Can you apply for a Bank Loan with a Pitch Deck? Business Plan vs. Pitch Deck

 

When applying for a loan, it makes sense to present detailed documentation about your business, including all of its most important (financial) aspects of course. The purpose of these documents is to show your business’s prospects of repaying your debt. So it is understandable to submit the most thorough bank loan business plan you can formulate. However, you may be surprised to know that you can apply for a bank loan with a Pitch Deck just as well.

Namely, because loan officers can be overwhelmed with dozens of lengthy applications, having something compact that conveys the most important information will immediately stand out in the sea of Bank Business Plan pages. So here are some pros and cons, to help you choose the best application format.

Business plan - a comprehensive description

Business plans are a necessity for operating any business. Besides providing great guidelines that can help you make better business decisions, they are a detailed description of your business as well. This makes them extremely beneficial, especially if you wish to apply for a bank loan.

Bank loan business plans include your business’s past, present and even future finances, in addition to everything else that will convince loan officers just how successful your business is, and more importantly, will be. Lenders will be looking for all of the factors that show your business will keep producing a steady revenue: how it is organized, how it is operating, how skilled your personnel is, and how responsible you are with your finances.

• Dangers of TL;DR

Like mentioned before, keep in mind that long bank loan Business Plan can be an immense strain to the reader. Being bombarded with information can be tiresome, therefore, submitting lengthy documents can backfire on you. Loan officers can get lost in the array of data you have to offer about your business. The goal is not to make them yawn and want to skip to the next page (or worse - next business plan), but to keep them engaged and interested instead.

Pitch deck - when less is more

Applying for a loan with a mere presentation can seem unorthodox, but it surely has it’s benefits. Because you will be limited to a few slides, you will be forced to put only the most crucial information in them. Stripping your business to its bare bones will instantly show loan officers exactly what they are looking for. Skipping all the formalities, and getting straight to the point is surely a great way to grab someone’s attention. But not only that, having a limited number of slides will also force you to get creative, and find the best way to present your business’s heart and soul, leaving a lasting impression on your audience.

• Sometimes, less is just less

Making an attention grabbing Pitch Deck is definitely not as easy as it looks, because what seems to be its strength can also be its weakness. Since pitch decks are limited to only a few slides, you really need to make an impactful presentation, or things can easily go sour. You have a small window of opportunity to impress your audience, so make sure every slide counts and think carefully about how you will present your information to them.

Both Bank Business Plans and pitch decks have their good and bad qualities. When it comes to the battle of the formats there is just not a clear winner. But knowing all of the benefits and downfalls can definitely help you make the best decision. It all comes down to the individual case, so think long and hard what is best suited for you and your business. In either case, make sure your chosen format addresses a loan officers main concern: whether or not you’ll be able to repay your loan!

5 Common Market Research Mistakes when Writing a Bank Loan Business Plan

 

Market research is an important component for any business plan, but that can especially be said for a Bank Business Plan. Getting a bank loan is not easy, there are many requirements for getting a loan approved, one of them being a well composed business plan based on solid research. With such a huge emphasis on the research, it is important to do it right, so here are some common mistakes to avoid.

Not using all available information sources

The first step of any research is to gather all of the available and relevant information. In case of Market Research, this is done through surveys, questionnaires, test groups and interviews; in other words, data is collected directly from the customers themselves. This type of information would be considered primary data, and many make the mistake of using it as their only resource.

However, there is another way of collecting information, which is through secondary research. This includes all of the data and research collected and done prior to your own, such as news articles, government census, industry reports, studies, etc.

Overlooking the competition

Focusing on your brand is great, but you are not operating in a vacuum. There are other companies climbing the ladder of success, and you do not want to be at the bottom of it. Therefore, gather as much information as you can on your competition, so you can see how you are positioned on the market and how you can improve.

How you compare to your competition is an indicator of your business’s potential success. This is crucial information for loan officers, since it will give them an idea of your business’s value in the marketer and ability to repay your debt.

Thinking the market does not change

If you need market research for a bank business plan, don’t dust off your old research and use it again for a new document. The market is constantly changing and your Bank Business Plan will not benefit from outdated research. Doing regular research and keeping an eye on the market will show loan officers you are aware of any new market trends and are able to overcome or create opportunities from changes. This is valuable information for getting a loan approved since it shows you will be able to adjust to the market and keep producing a steady revenue.

Cherry picking information

The reason you are conducting market research may be for your bank business plan, with an overall goal to get a loan approved, but that should not be your research objective. The desire to make an impeccable business plan, can make people cherry pick information for their research, sometimes without even realizing it. The result of this may be a seemingly bulletproof business plan, but in reality it is flawed.

Therefore, you need to have a scientific approach to your research, which means that it needs to be:

systematic - following a clear plan and path; using good methods and research techniques

and objective - not being biased in your research is crucial. If you only make it your goal to get approved for a loan, you might lose your perspective. Your objective with market research is to present reality as it is.

Presenting an unreadable paper

Do not oversaturate your findings with charts and graphs. By all means, use them, you need to after all, but know that you should tell a story. Your research should be easy to follow, read and understand. Knowing how to present your findings is crucial. And keep in mind that your readers may not be as knowledgeable of your industry as you may think, so avoid using industry jargon as well.

The scope of market research can be intense, which leaves a lot of room for mistakes. So, avoid the mistakes others make and base your bank business plan on the most accurate research you can do. If you find the Market Research portion of business planning difficult, consult experts that can do it for you. This will mitigate the chance of being biased in your findings as well.

How to do Financial Modeling for a Pitch Deck

 

Financial Modeling may be the deciding factor in gaining investment for your business. It is certainly what investors are the most interested in when you are pitching your business idea to them. That is why having an outstanding pitch deck is so important. But, fitting your financial model on a few slides can be a challenge, so here is the best way to do it.

Financial modeling in 4 simple steps

Before you even make your Pitch Deck, first make sure your financial model is complete and accurate. It is a number crunching process, but to make the whole experience a bit easier, it can be broken down into four steps:

1. Collecting data - Start by gathering all of the necessary information you can find. Look into your business’s history in sales, get data from doing market research, anything and everything you can get your hands on. The more the better.

2. Making assumptions - After getting every piece of information you can find, proceed by making a list of assumptions. This step should be taken very seriously, since the rest of the model will be based on it.

3. Forecast the 3 statement model

The three statement model consists of income statement, cash flow statement and balance sheet.

4. Income statement will show your income and expenses for a certain period.

5. Cash flow statement shows how much money is entering and leaving your business, or how much money your business has at hand for a specific time frame.

6. Balance sheet shows how much your business owns in assets, liabilities and shareholder’s equities for a given period.

7. Risk assessment and sensitivity analysis - financial modeling is not complete without testing your model first. By doing assessments and analysis you are checking for any discrepancies in your model, checking to see if it will hold up, and understanding where you may fall within a realistic range.

Organizing your financial model on slides

After you’re done with financial modeling, the next challenge is trying to figure out how to present it in your Pitch Deck. This is by no means an easy task, and there are a few things to consider:

• Consider the number of slides

The whole pitch deck should not contain too many slides. Opinions on the slide number can vary. Some say no more than about 20 slides are necessary, but recently the trend is to keep your presentation down to only 10 slides. Keep in mind that only a fraction of those will be intended for your business’s finances, so your financial model may take up only about one or two slides.

• Consider the visuals

Having only a couple of slides for your financial model will force you to get creative when presenting your numbers. The best way is to use visuals to convey information such as graphs and charts. But think about their design as well. It is not just about having an aesthetically pleasing slide, but it should be easy to read. Think about using adequate font and font size, and do not forget about having enough negative space, meaning do not cram your slide with too much text and visuals.

Preparing a presentation is not easy, especially if you have a lot of material to work with. A challenge with pitch decks has always been how to present all of your business’s aspects in a limited number of slides, and having to incorporate Financial Modeling into them does not make things easier. Luckily, using the aid of compelling visuals will get the job done every time.

4 Common Financial Projection Mistakes when Writing an Information Memorandum

 

If you wish to sell your business or to do a merger, you – or an M&A advisor - might already be busy writing your Information Memorandum. By now, you might have noticed that it is not as easy to write it as initially seemed, especially when it came to making financial projections. Making projections is a long and complicated process and it is understandable that you are having trouble writing them. People usually make the same mistakes when projecting their finances for any business plan, and the same can be said for information memorandums. So here are a few common mistakes to avoid.

1. Making incomplete projections

When doing mergers and acquisitions it is logical to want to present your business in the best light possible. Information memorandum is a way to introduce your business to potential buyers, and it is therefore imperative to leave a good impression on them. However, for exactly this reason many people fall into a trap. They present only the good side of their business, while hiding the ugly. When presenting your projections it is imperative to be honest and show the whole picture, even if it is not favorable. But, fear not, a good strategy in this case, would be to include solutions to any future problem you may predict. After all, that is what Financial Projections are for anyway.

2. Not making enough assumptions

Another way people make incomplete financial projections is by making their list of assumptions too short. Making assumptions is a basic step in writing your projections, and maybe one of the most important ones. All of your projections will be based on these assumptions, therefore you should make as long a list as you can, in order to be able to make the most accurate projections.

3. Not doing market research

Entrepreneurs who underestimate market research, are missing out on all of the benefits it can bring to their business, especially when it comes to making financial projections. Having a good grasp of the market and its trends can be of great help when making your projections. All the data collected through Market Research can help you make your list of assumptions. Knowing all the changes the market is undergoing, or the ones that are about to happen, is a sure way to make the most precise financial predictions for your business.

4. Not basing your claims on data

Your Information Memorandum has to be based on facts about your business. So, when casting your projections, do not make your assumptions out of thin air, they have to come from somewhere. Just because you experienced a steady revenue growth for the past couple of years, does not mean it will continue into the next one. There are many contributing factors that can change the course of your business operations. That is why gathering all the information you can get your hands on and making your assumptions on actual data is what will make your financial projections credible, and consequently your information memorandum.

Avoiding these common mistakes will help you make the most realistic and accurate Financial Projections and a well formulated and well written information memorandum. Both of them are needed for a smooth merger and acquisition process, since they may be the biggest contributing factor for a successful transaction.