of mind.

1. Business Viability

The first is if your business or business idea (if not yet established) is viable, likely to succeed, and likely to be able to support repayment of a loan. The key to proving this is market research. Market research takes many shapes and forms and is both qualitative and quantitative in nature. The current figures of your business if it is already up and running will factor in but, that is not nearly enough.

Proving business viability and demonstrating that you have thoroughly considered your business or future plans will rely heavily on market research. Solid, comprehensive market research that is incorporated throughout your bank Business Plan is the best way to prove viability. Naturally, market research will be covered in depth in the market overview section of your business plan. However, you should use supporting elements in other appropriate areas of the business plan to back up your points. This could be when you are discussing the products/services and will certainly be included in your financials. The importance of supporting your entire business plan with market research cannot be stressed enough.

2. Personal Credit

The second major area of concern for a bank officer is your personal credit and that of any other business owners. Unlike in investments, when it comes to bank loans, you will be personally liable for the debt should the business fail. They are unlikely to extend a loan or credit if they feel the business is not likely to succeed but, no one can predict the future and banks are aware that businesses fail for all sorts of unpredictable reasons.

Especially if your personal credit history or personal finances are not in the best shape, you are going to have to rely on your bank business plan overall to carry you through. Proving a viable business is important regardless but, it becomes even more important in this case. As already stated, the key to crafting a solid bank business plan is market research.

Mitigating Risk

Overall, a bank loan officer’s purpose is to mitigate risk. In this case, mitigating risk is two-fold. It ensures the business is likely to succeed, which should be largely supported by market research, and if the individuals are likely to be able to cover the loan if the business is not successful. The bank business plan is the perfect format to address both of these aspects. Unlike other types of business plans, the bank business plan should focus on being very risk adverse and that must include issues around personal credit and Market Research. Addressing these issues and tying them in will make the strongest possible case for your business bank loan or line of credit application.