A quick note:

Make sure to check out my business SMB Business Plans if you're in need of a business plan for your SMB acquisition. We know how to write these business plans in the exact style that SBA lenders are looking for.

Also, check out Pioneer Tribe Insurance if you need insurance around your business acquisition.

-

Why do you need an SBA compliant business plan?

It’s not for the reason you might think.

While it’s helpful to lay out your plans for how you’ll operate the business you are about to acquire, the SBA compliant business plan has a different goal:

Assessing credit risk.

While this plan can be used as a strategic management plan, your real strategy will probably take a different format.

This one has to be written for an SBA lender, not an operator like yourself.

I talked directly to some SBA lenders and asked what they see as important for the business plan:

SBA Lender’s Survey

Ben Woodward - 1st Internet Bank

1. Who is the buyer, seller and transaction service provider(s)?
2. Products/Services (% of revenue)
3. Customer and supplier concentrations (% of revenue)
4. SWOT analysis
5. How was the business run by Seller? How will the business be run by Buyer?
6. What skills does the Buyer have to succeed in business acquisition?
7. Org chart changes? Transition plan? Key management/employees?
8. Deviations to P&L by new buyer. Rent expense? Opex changes?
9. 2 year projections tied to bear, base and bull case
10. Deal terms
11. Working Capital
12. Tie the Business plan to data room and make it easy to reference and understand

Nathan Walker - SBA Underwriter -Truliant Federal Credit Union

A brief description regarding the following over 5-6 pages max.

1. When the business was founded and how it makes money.
2. Industry specific licensing requirements, such as a GC license. Requirements, who has the license, buyer’s plans etc.
3. Markets served.
4. The physical address where operations and or collateral are housed.
5. The customer base, along with payment terms, payment types, etc. Mitigate any concentration.
6. If customer contracts or agreements are in place, speak to terms and if they are assignable.
7. The supplier base, along with payment terms, COD, etc. Mitigate any concentration.
8. Staffing, the existing management team and what they are responsible for.
9. The buyer, why they are purchasing the business and their plans. This should cross reference with projection assumptions.
10. How does the buyer’s experience relate to the subject business? Identify and close all proforma skill(s) gaps.

​

Why You Need a Business Plan for an SBA 7(a) Loan

When applying for an SBA 7(a) loan, a well-written business plan is essential. It not only fulfills a core requirement of the SBA but also strengthens your case for receiving funding.

Here are the specific reasons you’ll need one of these plans:

1. SBA Requirement

The Small Business Administration (SBA) requires a business plan as part of the 7(a) loan application. This document demonstrates the viability of your business and your ability to repay the loan.

2. Demonstrates Business Viability

A business plan shows that your business:

• Has a clear mission and strategy.
• Addresses a specific market need.
• Is supported by thorough market research and realistic financial projections.

Lenders want assurance that your business is well-positioned for success and growth.

3. Establishes Credibility

A detailed, professional business plan demonstrates to lenders that:

• You are serious about your business.
• You understand your market and industry.
• You have a clear vision for achieving your goals.

This builds trust and confidence in your ability to manage the business effectively.

4. Details Financial Projections

The SBA and lenders will closely review your financial projections to evaluate:

• Revenue potential.
• Cash flow management.
• The ability to meet loan repayment terms.

A business plan includes essential financial documents like profit-and-loss statements, cash flow projections, and a break-even analysis.

5. Outlines How Funds Will Be Used

Your plan must clearly explain how the SBA loan will be used. This could include:

• Startup costs.
• Equipment purchases.
• Working capital.
• Expanding operations.

Lenders need to see that the loan aligns with your business’s growth strategy and that funds will be used responsibly.

6. Addresses Risk Management

A business plan outlines potential risks and the steps you’ll take to mitigate them. This reassures lenders that you’re prepared for challenges and have contingency plans in place.

7. Helps You Stay Focused

Beyond meeting SBA requirements, the process of writing a business plan forces you to:

• Clarify your goals and strategies.
• Identify potential challenges early.
• Create a roadmap for achieving milestones.

This can improve decision-making and keep you on track post-funding.

Key Sections for SBA Business Plans

While every business plan varies, an SBA-friendly plan typically includes:

1. Executive Summary: Overview of the business and loan purpose.
2. Business Description: Details about the business, its structure, and its mission.
3. Market Analysis: Research on industry trends, competitors, and the target market.
4. Organization and Management: Description of the leadership team and their expertise.
5. Products/Services: Detailed explanation of what the business offers.
6. Marketing and Sales Strategy: How the business plans to attract and retain customers.
7. Financial Plan: Projections, funding needs, and repayment plans.
8. Appendix: Supporting documents, such as resumes, licenses, or market data.

My business, SMB Business Plans (which I run with my partner Joe Thomas) writes SBA compliant business plans as described above. Here are a few of our reviews:
​
​

​
​smbbusinessplans.com​

Take care,

Matthias

📩 Email me at matthias@pioneercap.com 🌐 Visit us at pioneercapitaladvisory.com​

Disclaimer: The information in this newsletter is for informational purposes only and should not be considered legal or financial advice. Business buyers are encouraged to consult with their legal counsel and accountant to ensure the proper structuring of their transactions and to fully understand the tax implications of seller financing.

Thanks for reading! Feel free to reply directly to this email with any questions or thoughts.