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How To Write A Business Plan For A Loan

A solid business plan is often critical to securing funding for your small business. Learn how to create a business plan for a loan that includes the information lenders want to see.

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Lead Staff Writer

A business plan is a crucial business document you need to have on hand when applying for business loans. However, the mere thought of writing a business plan for a loan is intimidating to a lot of business owners.

A one-page business plan may be sufficient for certain types of small business loans (for example, online loans), but bank loans and SBA loans typically require a more in-depth business plan that delves further into your financials.

If you need to write a business plan for a loan, you’ve come to the right place. Keep reading to learn more about everything you need to include in your business plan to improve your chances for loan approval.

Table of Contents

What Is A Business Plan For A Loan?

10 key sections to include in your business plan, what do lenders look for in a business plan, business plan examples, resources for writing a business plan for a loan, final thoughts on writing a business plan for a loan, faqs about how to create a business plan for a loan.

A business plan is a written document that provides a complete overview of your business, including information about your business’s services, strategies, finances, and goals. All businesses should have a business plan, but a business plan is especially important when applying for a business loan.

Most business plans should include some version of the following sections. Depending on your industry and other factors, such as whether you own a startup or established business, some sections could be condensed or combined. The exact verbiage for section titles can vary, as well.

For a business plan that’s longer than one page, it’s a good idea to preface these sections with a cover page and table of contents.

Executive Summary

This section is a condensed version of your entire business plan. It will likely include:

• Details of when, how, and why you started your business
• Your company mission statements
• High-level financial information about your business
• An explanation of how funding will help your business

Depending on whether you’re a startup or an established business, you may use this section to focus on your growth strategy or your past successes.

Company Description

Use this section to delve deeper into your company’s offerings, core principles, legal structure, and leadership. Your company description should also include your unique value proposition . Describe your company’s unique strengths that will ensure your success.

Products & Services

This section should detail the products and/or services your company provides. Make clear the problem that your offerings solve. Include information such as:

• Information on your raw materials and production process (if applicable)
• Profit margins
• Whether you have or plan to file patents or copyrights

Market Analysis

Use this section to demonstrate your understanding of your overall industry and the specific markets you serve, including market trends, competitors, and the demographics of your target customers. Some companies hire a consultant or agency to perform the research for the market analysis section.

Marketing & Sales Plan

Building off your market analysis, how will you market to your target customers and beat your competitors? How will you sell to them and distribute your product? What are your sales goals and projections? Provide these details in this section.

Organization & Management

Use this section to include your organizational and leadership structure, ideally including an organizational flowchart. Also include job descriptions, qualifications, and years of experience to demonstrate why your team is capable of delivering on your company goals and is worthy of investment.

Operational Strategy

This section is used to describe your day-to-day operational processes, including information about your location, facility, equipment, inventory, and daily production. If you have a service-based business, this section may focus more on your team’s daily activities and how they contribute to long-term goals.

Financial Outlook

This section should tell lenders how much you spend and how much you make in profits. Include up to five years of data if possible, including financial documents such as:

• Income statements
• Cash flow statements
• Balance sheets
• Capital expenditure budgets
• Sales forecasts
• Projected income statements
• Information on any collateral you have to secure the loan

Depending on how much financial documentation you have, you might refer to specific documents in this section and indicate that the full documents can be found in the Appendix section.

Though startups may not have all of this data, you can make projections based on monthly or quarterly data and industry averages.

Funding Request

Now that you’ve laid out your expenses and financial projections, it’s time to make your case for a loan. Be clear about how much money you need, how you will spend it, and how you will repay the loan. Be as detailed as possible.

In the Appendix, include any supporting documents, such as financial documents referred to in the Financial Outlook section. Some other types of documents you might include in this section are:

• Business licenses  or permits
• Credit reports
• Product photos
• Marketing materials
• Letter of intent to purchase business

If you know what lenders are looking for in a business plan for a loan, you will increase your chances of approval. Learn the five things lenders want to see in your business plan, followed by five tips to create a loan-worthy business plan.

The 5 Cs Of Credit

The Five Cs of Credit is a phrase that summarizes what lenders look for when deciding whether to extend a loan to a business. Lenders will, accordingly, look for the five Cs when reviewing the business plan in your loan application. The five Cs are:

• Character: Your knowledge, experience, and creditworthiness
• Capacity: Your ability to repay the loan
• Capital: How much you have already invested in your business
• Conditions: Your market viability, considering your industry as well as overall economic conditions
• Collateral: Assets you can use to secure the loan

5 Business Plan Tips For Loan Approval

Besides emphasizing your “5 Cs,” there are a few other things you can do to make the best impression with your business plan to increase your chances of securing funding.

• Avoid Industry Jargon: Use plain English rather than industry terminology that the lender might not be familiar with. Remember that the loan underwriter may not have deep knowledge of your specific industry.
• Show Cash Flow: Cash flow is one of the most important factors that determine loan eligibility. You can even get a loan with bad credit as long as your cash flow is sufficiently high. The more insight you can provide into your past, current, and future cash flow, the better.
• Show Your Investment: Before extending a loan, the lender will want to see that you have already invested some of your own resources, such as personal savings, into your business. Be sure to include documentation that demonstrates your investment.
• Enlist Help: You will likely need some professional assistance in creating your business plan, whether that means hiring a writer, an industry consultant, or both. At the very least, you should have a third party review your business plan before you submit it as part of a loan application.
• Revise Your Plan As Needed: If this is the first time you’ve taken a close look at your business strategy and financials, you will surely learn some things about your business while creating your plan. For example, you may realize you cannot afford a business loan as large as you planned to ask for. Rather than trying to justify the number you started with, it’s better to modify your funding request (and other aspects of your plan) to align with your financial reality.

It’s easy to find templates and examples of business plans online. Though you may not want to copy and paste from a template verbatim, these samples provide a starting point and show you different ways a business plan can be structured. Here are a few to start with:

• Business plan template for a startup (from SCORE)
• Business plan template for traditional businesses  (from the SBA)
• Business plan template for retail or eCommerce (from Shopify; requires email address)

These tools and resources can help you create a solid business plan for a loan. While some free business plan creation tools are available online, you will have to pay for some options.

SBA Business Plan Resources (Free)

The SBA has a great resource in its online learning center that includes business plan worksheets . In addition to business plan templates, the SBA also helps you connect to free local business counselors who may be able to help you with your business plan.

Business Plan Software ($)

If you need extra help creating a business plan and don’t mind spending a little bit of money, consider business plan creation software. For example, LivePlan ($20/month) is business plan software that connects with QuickBooks to import your financial data to your plan.

Business Plan Writer/Consultant ($$$)

If you’re willing to invest more heavily into your business plan, consider hiring a writer or consultant that specializes in creating business plans. This option costs anywhere from $2,000 to $20,000, with the lower end of that scale typically including only basic writing services and the higher end representing a specialized industry consultant agency.

While it’s helpful to know how to write a business plan for a loan, you can always hire someone to help you draft the plan if the task is too daunting. A business plan is a worthwhile investment no matter what type of business you have or whether you are currently trying to secure business funding. Even if you don’t need a loan right now, it’s important to maintain an updated business plan to serve as a guide for your own business decisions.

Was your loan denied because of your business plan (or another reason)? Learn what to do if your business loan was denied .

Do you need a business plan to get a loan?

No, you do not always need a business plan to get a loan. Most traditional business lenders, including banks and SBA lenders, do require a business plan. However, a lot of online business lenders (such as OnDeck ) do not ask for a business plan.

How do you write a business plan for a bank loan?

To write a business plan for a bank loan, you first need to lay the groundwork by analyzing your business’s finances, strategies, and market conditions. Alternatively, you can hire someone to do this research for you. Once you have all this information, you can use a guide, template, or software to help you organize it into a business plan.

How do you write a business plan for an SBA loan?

To get an SBA loan, you will usually need a comprehensive business plan, including a detailed plan for how you intend to use the funds. On the SBA website, you can find general information about what to include in a business plan, or you can download a free business plan template. Some online SBA loan services, such as SmartBiz , do not require a business plan.

How long should a business plan be?

There is no set length for a business plan. A typical business plan used to secure financing might be 20-40 pages. A so-called “lean business plan” that serves as an internal company document for a small business may only be one or two pages.

Who writes business plans?

Business plans are often written by the business owners themselves, but you can also hire a freelance writer or consultant to write a business plan. A business plan writer will still need the business owner’s input (and access to the business’s financial documents or accounting software ) in order to prepare the plan.

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Why Do I Need a Business Plan?

Sections of a business plan, the bottom line.

• Small Business

How to Write a Business Plan for a Loan

How to secure business financing

Matt Webber is an experienced personal finance writer, researcher, and editor. He has published widely on personal finance, marketing, and the impact of technology on contemporary arts and culture.

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A business plan is a document that explains what a company’s objectives are and how it will achieve them. It contains a road map for the company from a marketing, financial, and operational standpoint. Some business plans are more detailed than others, but they are used by all types of businesses, from large, established companies to small startups.

If you are applying for a business loan , your lender may want to see your business plan. Your plan can prove that you understand your market and your business model and that you are realistic about your goals. Even if you don’t need a business plan to apply for a loan, writing one can improve your chances of securing finance.

Key Takeaways

• Many lenders will require you to write a business plan to support your loan application.
• Though every business plan is different, there are a number of sections that appear in every business plan.
• A good business plan will define your company’s strategic priorities for the coming years and explain how you will try to achieve growth.
• Lenders will assess your plan against the “five Cs”: character, capacity, capital, conditions, and collateral.

There are many reasons why all businesses should have a business plan . A business plan can improve the way that your company operates, but a well-written plan is also invaluable for attracting investment.

On an operational level, a well-written business plan has several advantages. A good plan will explain how a company is going to develop over time and will lay out the risks and contingencies that it may encounter along the way.

A business plan can act as a valuable strategic guide, reminding executives of their long-term goals amid the chaos of day-to-day business. It also allows businesses to measure their own success—without a plan, it can be difficult to determine whether a business is moving in the right direction.

A business plan is also valuable when it comes to dealing with external organizations. Indeed, banks and venture capital firms often require a viable business plan before considering whether they’ll provide capital to new businesses.

Even if a business is well-established, lenders may want to see a solid business plan before providing financing. Lenders want to reduce their risk, so they want to see that a business has a serious and realistic plan in place to generate income and repay the loan.

Every business is different, and so is every business plan. Nevertheless, most business plans contain a number of generic sections. Common sections are: executive summary, company overview, products and services, market analysis, marketing and sales plan, operational plan, and management team. If you are applying for a loan, you should also include a funding request and financial statements.

Let’s look at each section in more detail.

Executive Summary

The executive summary is a summary of the information in the rest of your business plan, but it’s also where you can create interest in your business.

You should include basic information about your business, including what you do, where you are based, your products, and how long you’ve been in business. You can also mention what inspired you to start your business, your key successes so far, and your growth plans.

Company Overview

In this section, focus on the core strengths of your business, the problem you want to solve, and how you plan to address it.

Here, you should also mention any key advantages that your business has over your competitors, whether this is operating in a new market or a unique approach to an existing one. You should also include key statistics in this section, such as your annual turnover and number of employees.

Products and Services

In this section, provide some details of what you sell. A lender doesn’t need to know all the technical details of your products but will want to see that they are desirable.

You can also include information on how you make your products, or how you provide your services. This information will be useful to a lender if you are looking for financing to grow your business.

Market Analysis

A market analysis is a core section of your business plan. Here, you need to demonstrate that you understand the market you are operating in, and how you are different from your competitors. If you can find statistics on your market, and particularly on how it is projected to grow over the next few years, put them in this section.

Marketing and Sales Plan

Your marketing and sales plan gives details on what kind of new customers you are looking to attract, and how you are going to connect with them. This section should contain your sales goals and link these to marketing or advertising that you are planning.

If you are looking to expand into a new market, or to reach customers that you haven’t before, you should explain the risks and opportunities of doing so.

Operational Plan

This section explains the basic requirements of running your business on a day-to-day basis. Your exact requirements will vary depending on the type of business you run, but be as specific as possible.

If you need to rent office space, for example, you should include the cost in your operational plan. You should also include the cost of staff, equipment, and any raw materials required to run your business.

Management Team

The management team section is one of the most important sections in your business plan if you are applying for a loan. Your lender will want reassurance that you have a skilled, experienced, competent, and reliable senior management team in place.

Even if you have a small team, you should explain what makes each person qualified for their position. If you have a large team, you should include an organizational chart to explain how your team is structured.

Funding Request

If you are applying for a loan, you should add a funding request. This is where you explain how much money you are looking to borrow, and explain in detail how you are going to use it.

The most important part of the funding-request section is to explain how the loan you are asking for would improve the profitability of your business, and therefore allow you to repay your loan.

Financial Statements

Most lenders will also ask you to provide evidence of your business finances as part of your application. Graphs and charts are often a useful addition to this section, because they allow your lender to understand your finances at a glance.

The overall goal of providing financial statements is to show that your business is profitable and stable. Include three to five years of income statements, cash flow statements, and balance sheets. It can also be useful to provide further analysis, as well as projections of how your business will grow in the coming years.

What Do Lenders Look for in a Business Plan?

Lenders want to see that your business is stable, that you understand the market you are operating in, and that you have realistic plans for growth.

Your lender will base their decision on what are known as the “five Cs.” These are:

• Character : You can stress your good character in your executive summary, company overview, and your management team section.
• Capacity : This is, essentially, your ability to repay the loan. Your lender will look at your growth plans, your funding request, and your financial statements in order to assess this.
• Capital : This is the amount of money you already have in your business. The larger and more established your business is, the more likely you are to be approved for finance, so highlight your capital throughout your business plan.
• Conditions : Conditions refer to market conditions. In your market analysis, you should be able to prove that your business is well-positioned in relation to your target market and competitors.
• Collateral : Depending on your loan, you may be asked to provide collateral , so you should provide information on the assets you own in your operational plan.

How Long Does It Take to Write a Business Plan?

The length of time it takes to write a business plan depends on your business, but you should take your time to ensure it is thorough and correct. A business plan has advantages beyond applying for a loan, providing a strategic focus for your business.

What Should You Avoid When Writing a Business Plan?

The most common mistake that business owners make when writing a business plan is to be unrealistic about their growth potential. Your lender is likely to spot overly optimistic growth projections, so try to keep it reasonable.

Should I Hire Someone to Write a Business Plan for My Business?

You can hire someone to write a business plan for your business, but it can often be better to write it yourself. You are likely to understand your business better than an external consultant.

Writing a business plan can benefit your business, whether you are applying for a loan or not. A good business plan can help you develop strategic priorities and stick to them. It describes how you are going to grow your business, which can be valuable to lenders, who will want to see that you are able to repay a loan that you are applying for.

U.S. Small Business Administration. “ Write Your Business Plan .”

U.S. Small Business Administration. “ Market Research and Competitive Analysis .”

U.S. Small Business Administration. “ Fund Your Business .”

Navy Federal Credit Union. “ The 5 Cs of Credit .”

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• Mar 30, 2023

The Ultimate Guide to Writing a Business Plan for a Loan: A Step-by-Step Walk-Through

The Ultimate Guide to Writing a Business Plan for a Loan: A Step-by-Step Walkthrough

As a business plan specialist and expert business planner, I'm here to guide you through the process of writing a comprehensive business plan for securing a loan. Whether you're a start-up or an established business looking to expand, a well-crafted business plan is essential for impressing potential lenders and securing the funding you need.

In this extensive, 5,000-word article, I'll cover everything you need to know about creating a top-notch business plan that will boost your chances of loan approval. We'll go through each section in detail, providing you with practical examples and tips to optimize your plan for success. So, let's get started!

Executive Summary

The executive summary is the first and most critical section of your business plan. It's a brief overview of your entire plan, highlighting the key points and giving readers an insight into your business.

Key elements to include in your executive summary:

Business concept: Briefly explain your business idea, the products or services you plan to offer, and the target market.

Company overview: Provide essential information about your company, including its legal structure, location, and mission statement.

Management team: Showcase the expertise and experience of your management team, emphasizing their ability to lead the business.

Market opportunity: Describe the market demand, trends, and target audience, highlighting the opportunity for your business to succeed.

Financial highlights: Summarize your financial projections, including sales, profits, and cash flow.

Loan purpose: Clearly state the purpose of the loan and the amount you're seeking.

Remember, the executive summary is often the first thing lenders read, so make it engaging and informative to grab their attention.

Company Description

The company description section is where you provide a more in-depth look at your business. It should give readers a clear understanding of your company's purpose, goals, and competitive advantages.

Key elements to include in your company description:

Business history: If your company has an existing history, briefly describe its origins and milestones achieved.

Mission statement: Articulate the purpose of your company and the value you aim to provide to customers.

Objectives: Outline the specific goals you want to achieve with your business, both short-term and long-term.

Products and services: Provide a detailed description of the products or services you plan to offer, emphasizing the benefits they provide to customers.

Target market: Identify your target audience, specifying their demographics, psychographics, and buying habits.

Competitive advantage: Explain what sets your business apart from the competition and how you plan to maintain this edge.

Market Analysis

The market analysis section demonstrates your understanding of the industry, market, and competition. It's crucial to show lenders that you've done your homework and have a comprehensive understanding of the market landscape.

Key elements to include in your market analysis:

Industry overview: Provide a high-level view of your industry, including its size, growth trends, and key players.

Market segmentation: Break down your target market into smaller segments, identifying their unique needs and preferences.

Target market characteristics: Describe the specific characteristics of your target market, such as demographics, psychographics, and geographic location.

Market demand: Present evidence of market demand, using data on customer needs, market trends, and buying behaviors.

Competitor analysis: Evaluate your main competitors, analyzing their strengths, weaknesses, and market share.

SWOT analysis: Conduct a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) to assess your business's position in the market.

Marketing and Sales Strategy

In this section, outline your marketing and sales strategy to show lenders how you plan to attract and retain customers, as well as generate revenue. A well-defined marketing and sales strategy is crucial to demonstrate that you have a clear plan for growth and profitability.

Key elements to include in your marketing and sales strategy:

Marketing objectives: Define your marketing goals, such as brand awareness, lead generation, or customer retention.

Target audience: Reiterate your target market, emphasizing their needs and preferences.

Unique selling proposition (USP): Highlight your USP, the main reason customers should choose your products or services over the competition.

Marketing channels: Identify the marketing channels you plan to use, such as social media, email, content marketing, or paid advertising. Explain the rationale behind your choice of channels and how they align with your target audience.

Sales process: Describe your sales process, from lead generation to closing deals. Include details on your sales team structure, training, and compensation plans.

Key performance indicators (KPIs): List the KPIs you'll use to measure the success of your marketing and sales efforts, such as conversion rates, average deal size, or customer lifetime value.

Operations Plan

The operations plan section details the day-to-day activities required to run your business. It shows lenders that you have a clear understanding of the operational aspects of your company and the resources needed to support your growth.

Key elements to include in your operations plan:

Facilities: Describe your business's physical location, including its size, layout, and any equipment or machinery required.

Production process: If applicable, detail your production process, including the steps involved, quality control measures, and production capacity.

Supply chain: Outline your supply chain, identifying key suppliers, procurement processes, and inventory management practices.

Staffing: Explain your staffing requirements, including the roles, responsibilities, and qualifications of each team member.

Management structure: Provide an organizational chart, showcasing your company's management structure and reporting lines.

Legal and regulatory requirements: Identify any relevant legal or regulatory requirements, such as licenses, permits, or certifications needed to operate your business.

Financial Plan

The financial plan is arguably the most crucial section of your business plan when applying for a loan. It demonstrates your ability to manage finances, make informed decisions, and, ultimately, repay the loan.

Key elements to include in your financial plan:

Revenue projections: Estimate your future sales, breaking them down by product or service category and showing growth rates over time.

Expense projections: Forecast your expenses, including fixed costs (e.g., rent, utilities) and variable costs (e.g., marketing, salaries).

Cash flow statement: Provide a detailed cash flow statement, showing how cash will flow in and out of your business over a specified period (typically 12 months).

Profit and loss statement: Create a profit and loss statement that projects your business's profitability over time.

Balance sheet: Prepare a balance sheet that showcases your business's assets, liabilities, and equity.

Break-even analysis: Calculate the point at which your business will break even, meaning your revenues equal your expenses.

Loan repayment schedule: Detail your proposed loan repayment schedule, including the loan amount, interest rate, repayment terms, and projected date of full repayment.

The appendices section is where you can include any additional documents or supporting materials that are relevant to your business plan. These documents may provide further evidence of your company's viability and help strengthen your case for securing a loan.

Examples of items to include in the appendices:

Resumes of key team members

Product samples or prototypes

Market research data or surveys

Letters of intent or contracts with suppliers, partners, or customers

Intellectual property documentation, such as patents, trademarks, or copyrights

Relevant licenses, permits, or certifications

Writing a comprehensive business plan for a loan can seem like a daunting task, but with the right approach and guidance, it's an achievable goal. By following the step-by-step instructions outlined in this article, you can create a well-structured, persuasive business plan that will greatly improve your chances of securing the funding you need. Remember to:

Pay close attention to your executive summary, as it sets the tone for the entire plan.

Be thorough and detailed in your market analysis, showing a deep understanding of your industry and target audience.

Develop a solid marketing and sales strategy to demonstrate your ability to attract and retain customers.

Address the operational aspects of your business, including staffing, facilities, and supply chain management.

Present a robust financial plan, complete with projections and a loan repayment schedule.

By doing so, you'll showcase your expertise, commitment, and preparedness to potential lenders, significantly increasing the likelihood of obtaining the loan your business needs to grow and succeed.

In addition to following the steps outlined in this guide, consider seeking professional assistance from a business plan consultant or specialist to review and refine your plan. Their expertise can help you identify any areas that may need improvement and ensure that your business plan is optimized for success.

Finally, remember to continuously update your business plan as your business evolves. Regular updates will ensure that your plan remains relevant and accurate, providing you with a valuable roadmap for your business's future growth and development.

With dedication, persistence, and a well-crafted business plan, you can secure the funding you need to bring your business vision to life. Good luck, and here's to your success!

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How To Write A Business Plan for A Bank Loan (3 Key Steps)

Wondering how to create a business plan that will wow your banker.

You're not alone.

Most entrepreneurs see writing a business plan as a gargantuan task – especially if they've never written one before.

Where do you start?

How do you calculate the financials?

How can you be sure you're not making a mistake?

And if you need a business plan for a bank loan, getting this document right is absolutely essential.

So here's what we recommend: simplify the planning process by breaking the work up into manageable, bite–sized steps. That way, you can focus on one section at a time to make sure it's accurate.

Here's a quick overview of the step–by–step process we guide entrepreneurs through when they sign up for LivePlan.

Step 1: Outline The Opportunity

This is the core of your business plan. It should give loan officers a clear understanding of:

• What problem you're solving
• How your product or service fits into the current market
• What sets your business apart from the competition

There are three key parts to this step:

The Problem & Solution

Detail exactly what problem you are solving for your customers. How do their lives improve after you solve that “pain point” for them?

We recommend actually going out and chatting with your target audience first. That way, you can validate that you're solving a real problem for your potential customers.

Be sure to describe your solution in vivid detail. For example, if the problem is that parking downtown is expensive and hard to find, your solution might be a bike rental service with designated pickup and dropoff locations.

Target Market

Who exactly are you selling to? And roughly how many of them are there?

This is crucial information for determining whether or not your business will succeed long–term. Never assume that your target market is “everyone.”

For example, it would be easy for a barber shop to target everyone who needs a haircut. But most likely, it will need to focus on a specific market segment to reach its full business potential. This might include catering to children and families, seniors or business professionals.

Competition

Who are your direct competitors? These are companies that provide similar solutions that aim to solve your customers' pain points.

Then outline what your competitive advantages are. Why should your target market choose you over the other products or services available?

Think you don't have any competition? Think again. Your customers are likely turning to an indirect competitor that is solving their problem with a different type of solution.

For example: A taco stand might compete directly with another taco stand, but indirectly with a nearby hot dog vendor.

Boost your chances of securing a loan

See how LivePlan can help you write a fundable business plan

Step 2: Show how you'll execute

This is where the action happens! Here you'll get into the details of how you'll take advantage of the opportunity you outlined in the previous section. This part demonstrates to banks that you have a strong plan to achieve success.

The three main components of this step include:

Marketing & Sales Plan

There can be a lot of moving parts to this one, depending on your business model.

But most importantly, you'll need to fully explain how you plan to reach your target market and convert those people into customers. A few example of what should be included:

• Positioning strategy. What makes your business both unique and highly desirable to your target market?
• Marketing activities. Will you advertise with billboards, online ads or something else entirely?
• Pricing. What you charge must reflect consumer demand. There are a few models to choose from, including ‘cost–plus pricing’ and ‘value pricing.’

This is the nuts and bolts of your business. It's especially important for brick–and–mortar companies that operate a storefront or have a warehouse.

You may want to explain why your location is important or detail how much space you have available. Plan to work at home? You can also cover your office space and any plans to move outside your house.

Any specialized software or equipment and tools should also be covered here.

Milestones & Metrics

Lenders and investors want to be confident that you know how to turn your business plans into financial success. That's where your milestones come in.

These are planned goals that help you progress your company. For example, if you're launching a new product your milestones may include completing prototypes and figuring out manufacturing.

Metrics are how you will gauge the success of your business. Do you want to generate a certain level of sales? Or keep costs at a certain level? Figuring out which metrics are most important and then tracking them is essential for growth.

Step 3: Detail your financial plan

This is the most crucial – and intimidating – part of any business plan for a bank loan. Your prospective lender will look especially close at this section to determine how likely your business is to succeed.

But the financial section doesn't have to be overwhelming, especially if you break the work into smaller pieces. Here are 3 items that your plan must have:

Simply put, this is your projections for your business finances. It gives you (and the bank) an idea of how much profit your company stands to make. Just a few items you'll need to include:

• Revenue. List all your products, services and any other ways your business will generate income.
• Direct costs. Or in other words, what are the costs to make what you sell?
• Personnel. Salaries and expenses related to what you pay yourself, employees and any contactors.
• Expenses. Things like rent, utilities, marketing costs and any other regular expenses.

Exactly how will you use any investments, loans or other financing to grow your business? This might include paying for capital expenses like equipment or hiring personnel.

Also detail where all your financing is coming from. Lines of credit, loans or personal savings should be listed here.

Bankers will be giving this section a lot of attention. Here's what you'll need:

• Profit & Loss. This statement pulls in numbers from your sales forecast and other elements to show whether you're making or losing money.
• Projected Balance Sheet. This is likely the first thing a loan officer will look at: it covers your liability, capital and assets. It provides an overview of how financially sound your business is.
• Projected Cash Flow. Essentially, this statement keeps track of how much money you have in the bank at any given point. Loan officers are likely to expect realistic monthly cash flow for the next 12 months.

Don't forget the Executive Summary

The Executive Summary is the first section of your business plan, but we recommend you tackle it last.

It's basically an introduction to your company, summarizing the main points of your plan. Keep it to just one or two pages and be as clear and concise as possible.

Think of it as a quick read designed to get the lender excited about your business.

If you need help writing your plan

Not everyone feels confident writing a business plan themselves, especially if it's needed to secure a bank loan.

And although you don't need an MBA to write one, getting your business plan right often does require quite a bit of work. So if you need help writing your plan, here are two options to consider:

• Hire a professional business plan writer to do it for you. This is typically the most expensive route, but worth it if you're pursuing $100,000 or more in capital.
• Sign up for LivePlan. It's business planning software that walks you through a step–by–step process for writing any type of plan. It's an affordable option that also gives you an easy way to track your actuals against your business plan, so you can get the insights you need to grow faster.

LivePlan makes it easy to write a winning business plan

No risk – includes our 35-day money back guarantee.

How to Write a Business Plan for a Loan

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• Pitch Deck Essentials
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Reading Time : 9 Min

Business plan 101.

Introduction

Securing a loan for your business can be a game-changer, providing the capital needed to start, expand, or stabilize operations. But to get that loan, you’ll need a compelling business plan that convinces lenders of your business’s potential and reliability. In this comprehensive guide, we’ll walk you through the process of crafting a winning business plan tailored for loan approval. Whether you’re a startup seeking initial fund raising or an established business in need of financial support, these steps will help you create a roadmap for success.

Understanding Your Business Needs

Determining the Purpose of the Loan

Before diving into the intricacies of your business plan, you must first understand the purpose of the loan. Be specific about why you need financing. Is it for startup capital, expansion, working capital, or a particular project? Identifying the exact purpose sets the foundation for the rest of your plan.

Assessing How Much Capital Is Required

Once you’ve pinpointed the purpose, assess how much capital is needed to achieve your goals. This calculation should include both the immediate requirements and any contingencies. Accurate financial projections play a crucial role in this step.

Identifying the Specific Uses of the Loan Funds

In your business plan, clearly outline how the loan funds will be used. Break down the allocation of funds, whether it’s for equipment purchase, hiring staff, marketing efforts, or debt consolidation. Providing this level of detail demonstrates your financial prudence.

Executive Summary

The executive summary is your opportunity to make a powerful first impression on lenders. This concise section should encapsulate your business’s essence and your loan request.

Crafting a Concise Overview

Begin with a succinct overview of your business, including its mission and a brief description. Clearly state the loan amount you’re seeking and the purpose of the loan. Remember, lenders often use the executive summary as a screening tool, so make it engaging and compelling.

Key Components of an Effective Executive Summary

A well-crafted executive summary includes vital information, such as your business’s history, its growth potential, financial highlights, and the qualifications of your management team. Each sentence should serve the purpose of convincing lenders to read further.

Capturing the Lender’s Attention

Your executive summary should be compelling enough to make lenders want to learn more about your business. Craft it carefully, as it’s the first thing they’ll see. Make sure it hooks them right from the start.

Business Description

In this section, provide an in-depth look at your business.

Providing an In-Depth Look at Your Business

Start by offering insights into your business’s history, its legal structure, location, and ownership. Highlight any unique achievements, milestones, or recognition your business has received.

Discussing Your Industry, Market, and Target Audience

Delve into your industry and market. Share your market research findings, including industry trends, market size, and demographics of your target audience. Showcase your understanding of the competitive landscape.

Explaining Your Business’s Unique Value Proposition

Clearly articulate what sets your business apart from competitors. Explain how your products or services fulfill a specific need or solve a problem for your target customers. Emphasize your unique value proposition.

Market Analysis

This section requires thorough market research and analysis.

Conducting Thorough Market Research

Explain the methods and sources you used to gather market data. This could include surveys, industry reports, or competitor analysis. Cite relevant statistics and sources to support your claims.

Analyzing Industry Trends and Competition

Interpret the data you’ve collected. Identify opportunities, threats, and gaps in the market. Discuss how your business plans to capitalize on these insights. Provide a detailed analysis of your competitors, highlighting their strengths and weaknesses.

Demonstrating a Solid Understanding of Your Market

Summarize your market analysis by showcasing key insights. Discuss the growth potential of your industry, significant challenges, and your business’s positioning within this landscape. Use data and statistics to support your arguments.

Organization and Management

This section introduces your business’s structure and team.

Detailing Your Company’s Structure

Provide an organizational chart or a description of how your business is structured. Explain the hierarchy, roles, and reporting relationships within your organization.

Introducing Key Team Members and Their Roles

Highlight the qualifications, experiences, and contributions of your management team. Explain why they are well-equipped to drive the business forward. Include resumes or profiles as appendices.

Highlighting Your Team’s Qualifications

Emphasize the educational backgrounds, relevant industry experience, and any notable achievements of your team members. This builds credibility and trust with lenders.

Products or Services

This section focuses on what your business offers.

Describing Your Offerings

Provide a detailed description of your products or services. Explain their features, benefits, and pricing structures. Use clear and concise language to ensure lenders understand what you offer.

Emphasizing the Benefits to Customers

Articulate how your offerings solve problems or fulfill needs for your customers. Highlight the unique selling points that make your products or services attractive.

Discussing Product/Service Development and Innovation

If applicable, discuss your plans for product or service development and innovation. Show that you’re forward-thinking and prepared to adapt to changing market demands.

Marketing and Sales Strategy

This section outlines your approach to reaching and retaining customers.

Outlining Your Marketing Plan

Explain your marketing strategies, including digital marketing, traditional advertising, public relations, and social media. Discuss how you plan to raise brand awareness and attract potential customers.

Defining Your Sales Strategy and Channels

Detail your sales strategy. Describe the channels you’ll use to reach your target audience. Discuss your sales team’s role if you have one. Explain how you intend to convert leads into customers.

Demonstrating How You’ll Attract and Retain Customers

Elaborate on your customer acquisition strategies and retention efforts. Discuss loyalty programs, customer relationship management, or any other initiatives aimed at ensuring customer satisfaction and repeat business.

Funding Request

In this section, specify the loan amount you’re seeking and how you plan to use it.

Specifying the Loan Amount You’re Seeking

Clearly state the exact amount of funding you’re requesting. Explain why this amount is necessary to achieve your business objectives.

Explaining How the Funds Will Be Used

Provide a breakdown of how the loan funds will be allocated. Be specific about which aspects of your business will benefit from this investment. This level of transparency demonstrates responsible financial planning.

Providing a Clear Repayment Plan

Discuss the terms of loan repayment, including interest rates, repayment periods, and any collateral you’re offering as security. Lenders want assurance that their investment will be repaid on schedule.

Financial Projections

This section focuses on creating realistic financial forecasts.

Creating Realistic Financial Forecasts

Explain the process of developing financial projections. This includes sales forecasts, income statements, balance sheets, and cash flow projections. Stress the importance of basing these projections on thorough research and realistic assumptions.

Including Income Statements, Balance Sheets, and Cash Flow Projections

Provide samples of these financial statements, highlighting key metrics such as revenue, expenses, assets, liabilities, and cash flow. Explain the significance of each statement in assessing your business’s financial health.

Discussing Your Assumptions and Methodology

Transparently present the assumptions that underlie your financial projections. Discuss the methodology you used to arrive at these numbers. Lenders need to trust the accuracy and reliability of your financial data.

Risk Assessment

Identify potential risks and demonstrate your strategies for mitigating them.

Identifying Potential Risks and Challenges

Discuss the major risks your business may face, whether they’re industry-specific, economic, or internal. Lenders appreciate your candid assessment of potential pitfalls.

Demonstrating Your Risk Mitigation Strategies

Outline concrete steps you’ll take to mitigate the identified risks. This reassures lenders that their investment is protected and that you have contingency plans in place.

Reassuring Lenders of Your Ability to Handle Adversity

Emphasize your business’s resilience by sharing past experiences of successfully navigating challenges. Highlight your ability to adapt and thrive even in adverse conditions.

Include supplementary documents and data to support your business plan.

Including Supplementary Documents and Data

List the additional documents that support your business plan. These might include resumes of key team members, market research data, legal documents, or letters of recommendation. Provide context for why each document is included.

Examples Might Include Resumes, Market Research, or Additional Financial Information

Offer examples of what these supplementary documents might look like and how they strengthen your case. Show that you’ve done your due diligence in preparing a comprehensive plan.

Tips for a Successful Loan Application

In this section, offer practical advice on presenting your plan.

Offering Practical Advice on Presenting Your Plan

Share tips on creating a visually appealing and well-organized document. Discuss formatting and design considerations, ensuring that your business plan is easy to navigate.

Discussing Common Mistakes to Avoid

Highlight common pitfalls that applicants should steer clear of, such as overestimating sales projections or downplaying risks. Addressing these mistakes proactively can enhance your credibility.

Highlighting the Importance of Preparation

Stress the value of meticulous preparation. Encourage applicants to double-check financial data, rehearse their presentations, and seek feedback from mentors or advisors.

In conclusion, crafting a business plan for a loan is a strategic endeavor that can significantly impact your business’s future. It’s not merely a document; it’s your roadmap to success and a testament to your commitment to financial prudence. By following the steps outlined in this guide, backed by thorough research, realistic financial projections, and a clear vision, you can present a compelling case to lenders. Remember, a well-structured business plan not only increases your chances of securing a loan but also sets the stage for your business’s growth and prosperity.

At Stellar Business , we understand the importance of a strong business plan in obtaining financing. Our team of experts can provide personalized guidance and support to help you create a business plan that stands out to lenders. Contact us today to learn more about how we can assist you in achieving your business goals.

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Updated On : September 3, 2023

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How to Write a Business Plan for a Loan

Business plans are often required when applying for funds from venture capitalists or other private investors, but even if you are seeking a bank loan for your company it is very helpful to prepare one since the lender wants to be confident that he is taking on an investment with growth potential so that you can repay the loan.

In this article, you will learn about the types of business loans, the importance of the business plan in your application for a loan, and how to write a business plan that will help you get the funding you need for your company.

Download our Ultimate Business Plan Template here

What Is a Business Loan?

A business loan is funding that is provided by a financial institution to a company for it to carry out its day-to-day operational activities. It also supports the purchase of equipment, refinancing of debt, and other purposes. Small businesses might need these loans because they may not have enough funds to buy equipment, refinance debt, or because they encounter financial difficulties.  

Your Loan Application

You can apply for a commercial loan with your local bank, credit union, Small Business Administration (SBA) lender, or community development financial institution like Capital Impact. You should expect that the lender will ask you detailed questions about all aspects of your business to ensure that he or she is lending you money that will be repaid.

In addition, if you are looking to purchase a business or commercial real estate, the lender may ask for additional information and documentation to assess your qualifications and ability to repay the loan.

Before applying for a business loan it can be helpful to research different types of loans so you understand what is available and what you will need to pay attention to in your loan proposal.

Common Types of Business Loans

There are many types of loans for small businesses, including:

• lines of credit
• commercial mortgages
• equipment financing

Contact different lenders in your area to see what kind of loan terms they offer and if their interest rates are within your budget.

What is a Business Plan?

A traditional business plan is a document that provides an analysis of the present situation and future financial projections for a company. It includes details about the owners, management team, customers, location of the business, finances, marketing plan, and other information.

A comprehensive and well-researched business plan will help lenders make informed decisions about providing a loan for your business.

To help you get started, you can download our sample business plan for bank loan pdf .

Why Do You Need a Business Plan to Get a Business Loan?

A loan proposal business plan is your opportunity to show the lender you understand your business, its capabilities, and how it operates within the industry in which it competes. By putting together a clear and concise document that outlines all of this information, the lender should have a much easier time understanding how you have arrived at your numbers and where you are going in the future.

A business plan is also helpful to the lender because it provides an opportunity for him or her to ask you questions, further clarifying details that might not be clear from your application materials alone. This way the lender can walk away from the meeting with a good understanding of what he or she is loaning money to and how likely it is he or she will see the loan repaid.

How to Write a Business Plan to Get Approved for a Loan

Different lenders may ask for different sections of your business plan, but most require some combination of the following key elements.

1. Executive Summary

The Executive Summary is the first section of your business plan that a lender will read, but typically the last section written. It is very important because it acts as a snapshot of your business plan and allows the person reading to get an overview of what you are proposing.

The summary should include:

• A statement about why you need the business loan
• Details on how much money you want to borrow, when you will repay it, and interest rates
• A description of how the proceeds from the loan will be used
• Your business’s historical and projected financial information (again)
• The expected impact on your company and the industry as a whole if you are successful.

2. Company Description

In the Company Description, you should include basic facts about your company such as:

• What is the business structure (corporation, partnership, limited liability company (LLC), etc.)?
• How long has your company been in operation?
• What is the size of your workforce?
• What accomplishments or milestones have you achieved within the last year?

This section should also include information about your future business plans.

• How do you plan to expand, if at all?
• Who are your main competitors and how is your company different from them?
• What changes will you make to excel against these competitors?

3. Industry Analysis

In the Industry or Market Analysis, you should include information about your industry in general.

• What are the strengths and weaknesses of your industry?
• How will your company compete in it?
• What trends within the industry affect its future success or potential struggles?

You may also include information about your specific niche in the market. If your company operates in a very specific area of the industry, be sure to highlight it.

4. Customer Analysis

The Customer Analysis section of your business plan helps a lender understand who your customers are and why they will buy from you.

In this section, you should include information on the following:

• Your target audience and the individual customer segments
• How many potential customers you have within your target market
• How much your customers typically spend, and how much you expect them to spend in the future
• What has caused these changes or trends to occur and how they will impact your business

5. Competitive Analysis

This section should show the competitive landscape and how you plan to compete against your competitors.

• What are their strengths?
• Where do they fall short?
• What changes will you implement to get ahead of them?
• What are your company’s competitive advantages over these competitors?

6. Marketing Plan

This section should include a detailed description of the marketing strategy you plan to implement.

• What is your customer acquisition cost? How much will it cost you to bring in one new customer?
• How will you reach these potential customers? Be specific about your marketing strategy, advertising methods and costs.
• Who is responsible for implementing each part of the marketing plan and how much it is expected to cost?

7. Operations Plan

Your Operations Analysis should describe the way your company currently operates and how it will operate with the help of the loan.

• What are your company’s strengths? Weaknesses?
• What have you implemented in the past 12 months that has led to increased revenue, decreased costs, or improved efficiency?
• How will you continue to operate efficiently with the proceeds?

8. Management Team

In the management section, you should describe your business in terms of its personnel structure.

• What are the responsibilities of each person on your team?
• Who are they? What are their qualifications?
• How will their roles change when you receive the loan proceeds?

9. Financial Plan

This section should include your company’s financial statements include the projected income statements, projected balance sheet, and cash flow statements for the next 3 – 5 years.

You can assume that you will receive loan proceeds in 20XX, so plan accordingly.

Include a five-year break-even analysis and an explanation of how you arrived at your income statement and cash flow projections. Don’t forget to include interest and loan payments in your financial projections.

10. Appendix

In this section, you will include the supporting documents for the claims within your business plan. This section should include:

• A loan agreement
• A list of all applicable business licenses, permits, etc. that your company holds or has applied for

You may also include:

• An organizational chart for your company
• The resumes of the members of your management team
• The resumes of any employees who will be making a significant impact on your business with the loan money
• Copies of contracts, leases, and other agreements that are relevant to your business plan
• Complete financial statements and projections if you only include a summary in the Financial Plan section

These documents should be attached to your business plan in a separate file if they are not included and may need to be submitted with the final small business loan application.

Tips for Writing a Business Plan for a Loan

To have a successful business plan and loan application, you need to know exactly what information your loan officer is looking for and how to find it.

• Before you submit your application, be sure to carefully edit and proofread it for errors. Errors in a business plan may lead a lender to question your attention to detail, so make sure it is polished and error-free.
• Always be sure to include an executive summary of the main points of your plan at the beginning, as some loan officers may not read all of the details.
• Be sure to keep your tone professional and business-like.
• Include detailed financials, market analysis, and other crucial information.
• Remember that any omission or inaccuracies will be carefully scrutinized by a lending officer, so be sure you have all of the necessary documents before submission.
• Finally, remember that lenders often appreciate creativity and outside-the-box thinking when it comes to business plans, but don’t let it distract from the necessary information for your application.

Writing a good business plan is one of the most important and necessary steps toward securing a loan or other source of capital.

Use our proven business plan template provided below, and you’ll be able to give your lender all of the information they need to make an informed decision.

The key is to do it right. By following the steps outlined above and including all of the necessary documents (and editing/proofing your application), you should significantly improve your chance of securing a loan for your business.

How to Finish Your Business Plan in 1 Day!

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With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!

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How to Get a Small Business Loan in 7 Simple Steps

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Sooner or later, many small-business owners consider taking out a loan to supplement their business's growth. But small-business loans can be tricky lines of capital to obtain, especially if you don't know much about the application process. And with the broader banking system still reeling from the collapse of Silicon Valley Bank and Signature Bank, you’ll need a rock-solid plan and squeaky-clean paperwork before you even approach a bank.  

That preparation begins here with these seven crucial steps for nailing down a business loan.

• Establish your reason for the loan
• Learn how lenders assess you
• Determine which type of loan you need
• Decide on a lender
• Gather the right financial documents
• Apply for the loan
• Keep building your financial profile

Lendio partners with over 75 lenders, which improves your odds and efficiency to get the funding you need.

Qualifications:

$50k in revenue

6 mos. in business

560 credit score

1. Establish your reason for the loan

The lender is going to hand over a significant amount of money to your business, and they’re going to want to know how and why it’s being spent. It’s a valid concern: how you invest the loan will affect your business’s income and ability to pay it back. Stocking up inventory or covering payroll are valid reasons banks and other traditional lenders would consider your loan application. (Purchasing a recreational 3D printer for the breakroom . . . not so much.)

General rationales for small businesses seeking loans include managing daily expenses, expanding or purchasing equipment, building a cash buffer against possible future shortfalls, or just starting a business. Also, determine exactly how much money you’ll need to borrow—don’t ballpark it and end up with too much to pay back or too little to cover expenses. A loan calculator can help you determine how much you can afford to take out, interest rates and all. 

2. Learn how lenders assess you

Banks and lenders have their own formulas to determine if a loan will likely be paid back. In the case of small businesses, the formula usually involves—but isn’t limited to—five factors for consideration. Since small businesses also tend to be newer operations, they’re probably not going to excel in every area, but if they’re strong in at least three of the five, that can help level the bank’s assessment. Factors to pay attention to include the following:

• Credit score and history. If you’ve repaid loans responsibly in the past, the potential lender will find out—and they’ll also find out if you haven’t. Banks can assess business and personal financial histories through a variety of avenues, but most loan processes begin with a credit review .
• Collateral. What do you own that could cover the loan in case of default? Most banks and lenders will require something of value to shield the lender. Typical business items that qualify as collateral include real estate, buildings, vehicles, equipment, inventory, and accounts receivable.
• Cash flow. The more money your business is currently making, the less of a loan risk it’ll be to the lender. Banks and lenders will not only look at the amount of profit you’re bringing in but also examine how you’re managing it. 
• Time in business. If you’ve been functioning as a business for several years, you’re probably doing something right. Startups and newer businesses won’t have time on their side, but a solid, executable business plan for reaching milestones will go a long way toward evening the odds in the lenders’ eyes.
• Industry. What’s the forecast for your line of business? For instance, if you had a successful local brewery last year but six more are fermenting in the area this year, your competitors might start to cut into your business's profits. Lenders might take current industry trends into consideration when deciding whether or not to approval your loan request.

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3. Determine which type of loan you need

Most traditional small-business lenders have strict requirements about your business's time in business and revenue. If you’re just launching your business and haven't started earning revenue, you'll have an easier time qualifying for a personal loan over a traditional small-business loan.

But there are multiple types of loans beyond traditional personal and business loans. Here are some of the most popular options.

Common loan types overview

We've overviewed the main types of loans—now let's look at a few more details.

• Term loans. With term loans , business owners receive a lump sum of money from their lender, which they’ll repay over an agreed-upon time. Along with repaying the principal loan amount, borrowers will repay interest accrued on the loan. Term loans are best for established businesses with solid credit that need expansion cash quickly.
• SBA loans. The U.S. Small Business Administration backs bank loans that meet strict borrower guidelines. This backing instills the confidence in banks and lenders to take chances on applicants who’ve previously been turned down. SBA loan interest rates are typically low, but the approval process can take months.
• Business lines of credit.  Less rigid than a bank loan, a business line of credit gives you access to as much capital as your credit limit will allow, but you pay interest only on the cash drawn. Business lines of credit work well for covering short-term expenses or annual downtime for seasonal businesses.
• Business credit cards . Like business lines of credit, business credit cards give business owners near-instant access to a revolving line of credit. Business credit cards often come with rewards and even sign-up bonuses, which you won't get with lines of credit, but the repayment terms are typically stricter and the APR much higher. 
• Commercial real estate loans. As the name implies, commercial real estate loans are for the purchase, development, and construction of business structures—offices, storefronts, hotels, etc.—typically for lease or rent to other businesses. Terms for these loans range from less than five years up to twenty.
• Invoice factoring and financing. With invoice factoring , you sell your business’s as-yet unpaid invoices to a factoring company, which then becomes responsible for collection from your customers. Conversely, invoice financing uses those invoices as collateral for a loan. Both generate cash fast.
• Equipment financing. When you take out a loan to buy business-related equipment , the equipment itself becomes the collateral, and the terms of the loan are determined by the expected lifespan and value of the equipment. As long as it doesn’t become outdated, owning it is good for building equity.
• Microfinancing. Microloans , or short-term loans under $50,000, can help business owners build their credit score as well as their cash flow.
• Merchant cash advances. If your business makes considerable and consistent credit card sales, a merchant cash advance can be a quick source of capital. After the lump-sum loan is made, it’s paid back through a daily withholding of your credit and debit card sales or weekly bank account withdrawals. Merchant cash advances are quite risky, and the repayment terms and interest rates are brutal if you miss a payment. Typically, we recommend merchant cash advances only as a last resort, and only if you're sure you can pay them back immediately.

4. Decide on a lender

After settling on which type of loan you need, it's time to choose a lender. Not all business financing venues, or even traditional lenders, are the same. If you're not sure where to start looking for lenders, here are a few of our favorites.

Recommended lenders

Data as of 2/8/23. Offers and availability may vary by location and are subject to change. *Does not represent the typical rate for every borrower, and other fees may apply.

Main types of lenders

Banks are typically seen as the traditional place to get a loan—but as you can tell from the table above, you have quite a few options to get a loan apart from going directly to a bank. Here are some of the main types of lenders you can choose from as you consider loan applications.

Direct lenders usually include banks, wealthy investors, asset-management firms, credit unions, and other traditional lenders. These types of lenders deal one-to-one with borrowers—you don't go through a third party to acquire a direct loan. 

At Business.org, we recommend direct lenders Kabbage , OnDeck , and Accion for small businesses in dealing with financial institutions.

A lending marketplace collects loan options from networks of business funders, including traditional banks. Online lenders typically have a fast turnaround but require decent credit scores. Business.org's favorite lending marketplace is Lendio , which partners with 75 or so lenders and matches you with the best loan offers after you submit your application.

Peer-to-peer lending is a form of direct lending that lives almost exclusively online. Investors browse borrower profiles and choose businesses they’d take a chance on. (You've probably funded a few small businesses, projects, or individuals on platforms like Kickstarter and GoFundMe.) A peer-to-peer loan can come from one or several investors.

If you're interested in finding a peer-to-peer loan, we recommend looking at Lending Club and Funding Circle .

5. Gather the right financial documents

Whichever type of lender you go with or type of loan you apply for, you’ll need to present financial documents that explain where your business stands financially.

Of course, lenders will typically look at your credit score (including your FICO score, if you're taking out a personal loan to fund your business). But your credit score isn't enough information for lenders to determine whether or not you're loan-worthy ("lendable"), which is why lenders typically require an assortment of the following documents:

• Financial statements, such as profit and loss statements , cash flow statements, and balance sheets
• Business and personal credit reports
• Business and personal tax returns for at least the last year
• Business plan
• Business forecast
• State registrations and licenses
• Legal documentation, such as articles of incorporation, commercial leases, franchise agreements, etc.

6. Apply for the loan

If you’re applying for a substantial amount of money, you’ll want to allow your business plan plenty of lead time. Depending on the loan and lender, the loan application process can take months. Using some avenues, like lending marketplaces, can speed up the application and approval course, but in most cases, actually getting the money isn’t an overnight proposition for startup business loans.

Beyond the loan amount itself, tacked-on fees can take you by surprise if you’re not paying attention. Keep an eye on loan application fees, SBA loan guarantee fees, early repayment fees, and late repayment fees, as they’ll eventually affect your annual percentage rate (APR). By the time you apply, you should have a reasonable level of comfort with your ability to repay the loan on time and with the payment schedule, the APR, and the included fees. 

Remember, you want to know how much the loan will ultimately cost, interest and all. As you're getting your documents in order and starting the application process, use a loan calculator to ensure you're taking out the right amount of money. 

7. Keep building your financial profile

Improving personal credit, establishing business credit , paying down existing debts, maximizing income, expanding assets—these are all ways to build up your financial profile for future growth. It may seem backward, but banks prefer lending to businesses that don’t desperately need the money. It’s in your best interest to negotiate from a position of capital power.

While running your own operation doesn’t necessarily get easier, your future small-business loan processes will become more painless going forward, now that you’ve begun building your financial profile. Establish and build your business credit, and  then you’ll be able to rely upon yourself instead of playing the economic odds.

Alternatives to business loans

Personal loans.

Newer businesses may not qualify for many small business loans — that’s where personal loans come in. Personal loans are authorized based primarily on your personal credit score .

Some personal lenders, like Upstart , will approve loans to individuals whose credit scores are as low as 300. But most personal loan providers require at least a 580 credit score.

Personal loans can range from $1,000 to $100,000 with an interest rate span of 5.99% to 35.95%. In order to qualify for higher amounts, you’ll likely need to secure the loan with some kind of collateral . 

Your personal credit and assets are liable in the event of defaulting on a personal loan. With many business loans, only business assets will be at stake. But, as long as you’re comfortable with the risks, a personal loan can be another way to secure financing.

Personal credit cards

Personal credit cards are a great way to build credit in pursuit of a wider variety of lending options. Credit card APR ranges from 15.16% to 24%+ depending on your credit score.

If you have a credit score below 579, your lender may only offer a secured credit card where you make a cash deposit as collateral. You won’t have as much borrowing power because your credit limit will be a percentage of your collateral. Still, a secured credit card can help you build credit. 

Your lender will decide your credit limit, but the average limit is around $13,000. The key to building credit — no matter your limit — is to consistently make your payments on time. Keep up with that and you’ll be able to apply for better lending products in no time.

The takeaway

Depending on if you have an established business or are just starting out, there are many attainable ways to get funding via small-business loans, including personal loans for first-time small-business owners.

Take a look at your financial wellbeing, documentation, and consider applying for a loan through your local bank, the SBA, or the multitude of online lenders—keeping in mind their specific fees and borrowing terms.

Wherever you’re at in your business journey, there are multiple options available for a first-time business loan.

Want to learn more about small business loans and financing? Check out our ultimate guide to small-business loans.

Related reading

• SBA Loan Rates Explained

Best Small Business Loans

• How to Apply for a Business Credit Card
• How to Build Business Credit: 5 Steps for Improving Your Business Credit Score

Small Business Loan FAQs

Some business lenders require around $10,000 of revenue per month while many require $30,000 or more per month. Your business revenue requirements depend on where you apply and what kind of loan you’re applying for. Be sure to check your lender requirements before you apply.

Yes. There are a few ways to approach securing a loan with bad credit . You can apply for a secure or collateralized loan or apply for a lending product that isn’t related to your credit score — something like an invoice factoring loan . 

You can also apply for microloans , some of which have no minimum requirements. Additionally, there are lending marketplaces like Lendio that send your application to multiple lenders.

No. Many small businesses loans are easy to obtain. Take Lendio’s small business loans , for example. You fill out a 15-minute loan application and Lendio sends your request to a marketplace of lenders who will make you offers. Just like that, you have business loans available to you.

That said, there are some factors that may make securing a loan for your business more difficult. If you have poor business credit or your business is relatively new, for example, it may be difficult to get approved for a loan.

You may still be able to apply for a personal loan if your business credentials aren’t solid yet. 

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How to Write an SBA Business Plan + Template

Noah Parsons

10 min. read

Updated November 21, 2023

Applying for a Small Business Administration loan typically requires a business plan.

Unfortunately, there’s no SBA loan business plan format that guarantees approval. The SBA even states you should “pick a business plan format that works for you.” 

While I agree with this sentiment, I’ve found that entrepreneurs who explain how funds will be used and how they will repay the loan tend to be more successful. 

Luckily, these details can be covered using our SBA-lender-approved business plan format . I’ll go over that structure in this article, and focus on the sections that the SBA prioritizes, so you can maximize your chances of getting funded .

You can even download a free SBA-lender-approved business plan template to fill out as you read. 

Let’s get started.

• Why you need a business plan for SBA loans

SBA loans require good documentation of your business and personal finances. You’ll need to pull together your past tax returns, bank statements, and various application forms depending on the type of SBA loan you apply for.

The bank issuing the loan will also want to know about the future of your business. 

They’ll want to see how the loan will be used and if future cash flow projections are realistic and indicate you can afford loan payments.

That’s where writing an SBA business plan comes in. 

Not only will your business plan describe your business to the lender, but it will include the financial projections the bank will use to determine if you qualify for the loan .

• What your business plan should include, according to the SBA

Business plans for SBA loans follow a fairly standard structure, but that doesn’t mean you need to follow it exactly. 

The SBA even recommends adjusting the plan outline to serve your needs. If a section does not apply to your business, it’s fine just to remove it.

Here’s the successful business plan structure I recommend for SBA loans:

1. Executive summary

A great executive summary is a short, simple overview of your business. It should be easy for a loan officer to read and clearly understand what your business does. 

When applying for an SBA loan, highlight your: 

• Business opportunity
• Financial forecast
• How much money you want to borrow and how it will be used

Remember, an executive summary should be short and to the point. The rest of your business plan will provide additional details.

[Dig deeper: How to write an executive summary ]

2. Company description

Some people call this section “Products and Services.” Either option is fine. The important thing is that you use this section to explain what your business opportunity is. 

You need to cover: 

• The problem you solve
• Who you’re solving it for
• What your solution is and why it’s better

Be specific and tell the story of your business and your customers. Focus on your strengths and what sets you apart from competitors. 

If your company is developing a product, include information on:

• What the product life cycle looks like
• Intellectual property filings
• Current research and development

If these topics don’t apply to your product, that’s fine. Just be sure that the description of what you sell is clear.

3. Market analysis

The market analysis chapter explains who your customers are. It provides an overview of your target market, competition, and industry.

Your target market is essentially a description of your ideal customers. Be sure to include specific demographic information (like age, gender, location, income) and psychographic information (hobbies, purchasing behaviors). 

This data should reinforce that your target market needs your solution .

It’s helpful to also include information on the size of your target market . Lenders will want to see evidence of enough potential customers to drive growth. 

While your target market information describes your customers, an industry overview discusses the type of business you’re in and its potential for growth. 

For example: If you’re starting a fast-casual restaurant, your industry overview might discuss the increased interest in fast-casual dining and how more people are eating in these types of restaurants every year. 

Finally, you’ll need to include a competitive analysis . This is a list of current competitors and alternatives, with explanations of why your business is a better option. 

Your goal is to show how your business is unique, what opportunities and threats there are, and how you plan to address the competition.

4. Organization and management

Also known as your company overview, this section is where you describe your legal structure, history, and team .

For your SBA loan application, you should focus on describing who is managing the business as clearly as possible. 

You may want to include an organizational chart. You should provide detailed resumes for everyone in leadership positions. Each team member’s experience, skills and professional qualifications can mitigate risk in the eyes of a lender .

To show you’re thinking ahead, it’s also helpful to include key positions you plan to fill as you grow. 

5. Sales and marketing plan

Your goal in this section is to summarize how you will attract, retain, and sell to your customers.

The marketing strategies and sales methods you describe should always have the customer top of mind, and demonstrate that you know how to connect with them. 

To help a loan officer visualize this, you can provide examples of marketing messaging, visuals, and promotions. If you have any research or results to show that your strategy has merit, include those as well. 

6. Financial projections

SBA lenders typically require 5 years of financial projections — including profit and loss statements , balance sheets , and cash flow statements . 

Be sure to include the SBA loan in your projections in the following areas: 

• A liability on your balance sheet.
• Payments on your cash flow.
• Interest expenses on your profit and loss statement. 

I’ll dive into specific details of what you should focus on in the “how to improve your chances” section.

Your first year of financial projections should include monthly details. After that, annual summaries are usually sufficient for most SBA lenders. Occasionally, a lender might require 24 months of monthly projections, so check with your bank before submitting your business plan. 

If your business is up and running, you must also provide historical financial reports for the past 12-24 months of operations—including income statements and a current balance sheet.

Typically, you will also need to provide reports on your personal finances , including any assets you have, such as a home or car. 

Finally, include a section explaining your use of funds—what exactly you plan to use the loan for.

7. Appendix

The appendix is your chance to provide additional documents that support sections of your business plan. 

When applying for a loan, these may include:

• Employee resumes
• Licenses and permits
• Patents and other legal documents
• Historical financial statements
• Credit histories

Don’t worry about stuffing your appendix full of additional documentation. Only include information if you believe it will strengthen your approval chances, or if your lender specifically asks for it.

• How to improve your chances of being approved for an SBA loan

Your SBA business plan needs to focus on the loan you are applying for and how that will impact your business financially. 

Make sure to include the following information in your financial plan to increase your chances of success with your lender:

Funding request 

In your executive summary, document how much money you are asking for. It’s best to put your number where it can be clearly read, instead of trying to bury it deep within your business plan.

Remember, there are limitations to how much you can borrow through SBA-backed loans.  Most have a maximum loan amount of $5 million, while SBA Express loans have a maximum loan amount of $350,000. 

Use of funds

You should also describe how you plan to use the loan and which aspects of the business you want to invest in. 

Some SBA loans are designed specifically for expanding export businesses or funding real estate transactions. So, make sure your use of funds description is appropriate for the loan you are applying for.

Cash flow forecast

Be sure to include the loan in your cash flow statements and projections . You want to demonstrate that you’ve planned how you will use and repay the loan.

You need to show:

• When you anticipate receiving the loan.
• How the loan will impact your finances. 
• Loan payments for the life of the loan. 

Having this prepared won’t just increase the chances of your application being approved—It  will make it much easier to manage the loan after you receive funding . 

Balance sheet 

You’ll also want to put the loan on your projected balance sheet , and show how the loan will get paid down over time. 

The money you owe will show up on your balance sheet as a liability, while the cash you receive from the loan will be an asset. Over time, your forecasted balance sheet will show that the loan is getting paid back. 

Your lender will want to see that you have forecasted this repayment properly.

Profit & Loss forecast

Your P&L should include the interest expenses for the loan, and show how the interest will impact your profitability in the coming months and years.

• How long does an SBA business plan need to be?

The SBA doesn’t have an official recommended or required business plan length . As a general rule of thumb, you should make your business plan as short and concise as possible. 

Your business plan is going to be reviewed by a bank loan officer, and they will be less than excited about the prospect of reading a 50-page business plan.

If possible, keep the written portion of your business plan between 10-15 pages. Your financial forecasts will take up several additional pages. 

If you’re struggling to keep it short, try a one-page plan

A great way to start your business plan is with a simple, one-page business plan that provides a brief and compelling overview of your business. 

A good one-page plan is easy to read and visually appealing. Once you have your one-page plan, you can expand on the ideas to develop your complete written business plan, and use the one-page plan as your executive summary. 

Loan officers will appreciate a concise overview of your business that provides the summary they need before they start looking at your complete business plan and financial plan .

• Resources and tools for writing an SBA business plan

Remember, you can download a free SBA-lender-approved business plan template . It includes detailed instructions to help you write each section, expert guidance and tips, and is formatted as lenders and investors expect.

If you’re looking for a more powerful plan writing tool, one that can also help you create financial forecasts for the use of your loan, I recommend you check out LivePlan . 

With LivePlan, you get:

• AI-powered recommendations: Generate and rewrite sections of your plan to be more professional and persuasive.
• Step-by-step instructions: In-app examples, tutorials, and tips to help you write an impressive business plan.
• Automatic financials: Skip the spreadsheets and complex formulas, and quickly create accurate financial forecasts with everything a lender needs.
• A built-in pitch presentation: Print or share your full business plan, one-page pitch, and financial reports—all with a professional and polished look.

Whether you use the template, LivePlan, or try writing a business plan yourself, following the structure and tips from this article will improve your chances of getting an SBA-backed loan. 

And for additional SBA-focused resources, check out our guide on how to get an SBA loan .   

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

Table of Contents

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How to Write a Professional Business Plan for a Loan

• March 27, 2024

11 Min Read

So, are you thinking of getting a loan or funding to start an exciting business journey?

That’s great! But before you go any further, it’s very important to have a solid business plan in place.

Well, we understand that creating a successful plan for a loan can be a daunting task. That’s why we’re here to help you!

This investment-ready business plan template for loans will help you include all the essential elements in your plan, from summarizing your business concept to projecting the financial data. It not only impresses business loan lenders but also sets the stage for success.

Ready to get started? Let’s first understand how business plans will help you with loan proposals.

How business plans help in loan applications?

A business plan is a professional document that serves as a written loan proposal if you want to secure a loan for capital investment. It details every aspect of your business, including its concept, goals, market opportunity, and financial data.

Whether you’re a new entrepreneur or a small business owner, you’ll need a well-prepared business plan. It helps you persuade potential investors or lenders of its viability and potential for success.

Here are a few primary reasons why business plans are necessary in loan applications:

It helps you showcase your vision

A well-written business plan communicates your business vision effectively and allows you to demonstrate your clarity of purpose and strategic direction. It offers lenders a compelling narrative of what your business is aimed for and how it will achieve its goals.

It helps you prove your financial feasibility

Well, lenders need assurance that they’re making a wise investment. A detailed business plan presents them with realistic financial projections, along with how your business will earn money and repay the loan. This infuses confidence in lenders and convinces them that your business is a safe bet.

It helps you mitigate potential risks

Once you start your business, it naturally involves fair enough risks. However, a good business plan clarifies that you’re aware of those challenges and have backup plans or strategies to mitigate them. This shows lenders that you’ve considered different situations and keep contingency plans in place.

It helps you demonstrate your preparedness

A business plan shows lenders that you’ve carefully outlined every aspect of your business—from conducting market analysis to predicting finances. It assures that you’re serious about your business and well-prepared to manage the ups and downs of starting a business.

In short, having a solid business plan can be the cornerstone of a successful loan application that explains your business idea and how you plan to utilize the loan money to get started.

Now that you know how business plans help in a loan application, it’s time to check out and understand the key elements of a business plan for a loan template.

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Key components of a successful business plan for a loan

1. executive summary.

An executive summary is the first section of the plan, providing a concise overview of the entire business plan.

Generally, it is written in the last, as it summarizes the most important components you mentioned in your plan.

Since the potential investors or lenders would read this section first, make sure that you keep it simple, crisp, and compelling to build their confidence in your business. Also, it should not be more than 1 or 2 pages.

You may write your executive summary with a precise explanation of your business concept, the type of business you operate, and its status.

Here are a few primary elements you must add to your summary:

• Your company’s mission statement
• The product or service you intend to offer
• Market Opportunity
• Management team’s background and experience
• Growth plans or long-term objectives
• Financial projections and funding needs

2. Company Overview

As you’ll give a brief introduction in the executive summary, this chapter will expand on it, providing an in-depth understanding of your business.

Company description includes all the business-related facts, such as the startup concept, vision-mission statements, company location, etc. Also, it explains the problems or challenges you aim to solve.

In addition to that, consider answering a few questions that would help lenders to grasp the significance of your business:

• What is the legal structure of your business?
• Who is the business owner?
• Do you have any business partners?
• Why did you start this business, and when it was founded?
• What are your business accomplishments to date?
• Who will get benefits from your company’s product or service?

Note that the company overview section can be regarded as your extended elevator pitch.

So, it’s a good opportunity to present your business’s specific details and structural aspects that the financing partner needs to know.

3. Market Analysis

The market analysis section provides readers with a deep understanding of the specific industry or market in which you plan to serve.

This seems unnecessary but serves different purposes. Those who are looking to fund a franchise business should do some serious work for this section, as lenders will review it very closely.

To carefully draft this section, you should conduct thorough market research and industry analysis to define your target customers, industry trends, market demand, and competitors.

This will demonstrate that you understand the market dynamics and validate the demand for your products or services.

Here are a few elements you should include in your market analysis section:

• Ideal target market
• Market size and growth potential
• Customer segments
• Competitive analysis
• Emerging trends
• Applicable government regulations

4. Product or Service Offerings

In this section, you may provide a detailed description of your products and service offerings, along with their features, benefits, and pricing structure.

It helps you highlight what your business offers to its ideal customers, how your offerings will satisfy their needs and explains the value proposition of your products or services.

You may consider including these points in the product or service section:

• A brief description of your product & service
• Pricing details
• Intellectual property, copyright, and patent filings
• Quality measures
• Any additional offerings

5. Sales and Marketing Strategies

Your marketing and sales plan elucidates how you intend to market your products or services in greater detail. It helps you outline the marketing and sales strategies you’ll use to attract and retain potential customers.

The primary goal is to give a flexible and practical marketing and sales strategy that persuades the lenders you know how to advertise or develop a public relations campaign to reach the company’s revenue goals.

For a well-crafted marketing plan, you might consider adding the following details in your plan:

• Your target audience and brand positioning
• Detailed marketing strategy
• Sales and marketing goals and KPIs
• Sales and marketing budgets
• Customer retention plan

While reviewing your loan application, lenders would like to know how you plan to make money and how you overcome marketing and sales challenges, so ensure that this strategy is always relevant.

6. Operations Plan

The operations plan section provides a clear picture of your company’s day-to-day operations and activities. It is a detailed-oriented section that outlines how you’ll manage to run your business smoothly.

Also, operational excellence is necessary to achieve your goals, satisfy client commitments, and maximize results. So, try to mention your operational intricacies and showcase efficient systems and processes.

Here are a list of details you must include in your operations plan:

• Staffing & training
• Operational processes
• Inventory needs and supplies
• facilities & technology
• Regulatory compliance

By offering insights into these operational aspects, this section helps you instill confidence in lenders about your ability to effectively handle and grow your company.

7. Management Team

Your management team section introduces the key individuals who are responsible for driving your business ahead.

It helps lenders easily understand your team’s roles & responsibilities, educational qualifications, industry experience, and how you plan to compensate your leadership team.

Even this will assure lenders that your team is capable enough to navigate challenges, make informed decisions, and reach strategic objectives. Also, they feel confident giving you a loan—even if it’s your startup.

So, you may consider including the below information:

• Company owner profile
• Resume-styled summary of key executives
• Organizational chart
• Compensation plan
• Details of advisory board members(if any)

8. Financial Plan

A well-written and comprehensive financial plan is one of the most crucial sections of your plan, as it helps you prove to lenders your business’s financial health, growth potential, and ability to repay the business loan.

So, your financial analysis must include the projected financial statements for three years or more. The following are the key financial projections that you should add:

• Income statements
• Cash flow statements
• Capital expenditure budgets
• Balance sheet
• Break-even analysis
• Funding requirements

As well as you should also list hard or soft collateral if you possess it so that you can put it up to get a loan. Even lenders may request to add more granular data(such as cost of sales or cost per product/service).

Note that if you’re a startup and don’t carry enough data to highlight, consider including estimated costs, revenue streams, and other strategic future projections you may have.

9. Appendix

The appendix is the last section of a professional business plan that typically provides supplementary information and other supporting documents the lender may need for better understanding.

You may include the following details in an appendix:

• Business licenses and permits
• Contractual agreements or other legal documents
• Letters of reference
• Credit histories and tax returns
• Key managers’ resumes and certificates
• Product photos

By adding these details, you offer more detailed explanations or validation for your business plan, strengthening your discussions and claims.

What factors do lenders look for in a business plan

When you submit a business plan to secure funding, lenders will analyze it to evaluate the viability and creditworthiness of your loan application. Here are several key factors they look for:

Character of your management team

Lenders will assess a business’ character that includes subjective or intangible qualities like whether its owners or key executives are perceived as honest, competent, or committed. Also, they consider educational background, industry experience, skills, leadership capabilities, and credit histories. This can be critical for evaluating prospects as most lenders don’t wish to lend to whom they don’t feel trustworthy.

Your capability to repay loans

Loan officers also spend a lot of time analyzing the borrower’s ability to repay the loan. They will thoroughly examine the financial statements such as projected revenue, expenses, cash flows, growth plans, and loan payments. Further, lenders analyze the financial history to see how much revenue you have generated or how much profit you have made in the past.

The capital amount you’re seeking

While reviewing loan applications, lenders will go through your financial information that highlights how much funding you’re seeking, how much cash you carry on hand, and how much debt you have. Also, they assess your personal financial investments as a sign of commitment and seriousness. So, make sure your business plan clearly outlines your investment amount and funding needs.

Collateral or personal guarantees

In some cases, lenders may request collateral or personal guarantees to secure the loan. Thus, you should document any assets or valuable items you can offer as collateral or additional security. Even lenders may still approve your loan without collateral if you have a good credit history and a reliable business plan.

By understanding these key considerations, you can prepare a business plan that resonates with the lender’s interests and concerns. Now, let’s move to a few business plan examples for a loan.

Business plan examples for a loan

When you’re just venturing into your entrepreneurship journey, crafting a comprehensive business plan for a loan application can be overwhelming.

So, try to consider some sample business plan templates or resources to get started on the first draft of your plan. Here are a few business plan examples that you may find helpful:

• Sample business plan outline
• Small business plan template
• Comprehensive business plan writing
• Business Plan Workbook for Loan Applications

Start preparing your business plan

Finally, you understand the importance and key elements of drafting a business plan for securing a loan or funding. But it requires some extra effort to find success down the road.

If you’re still confused about where to start, Upmetrics could be a great choice. It’s a modern business plan app that helps entrepreneurs or small business owners create an actionable plan quickly.

With Upmetrics, you’ll get easy-to-follow guides, a library of business plan templates , AI support, a financial forecasting tool, and other valuable resources to streamline your entire business planning approach.

So, don’t wait and start preparing your business plan for a loan!

Build your Business Plan Faster

with step-by-step Guidance & AI Assistance.

Frequently Asked Questions

Do i need a business plan to get a loan.

Of course, most lenders or financial institutes require a solid business plan, even if you are a well-established business. A well-crafted business plan helps you highlight every essential information about your business and demonstrate to lenders that you have a realistic plan in place to generate income and repay the loan.

Can I write a business plan myself?

Definitely, you can write a business plan by yourself. Also, you can get help from various resources available, including business plan templates and guides, to create a comprehensive plan. But, if you’re unsure or need assistance, you may consider having a business plan software or hiring a professional writer.

How long should my business plan be?

The length of your business plan should be concise and focused, typically depending on its purpose. A one-page business plan is a single-page document, a lean or mini business plan comprises 1–10 pages, while a comprehensive business plan can range from 15 to 35 pages and beyond.

What's the most important element of a loan-seeking business plan?

The financial plan is the most crucial element of a loan-seeking business plan, as lenders want to check realistic and well-structured financial forecasts that present your ability to repay the loan. Also, this section can make or break a lender’s confidence and willingness to raise capital.

What format should I use?

It’s essential to select a format that can effectively convey your business idea, strategy, and financial projections to the lenders. Following are a few common options to consider:

• Traditional text-based document
• PowerPoint or Keynote presentation deck
• Executive summary or a pitch deck

So, whatever format you choose, it should align with your preferences, the lender requirements, and the complexity of your business.

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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How To Write a Business Plan for a Loan: A Guide

This article contains general information and is not intended to provide information that is specific to American Express, or its products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.

Many small business owners know that it can take money to grow. But what does it take to secure that funding? A strong business plan is often a part of the answer. That’s why learning how to write a business plan for a loan may be an important part of setting up a small business for success.

A good business plan helps a lender assess a business’ prospects. There is a standard format that owners may wish to follow. Keep in mind that applying for a loan is an important step that has legal consequences. As you put together your business plan, consult your professional advisers to make sure that you understand the importance of providing accurate information.

Here are some pointers on writing a business plan for a loan to help grow your business .

Why is a business plan important when you’re applying for a loan?

The Small Business Administration (SBA) describes a business plan as a “roadmap to small business success.” Given all the challenges of keeping a small business thriving, a roadmap is a handy thing to have. A business plan helps an owner visualize the future, take the actions needed to get there, and understand when to change strategies.

A business plan is also often required when applying for a business loan. Lenders often use an applicant’s business plan as part of the loan application and approval process. It helps the lender evaluate the likelihood of the small business being profitable.

Knowing how to write a business plan can also be helpful for other purposes. Commercial real estate landlords may ask for a business plan before leasing a space. A thorough business plan may also help with finding investors.

What lenders look for in a business plan

A lender typically evaluates several factors to decide if a small business is likely to repay requested financing. The various sections of the plan will help the lender decide if a market opportunity for the company exists, if the business has access to the organizational and managerial resources it needs, if the product or service appears viable, if a marketing plan exists, and if the small business’ finances are healthy. Simply put, the plan helps the lender review all aspects of the business on paper, so that the lender can make a more informed decision about making a loan.

In addition to the business plan, the lender will likely assess the company’s accompanying business credit reports and business credit scores to determine its creditworthiness.

What does a formal business plan include?

Many business owners have informal business plans from when their small business was just a side hustle. Business ideas written on the back of a napkin are a cliche for a reason: it’s a common way for a small business to take shape.

A formal business plan, however, can’t fit on a napkin. When a growing small business needs a sizable business loan or line of credit , they will likely need to provide something quite detailed to a lender. The need for a formal document doesn’t necessarily mean it will be difficult to secure the loan , however. It just means the lender needs a clear picture of the business.

Small business owners can think of a business plan for a loan application like a resumé when seeking a job. It helps a lender decide if the small business is a good candidate for a loan in an easy-to-read document. Similar to a resumé, the business plan should be professional looking and free of spelling, grammatical, and typographical errors.

The list below follows the naming conventions and structure of how to write a business plan for a loan application according to the SBA . It includes:

• Executive summary
• Company profile
• Market analysis
• Organization and management
• Service or product line
• Marketing and sales
• Funding request
• Financial projections

1. Executive summary: Spark interest in your business

The executive summary may be the first thing a lender will read, but small business owners may be best served by writing it last. Learning how to write a business plan for a loan may help owners understand their own business better. The executive summary will likely be most accurate after the owner has thought through, and learned from, all the sections to follow.

What is the executive summary?

The executive summary is a brief overview of the business plan. It should give readers a high-level description of the business, as well as the high points of the business plan.

What to include in an executive summary

An executive summary should include the following:

• Business name, contact information, and social media profiles : This will help the reader find the business in the real world.
• Mission statement : A mission statement should directly reflect the values of the business to help readers understand why the business exists.
• Product or service description : This highlights what customers can expect from the business.
• Demographic, economic, and financial factors affecting the business : Readers should understand the general environment in which the business operates.
• An analysis of competitors and the primary market : This previews the market analysis section and clarifies the business’ market position.
• Marketing, public relations, and sales plan : Readers should understand how the business plans to attract and retain customers.
• Future revenue and cash flow projections : Financial forecasts help readers understand the business’ potential for growth and profitability.
• Any current assets or capital : Lenders will want to know what potential collateral the business has.

2. Company profile: Define the business

A company profile is a business owner’s opportunity to briefly explain what their business is all about and why it exists. The profile should be heavy on facts, including what the products and services are, the target audience, and what needs the business fulfills. It should be written in a formal tone and explain what, if anything, makes the business unique.

3. Market analysis: Competitors and customers

A market analysis explains the business environment in which the company will operate. Lenders may look at this section to determine if the business has a good understanding of its competition and potential customers. You may want to consider hiring a market research firm to help you prepare a market analysis.

Market analysis elements include:

• An industry analysis : This describes the outlook for the industry to which the business belongs.
• Knowing your competition : A competitor analysis highlights the strengths and weaknesses of similar businesses in the same market to identify challenges and opportunities.
• Know your niche : Explain how the product or service addresses an unmet If your business has a significant social media following, that may help to show how your business is reaching your customers.

4. Organization and management: Talent and experience

Who will run the business? This section is meant to help lenders understand the experience and skills of those operating the business. It’s not uncommon for lenders to ask if the talent that has made a business successful so far will stay with the business as it grows. Including a description of the current and future business structure over the next three to five years may demonstrate room for growth for valuable staff members.

5. Service or product line: What makes the business special?

A description of the small business’ service or products helps highlight what makes the business unique. The nuts and bolts of these offerings are critical, but their intangible qualities are valuable as well. This could include the recent hiring of an up-and-coming chef, the development of a new, patented product, or an innovative production method. This section is an opportunity to drill down on what makes the business unique.

6. Marketing and sales: How do you get the word out?

A great product or service is only valuable if enough potential customers hear about it. A lender will want to know how the business plans to get the word out about its offerings and increase its share of the target market. The plan might include social media platforms, established business partners, and how the company will generate and nurture sales leads.

7. Funding request: How much does the business need?

A business plan is all about clarity. Small business owners may use this opportunity to clarify how much money they need and why they need it. Lenders value a detailed explanation of how the business will use the loan and why it will increase their revenue or net profits.

8. Financial projections: Dollars and cents

Naturally, lenders will want to know about a business loan applicant’s finances. When learning how to write a business plan for a bank loan, business owners should understand the critical role of financial reports.

When preparing financial projections, it may be wise to consult a professional to best help your business prepare your documents accurately. Financial projections may include the following documentation:

• Startup expenses
• Payroll costs
• Sales forecast
• Operating expenses
• Cash flow statements
• Income statements for the first three years of business
• Balance sheet
• Break-even analysis
• Financial ratios
• Cost of goods sold (COGS)
• Amortization and depreciation for your business

9. Appendix: Show instead of tell

The appendix is where a business owner can show their work. The appendix includes supporting documentation, including resumés, financial statements, media clips indicating buzz around a product or brand, or anything else that verifies the information shared in the previous eight sections.

A formal business plan can be important when applying for a business loan

Seeking financing for business growth is a great opportunity to move from an informal business plan to something more structured. Having a business plan ready for lenders is a great first step in securing the funding your business may need to grow or sustain operations.

The material made available for you on this website is for informational purposes only and is not intended to provide legal, tax or financial advice. If you have questions, please consult your own professional legal, tax and financial advisors.

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What Is an SBA Loan?

What Is Factoring in Business?

How Hard Is It To Get a Small Business Loan?

Hispanic Small Business Loans and Funding Options

SBA Business Plan Template: Full Guide [2023]

• January 12, 2023
• Small Businesses

In 2020, SBA’s flagship 7(a) loan program approved more than 42,000 loans totalling $22 billion . Yet, SBA loans are notoriously difficult to obtain for small businesses: less than 15% of SBA loan applications were granted by big banks. If you’re applying for a SBA loan , you will need a solid business plan template for your loan application.

In this article we go through, step-by-step, all the different sections you need in your business plan to build a complete, clear and solid business plan lenders will approve. Read on!

Why do you need a business plan for your SBA loan application?

Other than your basic eligibility requirements, the primary element that lenders would review is your business plan. Having a good business plan determines if your business is a lucrative opportunity for SBA lenders.

Also, a solid business plan makes it easier to get your loans approved because banks would be confident that your business would be successful and you would be able to repay your loan.

However, business plans tend to differ depending on the nature and status of your business. If you’re running an independent business or launching a startup for example, your business plan will be reviewed more thoroughly.

1. Executive summary

The executive summary is the most important page of your SBA business plan template . We can’t make this clearer. This is the first section that the lenders will have a look at.

Before we go into specifics, keep in mind the executive summary actually is a summary. Keep it brief: your executive summary should never be more than 2 pages maximum .

Your executive summary should consists of 5 parts:

• The “mission statement “: what problem(s) is your business solving?
• Product and service : what is it that you sell? to whom? where?
• People : who are the founders / management? What about their experience? How many people / teams do you employ?
• Key financials and projections : what are your key metrics and financials today (revenues, customers, etc.)? What do you expect these to be in 3/5 years from now?
• Funding ask : what (how much) are you asking as part of this loan? Where will you spend it? For what?

2. Company description

The company description is where we go into more details about your business, and which problem(s) it actually solves.

You should explain here clearly:

What is the problem at stake?

You should list here the 2/3 friction points you aim to tackle.

Remember: even if your business isn’t necessarily innovative, your business is potentially solving a problem, as obvious as it may be, for many people out there. The more obvious the problem is, the more people it affects, the better

What is your solution?

Your business is commercialising a product and/or a service which solves the problem mentioned above. Here, you should explain 2 things: how your product / service works, and what benefits it brings to your customers.

Ideally, you should compare the pain points explained earlier (the problem) to the benefits your solution brings to your customers. That way, it is crystal clear to lenders and investors your solution really adds value to potential customers .

When explaining your business’ solution, you should explain clearly who is your customer persona . In other words, who are your customers (or who do you think they will be)? Which gender, age range, social background, interests, etc?

Where are you going?

The third section of the company description should explain what your strategy is in the short to long term. Are you expecting to launch new products? To expand regionally, internationally? Etc.

3. Market plan and analysis

The market plan and analysis section tell investors and lenders that you have extensively studied the market and reveal your competitive plan.

Your market plan and analysis section should include the following:

Industry overview and outlook

Here you need to clearly identify 2 very important metrics:

• Market size : how big is your market?
• Market growth: how fast does your market grow?

If you are operating in a niche market, chances are that you will face some challenges: the information might not be publicly available. In any case, you should be able to make a high-level estimation of your market. Read our article on market sizing and how to estimate TAM, SAM and SOM for your startup .

When looking for these metrics, you have multiple sources of information: public reports, specialised press, etc. Even public companies publish press releases and annual reports including some of their proprietary market estimates so be sure to look there too.

Competitive landscape

Here we must answer 2 key questions:

How fragmented is your market?

Are there 3 big players sharing 90% market share or thousands of small players? Here, refer to public market reports and your own understanding of the competitive landscape .

A few questions you could ask yourself, among others:

• Who are your competitors?
• Are they local, regional, national or global?
• Are there any product alternatives to your product?
• What about their IP / technological advantage?

Where do you position yourself vs. competition?

Is your solution a game changer other competitors don’t have (yet)? Do you have competitors with similar products/services?

Ideally, you would create a small table with, for each type of competitors and their main characteristics.

For instance, do they all a global presence? Do they cover all the products you offer? What is their relative price positioning (expensive vs. accessible)?

4. Organization and management

The amount of details you need to include here varies depending on the size of your company.

No matter how many leadership roles there are, an organizational chart effectively shows lenders and investors how the management system is structured.

If you plan on running your business alone indefinitely, you can write a short paragraph explaining your qualifications and previous professional experiences.

The first thing you should include in this section is a list of each management position. This list includes who will fill the role and the qualifications of these people. These people are the heart of your company, and their skills and experience are vital in ensuring your company’s success.

Next, provide any additional information about how the management team will contribute to the business’s success. Be sure to give as many details as possible since lenders need to be comfortable and confident that you have a good team running your business.

Lastly, include information about the Board of Directors (and/or any other advisors to your business).

5. Service or product line

The level of detail and the content of this section changes depending on the type of business you have. A number of questions you need to answer are shown below (but not limited to):

• Are you selling products or services (or both)?
• How many products do you sell?
• What are they?
• What is their pricing?
• How do they work?
• Are your products protected by any kind of intellectual property (copyright, patent, etc.)?
• If you do not manufacture all of your product(s): who are they suppliers? Where do they fit in the value chain ? etc.

Expert-built financial model templates for tech startups

6. Marketing and sales

Your SBA business plan template should include a marketing and sales plan where you describe your strategy for acquiring potential clients.

Here, you should give details about your marketing plan. A few questions you should answer are:

• How you plan to build and support your sales strategy ?
• What channel(s) are you using (online vs. offline)?
• How it makes sense for your target audience (the customer persona mentioned above)?

What about your metrics?

Sales and marketing goals and KPIs are also provided in this section. Don’t forget to include a detailed report about budgets for both sales and marketing.

Include metrics such as conversion rate, customer acquisition cost (CAC) , the efficiency of your sales team, etc.

It’s ok if you don’t know them already (if you are about to launch you new venture for example), yet you should have at least targets for them. How many website visitors do you expect to generate next year? What is your target conversion rate? Etc.

This particular report would be of great interest to lenders since they will glimpse how you handle your budget. Indeed, if you expect to spend in average $100 Customer Acquisition Cost, lenders will tie the number into your financial projections later on (more on that below).

Proving lenders you are able to link your financial projections with your actual business metrics (customers, sales volume, etc.) is a big plus . Indeed, that way you will show lenders you understand very clearly your business and how it ties into your financials (more on that in our article on why you should build a solid financial projections ).

7. Funding request

The funding request is the section of your SBA business plan template where you communicate to your investors how much you need.

This report also includes how you plan on repaying your loan. It’s also essential to explain how you plan to spend the funding you’ll receive for your business.

Will you spend the loan in working capital , in equipment, in inventory, salaries or marketing costs? The more specific you are, the better.

If you haven’t done so, we really recommend you read our article on how to determine how much you should raise for you business . While raising too little creates obvious problems, raising too much isn’t necessarily better.

On top of the amount, a good practice is to include a pie chart of where you will spend that money over a given period (your runway). Will you spend the bulk of it in product development to build your MVP? Or will you use a large portion in sales & marketing to commercialise your product and find product-market fit?

Our financial model templates include a cash burn dashboard where you can easily assess how much you should raise, and where you will spend your money. We also included charts ready to be included in your pitch deck. See how to use our cash burn dashboard here .

The funding request usually includes an overview of the business. You also have to outline how much funding you need for the next five years.  The standard timeframe for repaying your loan is usually ten years, so lenders expect to see some success in your business by that time. Mention a  detailed explanation of how the funds will be used and strategic financial plans for the future here.  Include financial information for current operations if applicable.

8. Financial projections

The financial projections section of your SBA business plan is one of the most important one.

Why? Lenders will have a thorough review of your expected financials over the next 3 to 5 years and judge whether your financial projections:

Are realistic (and use verifiable assumptions)

We are all by nature optimistic, especially when we are running businesses. It’s good to be optimistic, yet it is another one to be unrealistic.

Also, when presenting your financial projections, make sure to make it clear what are your assumptions. The more sources you can find to back up your forecasts, the better.

If you need help building realistic projections for your business, we have lots of free content. Make sure to check out our guides below:

• The 5 Mistakes To Avoid For Your Startup Financial Plan
• How To Build Realistic Revenue Projections For Your Startup?

Allow you to repay the SBA loan in the future

It’s great if you have built rock-solid and realistic financial projections for your business plan. Yet, if your plan doesn’t allow you to meet your debt obligations (the SBA loan and any other debt your business might have), lenders will not grant you any loan.

When assessing whether your financial plan allows you to repay the debt, you should check if the positive cash flows your business generates are enough to cover your debt repayment (and interests).

What financials should you include?

In short, you should present 3 different set of financials:

• Profit-and-loss
• Balance sheet
• Cash flow statement

If you don’t know them already, these are the financial statements every business need to prepare at least annually (with the help of an accountant). For more information on what they are and how to prepare them, read our articles below:

• 4 Key Financial Statements For Your Startup Business Plan
• SBA Loan Application: 6 Steps To Build Solid Financial Projections

9. Appendix

This section is the best place to add supporting documents like charts, graphs, and data.

For example, a complete list of documents like licenses, contracts, maps, etc. makes you more attractive to lenders as it gives them more content to review. If you do so, make sure to reference the documents in appendix and link them to pages in earlier sections. Avoid using the appendix as a dump section: it should be well organised and structured (else no one will bother looking at it).

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Every business owner can benefit from writing a business plan, including those in the early stages of launching a business . A well-crafted business plan communicates the business’s strategy for growth to key leaders and investors. It’s also an important step to getting a business loan since many lenders require it.

Let’s walk through the steps and elements of writing your ideal business plan.

Key takeaways

• A business plan outlines how you plan to bring products or services to market
• Many lenders require a business plan be included with a loan application
• You can choose to write a lean or traditional business plan
• It covers everything from market research to your marketing and financial plan.

What is a business plan?

A business plan is a document that outlines a business’s strategy for bringing a product or service to market. It describes the company, product idea and goals or steps that the business will take to achieve growth. The document includes multiple sections that provide insight into each part of the strategy.

The business plan can be a simple document called a lean business plan or a more detailed traditional business plan. The lean business plan covers the basics of the company, product, target customers and how it will get revenue. It may only be one page with short descriptions for each part.

The traditional business plan includes more depth on the goals, measurements, research and marketing strategies to get the business where it’s going. Here are key differences in the information written for each type of business plan:

Although there’s no one-size-fits-all approach, follow these steps to create a strong business plan.

Write an executive summary

An executive summary is the introduction to a business plan, giving the key details about your business model and the product or service you’re offering. While there’s no strict formula for writing this section, you should include all the relevant details that you’d want a key partner or investor to know.

It should describe your product or service idea, target market and key objectives for growth within the next few years. It may also summarize your marketing and sources of revenue or funding.

You can adjust what to include based on the exact business you’re starting and its business model. Most business plans keep the executive summary to one to two pages.

Create a company description

The company description should overview important details about your company. It can state your company’s name, location and type of entity as well as describe its history. It should also clearly define the vision that you have for your company’s future in the form of a mission or vision statement.

You may also outline the structure for managing the business, listing key roles and responsibilities and the people filling those roles. Depending on the details you included in the executive summary, you might include information about your product or service.

Describe your value proposition

The value proposition is your chance to pitch what makes your business stand out. It identifies the customer’s problem or gap in the market for the product or service you’re offering. It then goes into detail about how your business will solve the problem.

The value proposition can also explain major barriers that customers have before making a decision and what your business will do to break through those barriers. It shows leaders and investors that you have a thoughtful purpose behind the business you’re creating.

State your business goals

The path to achieving success starts with knowing what success looks like. Many business plans state its main objectives in the company description. Others describe those goals in a separate part of the business plan to dive deeper into the specific goals.

You can also include key measurements you’ll use to gauge whether your business is achieving its goals. You would then use these goals in other business planning documents, further breaking them down into defined short-term steps that ladder up to the larger goals.

Outline your product and service

Next, you want to dive into the main product or service that your business is offering. Explain what the product is, how it works and the benefits that it brings to customers. If you’re planning to make multiple products, you can include a description of each product line. Show how this product or service is set apart from similar products from competitors.

You can also use this section to show how the product or service is produced, including cost of supplies and the price at which you plan to sell. Let the investors and stakeholders know if you have a trademark or patent for the products you’re creating.

Give a summary of market research

Next comes market research, the part of the plan where you do your due diligence to gather information and understand your target customers and competitors. First, you want to understand your target customers’ needs and any barriers they might have to buying your product.

You want to look for information about their demographics and how they might respond to the product you’re offering. This information will help you when designing your product and marketing it in a way that resonates with customers.

Then, you can look at the economy around your product, such as average pricing and sales revenue. This also includes research about your competitors, the market share that they hold and the barriers to entering your market. This section may include data from data research companies, surveys, focus groups and interviews.

According to the U.S. Small Business Administration , the questions you’re trying to answer include:

• Market size, or how many people may want to buy your product
• What people are willing to pay for your product
• Similar products already available
• Who your competitors are
• How your industry is doing
• Typical revenue gained by small businesses in your industry

Summarize a marketing strategy

Once you’ve clearly defined your product and who you’re selling to, you can come up with a strategy for how you’ll reach and sell to customers. In this section, you’ll include the different marketing channels you’ll use to promote your products and services.

These may include direct mailers, social media, traditional or online advertising or media events. The exact channels you use will depend on where you can easily find your target customers.

You can also describe the key messaging that you plan to use during marketing, which will pinpoint the value that it offers to customers. The marketing plan should also include the cost of marketing to different channels and your marketing budget. You can then outline the marketing goals and measurements you’ll use to see if you’re meeting those goals.

Create a logistics and operations plan

The logistics and operations section of your business plan is a detailed description of how your business will bring products and services to market. It explains how the business will run on a day-to-day basis. It should highlight your company’s management structure, give an overview of processes and describe the workflow from end to end. It can also include data on how many products you can make or how long it will take to make products or offer services.

Create a financial plan

Now that you’ve laid out the research, goals and planning, you can use that information to forecast revenue and build a financial plan. Use any past revenue or sales history as a starting point. Then, refer to your company’s recent growth and goals to calculate future financial growth.

If you’re a startup , you can use market research to estimate revenue for a startup in your industry. You can either forecast revenue manually or find software that projects revenue for you.

In your financial plan, you also want to create and track your business budget . You’ll track your estimated and actual revenue, updating regularly to keep the revenue forecast accurate and realistic. Next, you’ll list all expenses and their amounts, including one-time, variable, fixed or seasonal expenses. Here are some examples of different business expenses:

• One-time or capital expenses: Equipment, real estate, furniture, commercial vehicles, business licenses
• Variable expenses: Inventory, utilities, fuel, office supplies, shipping services, card processing fees
• Fixed expenses: Employee salaries and benefits, software, web hosting, office or equipment leases, business loan repayments

Business plan resources

Writing your business plan will take more than putting pen to paper. Try these resources to help you gather data, set up your finances and more:

• Business plan templates. Creating a business plan for the first time? Learn by looking up examples of other business plans or templates like these from Smartsheet .
• Software for accounting and financial planning. Many small businesses use Quickbooks, Xero or Netsuite to track revenue and expenses. These may also forecast revenue based on sales history.
• Business loan resources. To cover your funding needs, think through the types of business loans that would best serve your business. Once you’ve landed on a loan, compare features and interest rates to help you make a decision.
• Survey tools. For in-depth market research, you can build a survey and send to your target customers through a data research company like GWI.

Small business mentoring

Experienced mentors can guide you to making effective business decisions and unlock new potential for growth. Where to find small business mentors:

• SBA. You can find resources and free or low-cost mentors through the SBA’s local assistance tool .
• Small Business Development Centers. SBDCs provide specialized training programs in your local area covering specialized topics like marketing, data research and business management.
• Community Development Financial Institutions. CDFIs   are financial organizations like banks and credit unions that are built to develop the community. Alongside banking and lending services, CDFIs offer training programs and resources.
• SCORE. SCORE is an organization that partners with the SBA to bring resources to small business owners. Mentorship is at the core of what the organization does, and it can match you with a local mentor through its online locator tool.
• Local Chamber of Commerce. These local organizations are known for supporting business networking. They may help you find a mentorship program, or you may build a relationship with another successful entrepreneur through networking events.
• Nonprofit organizations. Some nonprofit organizations are dedicated to supporting small business owners with funding, trainings and mentorship programs. These are typically local programs. For example, NYPACE is a nonprofit that offers free consulting to underserved entrepreneurs in New York.

Bottom line

Your business plan should outline key information about your company, products and the strategy for getting those products in the hands of your customers. Every business plan looks different, but there is essential information to include in every plan, such as who your target customer is and your expected revenue. The business plan serves to help you get business funding and outline exact goals and steps to growing your company.

Frequently asked questions

Do i need a business plan to apply for a business loan, how do i write a simple business plan, what basic items should be included in a business plan.

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What Happens to Biden’s Student Loan Repayment Plan Now?

More than eight million borrowers are enrolled in the income-driven plan known as SAVE. The Education Department is assessing the rulings.

By Tara Siegel Bernard

President Biden’s new student loan repayment plan was hobbled on Monday after two federal judges in Kansas and Missouri issued separate rulings that temporarily blocked some of the plan’s benefits, leaving questions about its fate.

The preliminary injunctions, which suspend parts of the program known as SAVE, leave millions of borrowers in limbo until lawsuits filed by two groups of Republican-led states challenging the legality of the plan are decided.

That means the Biden administration cannot reduce borrowers’ monthly bills by as much as half starting July 1, as had been scheduled, and it must pause debt forgiveness to SAVE enrollees. The administration has canceled $5.5 billion in debt for more than 414,000 borrowers through the plan, which opened in August.

If you’re among the eight million borrowers making payments through SAVE — the Saving on a Valuable Education plan — you probably have many questions. Here’s what we know so far, though the Education Department has yet to release its official guidance.

Let’s back up for a minute. What does SAVE do?

Like the income-driven repayment plans that came before it, the SAVE program ties borrowers’ monthly payments to their income and household size. After payments are made for a certain period of years, generally 20 or 25, any remaining debt is canceled.

But the SAVE plan — which replaced the Revised Pay as You Earn program, or REPAYE — is more generous than its predecessor plans in several ways.

Ask us your questions about the SAVE student loan repayment plan.

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Student-loan borrowers who were set to get debt cancellation or lower payments through Biden's new repayment plan won't get it — for now. Here's what you need to know.

• Two federal judges blocked parts of the SAVE income-driven, student-loan repayment plan on Monday.
• The rulings mean that student-loan forgiveness and lower payments set to begin in July cannot move forward.
• The Justice Department is appealing the rulings, and the courts have yet to make final decisions. 

Legal challenges against President Joe Biden's student-debt relief efforts are back — and the latest rulings are bad news for his new repayment plan.

On Monday evening, district courts in Kansas and Missouri handed down rulings blocking parts of the new SAVE income-driven repayment plan , first introduced last summer with the goal of giving borrowers more affordable payments and a shorter timeline for loan forgiveness.

The first lawsuit was filed in March in Kansas by 11 GOP state attorneys general, and the second was filed in April in Missouri by seven GOP state attorneys general. In both cases, the plaintiffs requested that the courts block the SAVE plan and the loan forgiveness that comes with it, arguing that the relief is beyond the administration's authority.

Monday's district court rulings were different, but both dealt blows to the SAVE plan. Kansas Judge Daniel Crabtree ruled that new provisions through SAVE set to go into effect July 1, like lower monthly payments, cannot be implemented as the legal process progresses. Missouri Judge John Ross ruled that the plan's provision to cancel student debt for borrowers with original balances of $12,000 or lower who made as few as 10 years of qualifying is now blocked, as well.

Education Secretary Miguel Cardona condemned the rulings on Monday, saying in a statement that "the Department of Justice will continue to vigorously defend the SAVE Plan."

"Republican elected officials and special interests sued to block their own constituents from being able to benefit from this plan – even though the Department has relied on the authority under the Higher Education Act three times over the last 30 years to implement income-driven repayment plans," Cardona said.

"While we continue to review these rulings, the SAVE plan still means lower monthly payments for millions of borrowers - including more than 4 million borrowers who owe no payments at all, and protections for borrowers facing runaway interest when they are making their monthly payments," he added.

Related stories

Here's what borrowers should know about the rulings.

First ruling: No new payment reforms

Student-loan borrowers who have already enrolled in SAVE can continue making the payments the plan calculated for them. However, the new provisions set to go into effect July 1 — including cutting undergraduate borrowers' payments in half and forgiveness credit for period of deferment of forbearance — are halted.

Here's why: Kansas' Crabtree ruled , in part, in favor of the attorneys general, and he explained in his ruling that the SAVE plan's monthly payment cap and shortening of the payment period for forgiveness "overreach any generosity Congress has authorized before."

However, Crabtree ruled to preserve the provisions of SAVE that have already gone into effect because the plaintiffs failed to adequately show how they suffered harm from parts of the plan already in place. For example, the Education Department outlined in June 2023 its intention to cap monthly payments and announced the shorter timeline to forgiveness a month in advance, leaving the attorneys general with time to challenge the plan earlier.

"All of this is to ask why: if these parts of the SAVE Plan promised an irreparable harm to plaintiffs, why didn't they move to enjoin the SAVE Plan before they took effect?" Crabtree wrote.

However, with regards to the new SAVE provisions set to go into effect July 1, Crabtree ruled that the plaintiffs succeeded in showing harm because there was no delay in challenging the plan's unimplemented provisions, and any forthcoming relief would be irreversible.

So rather than reversing or altering any of the provisions through SAVE already implemented, Crabtree decided to halt any new measures that have yet to be implemented until the court makes a final decision.

Second ruling: No student-loan forgiveness

While thousands of borrowers have already received student-loan forgiveness through the SAVE provision, which cancels debt for borrowers with original balances of $12,000 or less, no more borrowers will be able to partake in that relief for now.

Missouri's Ross handed down a different ruling regarding SAVE. He first said that Missouri's argument that the plan would harm student-loan company MOHELA — based in Missouri — due to lost revenue has standing, given it was the same conclusion the Supreme Court reached when it struck down Biden's first attempt at broad debt relief last summer.

With regards to the fate of SAVE, Ross decided that while already implemented provisions of SAVE can remain, any future student-loan forgiveness through the plan is blocked. He wrote that Congress did not account for the scale of loan forgiveness under SAVE, and as a result, the attorneys general have "a 'fair chance' of success on the merits on their claim that the Secretary has overstepped its authority by promulgating a loan forgiveness provision as part of the SAVE program."

He also said that even without allowing student-loan forgiveness, the other provisions, like lower payments and limited interest accrual, will still provide relief to borrowers. Since the attorneys general did not adequately argue why the other provisions should be blocked, Crabtree said he would only place a preliminary injunction on the debt cancellation.

Cardona said on Tuesday that the Justice Department will appeal the rulings.

White House Press Secretary Karine Jean-Pierre said in a statement that the Education Department will "continue to enroll more Americans in SAVE and help more students and borrowers access the benefits of the plan that remain available, including $0 payments for anyone making $16 an hour or less, lower monthly payments for millions more borrowers, and protecting borrowers from runaway interest if they are making their monthly payments."

Watch: Why student loans aren't canceled, and what Biden's going to do about it

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Biden Student Loan Forgiveness FAQs: The Details, Explained

Updated: May 6, 2024, 4:56am

Student loan borrowers can now apply for the Biden administration’s new income-driven repayment (IDR) plan online. The Department of Education has launched a beta website for its Saving on Valuable Education (SAVE) plan.

SAVE is expected to significantly reduce the monthly payments of many low- and middle-income borrowers and provide a shorter path to loan forgiveness.

SAVE will be rolled out in stages, and all program features won’t be active until 2024. But the application for SAVE is now open, allowing the Department of Education to refine its processes before the program’s official launch.

When applying, you will be able to select the option for your loan servicer to place you on the plan with the lowest monthly payment, which will usually be SAVE, according to the website.

“If you submit an IDR application now, it will be processed and will not need to be resubmitted,” the department said on its website. “The application may be available on and off during this beta testing period. If the application is not available, try again later.”

If you apply this summer, your application will be processed in time for your first due date when payments resume this fall, according to the site.

President Joe Biden’s Student Loan Forgiveness Update

What happened to biden’s student loan forgiveness program.

The beta site is being unveiled about a month after the Supreme Court rejected President Joe Biden’s one-time $441 billion debt relief program.

Under that initiative, borrowers who earned less than $125,000 ($250,000 for married couples) would have been able to qualify for forgiveness of up to $10,000 of outstanding federal loans. Borrowers who received Pell Grants to pay for part of their education could have been eligible for up to $20,000 of loan forgiveness.

Following the Supreme Court ruling, the Department of Education is prohibited from forgiving any federal loans under this program.

Who qualifies for student loan forgiveness?

After the Supreme Court struck down the forgiveness plan, the Biden administration set up a Student Loan Relief Committee to engage in “negotiated rule-making” over the next few months to discuss the next steps for student debt relief. It’s unclear if any new forgiveness program would have the same eligibility requirements as the first one, but the administration has indicated that it will prioritize relief for borrowers with financial hardship.

Although Biden’s student loan forgiveness plan isn’t available anymore, you might still qualify for loan forgiveness if any of the following apply:

• You work full-time in public service for 10 years and make 120 qualifying payments on your federal student loans.
• You’re a teacher in a low-income school or at an educational service agency for five consecutive years.
• You’re a nurse or nurse faculty member serving a high-need population in a critical shortage area.
• You qualify for Perkins loan cancellation.
• You’ve experienced a total and permanent disability.
• You have another qualifying reason for student loan discharge, such as being defrauded by your school.
• You make payments for 20 or 25 years on an IDR plan.

How do I apply for student loan forgiveness?

The application process for student loan forgiveness will depend on the program you pursue. Here are some steps you might take, depending on the program:

• Public Service Loan Forgiveness (PSLF). To apply for PSLF, use the PSLF Help Tool to generate and submit the PSLF & Temporary Expanded PSLF (TEPSLF) certification and application to your loan servicer. Submit this form annually so your servicer has a record of your progress. When the 10 years are up, you’ll submit a final PSLF form to federal student loan servicer MOHELA.
• Teacher Loan Forgiveness. Submit this Teacher Loan Forgiveness Application to your loan servicer(s). You’ll need the chief administrative officer of your school or agency to complete the certification section of this application.
• Nurse CORPS Loan Forgiveness. You can apply through your account on the Health Resources & Services Administration’s (HRSA) site. This guide explains the process in greater detail.
• IDR plan forgiveness. Your loans should automatically qualify for forgiveness after you’ve spent 20 or 25 years in repayment. Reach out to your loan servicer about any steps you may need to take.
• Total and permanent disability (TPD) discharge. Borrowers with a total and permanent disability may get an automatic discharge of their student loans. If you don’t, you can complete a TPD discharge application and submit it to the servicer. Along with your application, you’ll need to provide supporting documentation from the U.S. Department of Veterans Affairs (VA), the Social Security Administration (SSA) or an authorized medical professional.

What will happen to my student loans?

Without the debt forgiveness program as an option, federal loan borrowers will need to make plans for repayment. The federal payment freeze—which has been in effect since March 2020—ends in September, and borrowers must start making payments in October.

When do student loan payments resume?

Interest begins accruing on loan balances on September 1, 2023, and payments will resume in October .

Can I defer my student loan payments beyond October?

You may qualify for a federal loan deferment and pause your payments depending on your circumstances. Common types of forbearance or deferment include:

• Cancer treatment deferment. If you’re diagnosed with cancer and undergoing treatments, you can submit a request to postpone your payments during your treatments and for six months after your treatment ends.
• Economic hardship deferment. If you receive government benefits, such as welfare, work full-time but earn 150% of the federal poverty guidelines or less, or are serving in the Peace Corps, you may be eligible for economic hardship deferment. You can postpone your payments for several months at a time, up to a maximum of three years.
• In-school deferment. If you’re a borrower looking to return to school to earn another degree, such as a master’s or doctorate, you can defer payments while in school and for up to six months after you graduate or drop below half-time status.
• Unemployment deferment. If you lost your job and are receiving unemployment benefits, you may be able to postpone your payments for up to three years under the unemployment deferment program.

Are there other student loan forgiveness programs?

Even though the Supreme Court blocked the one-time debt relief program, borrowers may qualify for other loan forgiveness programs , including:

• Public Service Loan Forgiveness (PSLF). Federal loan borrowers can qualify for loan forgiveness if they work for a qualifying public service employer, including 501(c)(3) not-for-profits and government agencies. They must work for a qualifying employer full-time for 10 years and make 120 payments under a qualifying payment plan. For borrowers pursuing PSLF , MOHELA is their loan servicer. Any existing loans will be transferred to MOHELA when the borrower notifies their current servicer of their intentions to apply for PSLF.
• Teacher Loan Forgiveness. Teacher Loan Forgiveness provides up to $17,500 in loan forgiveness to teachers who work for five full and consecutive academic years in a low-income school or education agency and teach high-need subjects.
• Income-driven repayment (IDR) discharge. Under an IDR plan , you get a reduced payment based on your discretionary income and a new loan term of 20 or 25 years. The government forgives the remaining amount if you still have a loan balance at the end of your loan term.

How do I know if my student loans are forgiven?

If you qualify for loan forgiveness under PSLF, Teacher Loan Forgiveness or IDR discharge, the loan servicer or Department of Education will send you a notification letter. Depending on your account settings, you may receive the letter electronically or via mail. It will state the amount of forgiveness you received and the date the loans were discharged.

If you made payments beyond the forgiven balance, you’ll receive a refund of the excess amount.

How is student loan forgiveness taxed?

Student loan forgiveness isn’t taxable at the federal level through 2025, due to the American Rescue Plan Act. After that, how loan forgiveness is taxed varies by program:

• PSLF. Loans forgiven under PSLF are not taxable as income.
• Teacher Loan Forgiveness. Previously, the loan balance forgiven through Teacher Loan Forgiveness was taxable as income. However, loans forgiven on or after January 1, 2021 are exempt from federal income taxes.
• IDR discharge. The loan balance forgiven under IDR plans is subject to federal income taxes.

SAVE Repayment Plan FAQs

What is the save plan.

The SAVE plan is a new IDR plan. While the other IDR plans calculate your payments using your discretionary income—defined as the difference between your income and 150% of the federal poverty guideline for your household size—the SAVE plan uses a different formula. It considers your discretionary income to be the difference between your income and 225% of the federal poverty guideline, so more of your income is protected.

In 2024, additional benefits will be in force. Those features include loan forgiveness after just 10 years for those with loan balances of $12,000 or less.

The SAVE plan will replace the current Revised Pay As You Earn (REPAYE) Plan. If you’re already on the REPAYE Plan you will automatically be enrolled in SAVE.

How does the SAVE plan work?

SAVE slashes payments for borrowers enrolled in IDR plans because it uses a higher percentage of the federal poverty guideline to determine your discretionary income.

Let’s say you’re single and earn $30,000 annually. Under the current IDR plans, your discretionary income would be the difference between your $30,000 salary and 150% of the federal poverty guideline for one person. As of 2023, the guideline for one person is $14,580; 150% of that number is $21,870.

For the existing IDR plans, your discretionary income would be $8,130. Depending on the plan, your payments would be up to 10% to 20% of your discretionary income, so you’d pay $813 to $1,626 per year.

Under the SAVE plan, for example, single borrowers who earn $32,800 or less—or families of four who earn $67,500 or less (amounts are higher in Alaska and Hawaii)—will qualify for $0 payments. For borrowers transferring to SAVE from another plan, the new plan would help them save thousands each year.

Who qualifies for the SAVE repayment plan?

Any borrower who owes eligible federal student loans can qualify for the SAVE repayment plan. Eligible loans include:

• Direct subsidized and unsubsidized loans
• Direct PLUS loans made to graduate or professional students
• Direct consolidation loans that didn’t repay any parent PLUS loans

The following loan types are also eligible for SAVE if you consolidate them with a direct consolidation loan:

• Subsidized and unsubsidized FFEL loans
• FFEL Plus loans made to graduate or professional students
• FFEL consolidation loans
• Perkins loans

If you were previously on the Revised Pay As You Earn (REPAYE) plan, you’ll automatically be enrolled in SAVE. If not, you can apply for SAVE by submitting an IDR plan request on the Federal Student Aid website.

What are the pros and cons of the SAVE repayment plan?

Some benefits include:

• Larger income exemption. When calculating discretionary income, the SAVE plan uses 225% of the poverty guideline for your state and family size. By contrast, the other plans use 100% or 150%. This exemption means lower monthly payments.
• More generous interest subsidy. On the SAVE plan, the government will pay for any remaining interest charges that your monthly payments don’t cover.
• Payments as low as 5% of discretionary income. Starting in 2024, payments on undergraduate federal student loans will be cut in half to 5%, rather than 10%, of your discretionary income.
• Faster path to loan forgiveness. If your original balance was $12,000 or less, you could receive loan forgiveness after 10 years. One year gets added for each additional $1,000 you borrowed, up to a maximum of 20 or 25 years.
• Spouse’s income can be excluded. If you file taxes separately from your spouse, the Department of Education won’t include their income when calculating your monthly payment on the SAVE plan.

At the same time, there are a few potential cons to this plan:

• Parent loans aren’t eligible. Parent loans aren’t eligible for the SAVE plan, nor are consolidation loans that paid off any loans made to parents.
• Some benefits won’t be active until July 2024. Although the SAVE plan is currently active, not all of its features are available yet. In particular, you’ll have to wait until July 2024 for undergraduate loan payments to be reduced to 5% and for the forgiveness timeline to be shortened to 10 or more years.
• May not benefit from grad school loans. Borrowers with graduate student loans will still have to pay 10% of their discretionary income each month, which is the same percentage as some other IDR plans. That said, grad borrowers may still see a lower payment on SAVE due to the way it calculates discretionary income.

Is the SAVE Plan the same as student loan forgiveness?

SAVE does not provide immediate loan forgiveness. It’s a new repayment plan that could give borrowers a lower monthly payment. Eligible borrowers could qualify for loan forgiveness sooner and SAVE will discharge loans in as little as 10 years rather than 20 or 25.

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Federal Judges Pause Parts Of SAVE Student Loan Forgiveness Program

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Judges temporarily halt part of President Biden's student debt forgiveness plan

The Associated Press

President Biden speaks at an event about canceling student debt, at the Madison Area Technical College Truax campus, April 8, 2024, in Madison, Wis. Kayla Wolf/AP hide caption

TOPEKA, Kan. — Federal judges in Kansas and Missouri on Monday together blocked much of a Biden administration student loan repayment plan that provides a faster path to cancellation and lower monthly payments for millions of borrowers.

The judges’ rulings prevent the U.S. Department of Education from helping many of the intended borrowers ease their loan repayment burdens going forward under a rule set to go into effect July 1. The decisions do not cancel assistance already provided to borrowers.

In Kansas, U.S. District Judge Daniel Crabtree ruled in a lawsuit filed by the state’s attorney general, Kris Kobach, on behalf of his state and 10 others. In his ruling, Crabtree allowed parts of the program that allow students who borrowed $12,000 or less to have the rest of their loans forgiven if they make 10 years’ worth of payments, instead of the standard 25.

But Crabtree said that the Department of Education won’t be allowed to implement parts of the program meant to help students who had larger loans and could have their monthly payments lowered and their required payment period reduced from 25 years to 20 years.

In Missouri, U.S. District Judge John Ross’ order applies to different parts of the program than Crabtree’s. His order says that the U.S. Department of Education cannot forgive loan balances going forward. He said the department still could lower monthly payments.

3 things you need to know about student loans this summer

Ross issued a ruling in a lawsuit filed by Missouri Attorney General Andrew Bailey on behalf of his state and six others.

Together, the two rulings, each by a judge appointed by former President Barack Obama, a Democrat, appeared to greatly limit the scope of the Biden administration’s efforts to help borrowers after the U.S. Supreme Court last year rejected the Democratic president’s first attempt at a forgiveness plan. Both judges said Education Secretary Miguel Cardona exceeded the authority granted by Congress in laws dealing with students loans.

Bailey and Kobach each hailed the decision from their state's judge as a major legal victory against the Biden administration and argue, as many Republicans do, that forgiving some students' loans shifts the cost of repaying them to taxpayers.

“Only Congress has the power of the purse, not the President,” Bailey said in a statement. "Today’s ruling was a huge win for the rule of law, and for every American who Joe Biden was about to force to pay off someone else’s debt.”

The White House said it strongly disagrees with the judges’ rulings and would continue to defend the program, and use every available tool to give relief to students and borrowers.

In a statement, White House press secretary Karine Jean-Pierre said the Biden administration “will never stop fighting for students and borrowers — no matter how many roadblocks Republican elected officials and special interests put in our way.”

In a statement posted on the social media platform X, leaders of the Student Borrower Protection Center, which advocates for eliminating student debt, called the decisions “partisan lawfare” and “a recipe for chaos across the student loan system.”

“Millions of borrowers are now in limbo as they struggle to make sense of their rights under the law and the information being provided by the government and their student loan companies,” said the group’s executive director, Mike Pierce.

In both lawsuits, the suing states sought to invalidate the entire program, which the Biden administration first made available to borrowers in July 2023, and at least 150,000 have had their loans canceled. But the judges noted that the lawsuits weren't filed until late March in Kansas and early April in Missouri.

“So the court doesn’t see how plaintiffs can complain of irreparable harm from them,” Crabtree wrote in his opinion.

Both orders are preliminary, meaning the injunctions imposed by the judges would remain in effect through a trial of the separate lawsuits. However, to issue a temporary order each judge had to conclude that the states were likely to prevail in a trial.

Kobach framed the Biden plan as “unconstitutional” and an affront to “blue collar Kansas workers who didn’t go to college."

There was some irony in Crabtree's decision: Kansas is no longer a party to the lawsuit Kobach filed. Earlier this month, Crabtree ruled that Kansas and seven other states in the lawsuit — Alabama, Idaho, Iowa, Lousiana, Montana, Nebraska and Utah — couldn't show that they'd been harmed by the new program and dismissed them as plaintiffs.

That left Alaska, South Carolina and Texas, and Crabtree said they could sue because each has a state agency that services student loans.

But Crabtree said that lowering monthly payments and shortening the period of required payments to earn loan forgiveness “overreach any generosity Congress has authorized before.”

In the Missouri ruling, Ross said repayment schedules and “are well within the wheelhouse” of the department but the “plain text” of U.S. law doesn’t give it authority to forgive loans before 25 years of payments.

Missouri also has an agency that services student loans. The other states in its lawsuit are Arkansas, Florida, Georgia, North Dakota, Ohio and Oklahoma.

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SAVE Lawsuits: What Student Loan Borrowers Face Now

Eliza Haverstock is NerdWallet's higher education writer, where she covers all aspects of college affordability and student loans. Previously, she reported on billionaires and investing for Forbes in New York, and she also covered private markets for PitchBook in Seattle. Eliza got started at her college newspaper at the University of Virginia and interned for Bloomberg, where she spent a summer writing a feature story about plastic straws. She is based in Washington, D.C.

Cecilia Clark is a writer and spokesperson on the education team. She covers student loan refinance and manages product reviews and roundups. Previously, she worked as a freelance writer and developed communications strategies for cybersecurity firms. Cecilia has also worked in post-secondary education, elevator operations management and sales and military nuclear command control, maintenance management and public affairs.

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money .

Updated on June 28:

In response to the legal rulings, the Education Department extended an administrative forbearance to all 3 million SAVE borrowers who don't have $0 monthly payments. Affected borrowers will be notified in the coming days. It's unclear how long the payment pause will last.

The department also said it will close online applications for income-driven repayment and loan consolidation for 4-6 weeks. Borrowers can still apply for these programs through their servicers with a paper or PDF application.

Two federal judges derailed portions of the Saving on a Valuable Education (SAVE) repayment plan on Monday, days before reduced payments were slated to go into effect for millions of borrowers.

A Missouri judge ruled that the Education Department could not continue forgiving small principal student loan balances in just 10 years under the SAVE plan. And in Kansas, a judge blocked the department from rolling out the final components of the SAVE plan as scheduled on July 1 that would have cut monthly bills in half for borrowers with undergraduate loans only, among other benefits.

“We strongly disagree with the Kansas and Missouri District Court rulings, which block components of the SAVE Plan that help student loan borrowers have affordable monthly payments and stay out of default. The Department of Justice will continue to vigorously defend the SAVE Plan,” U.S. Secretary of Education Miguel Cardona said in a statement.

SAVE, which debuted in August, offers lower payments and more benefits than other income-driven repayment (IDR) plans . It forgives remaining debt in as little as 10 years for those with an original principal balance of $12,000 or less instead of 20 or 25 years on other IDR plans. It waives any interest left over after borrowers make their assigned monthly payments, preventing ballooning student loan balances. Those earning less than $67,500 as a family of four, or less than $32,800 as an individual, even qualify for $0 payments.

About 8 million borrowers are enrolled in SAVE, representing 1 in 5 borrowers with outstanding federal student loans. Of the 8 million SAVE borrowers, 4.6 million have a low enough income to qualify for $0 payments.

How the rulings impact SAVE borrowers

The most immediate impact of the Kansas court order: As many as 3.4 million borrowers who owe payments under SAVE won’t see smaller bills starting in July. The Education Department was gearing up to shrink monthly payments for borrowers with only undergraduate loans, from 10% of their discretionary income to 5%. (Borrowers with both undergraduate and graduate loans would have seen payments calculated at a weighted average between 5% and 10%.)

Other SAVE provisions slated to go into effect July 1 won’t happen as scheduled, either. That includes automatic SAVE enrollment for borrowers who are at least 75 days behind on payments, which could reduce default rates. Another provision would have given borrowers automatic credit toward SAVE forgiveness for most past periods of forbearance and deferment.

The Missouri ruling blocks borrowers with lower principal balances from getting accelerated forgiveness going forward. Since February, the department has already approved about $5.5 billion worth of student debt forgiveness for 414,000 SAVE borrowers.

Previous waves of SAVE forgiveness are likely safe, says Mike Pierce, executive director and co-founder of the Student Borrower Protection Center, a nonprofit organization that advocates for student debt relief. The court order does not impact the 20- or 25-year forgiveness timeline for SAVE borrowers who took out amounts of debt greater than $12,000.

“I would not expect, no matter where this goes, for people who are now debt-free to have to worry about the government coming back to them and saying, ‘No, actually, the court says we got it wrong, so you have to pay your bills now,’” Pierce says. “But for everybody else, people who are relying on these lower monthly payments, that's very much in peril.”

Student loan servicers recently notified some borrowers about a July administrative forbearance due to SAVE plan changes. Most likely, that July forbearance will continue as planned and payments will resume in August, though servicers are still waiting on official Education Department direction, says Scott Buchanan, executive director of the Student Loan Servicing Alliance. If you have questions about the July forbearance, wait a few days before contacting your servicer.

“I would encourage borrowers to hold off and wait until we get more information about how the government is going to proceed here, because if they call today and say, ‘Hey, what's happening in August?’ I don't think anyone's going to have an answer,” Buchanan says.

What could happen next with the SAVE lawsuits

The dual court orders were both preliminary injunctions, which means they are not yet final rulings.

“The court has not made a decision about whether or not the SAVE plan is legal, so the states asked the court to temporarily pause the full SAVE regulations while the court considers whether or not the actions by the administration were lawful,” explains Pierce.

Next, the Justice Department will decide whether it will appeal these injunctions and ask an appellate court to review them or litigate the cases in front of these judges and try to prove that the SAVE plan is legal.

In either case, it’s unlikely that SAVE borrowers will be impacted by further legal updates in the “very near-term,” Pierce says. “It's possible the administration is going to fight tooth and nail to roll back these injunctions. We'll know more in the coming days, but as of right now, assuming these cases stay in front of these trial court judges, we're talking about months here.”

The future of the SAVE plan remains uncertain. In the meantime, SAVE continues to stand in its current form, minus the forgiveness portion. Borrowers enrolled in the plan should continue to make payments as usual, and borrowers who aren’t yet on SAVE can still sign up.

“While we continue to review these rulings, the SAVE plan still means lower monthly payments for millions of borrowers — including more than 4 million borrowers who owe no payments at all, and protections for borrowers facing runaway interest when they are making their monthly payments,” Education Secretary Cardona said.

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