I am a small business owner and am looking to acquire another business for growth. When applying for a business loan, do lending institutes prefer to see you borrow money to pay off existing debt or do they prefer to see you keep that debt and invest borrowed funds to pay for additional equipment? What do lending institutes mostly look for when lending to small businesses? What about if they ask for a business plan? What part of the plan is most reviewed and most beneficial to show to best secure lending?
A lender wants to know what the funds will be used for, what income the business will generate, and if this income will service all the debts and expenses to make the business profitable. Yes, a strong and well thought out business plan indicates that there is a thought process that provides a direction. That direction should be to profitability that may be sustained. There is no part that is more important than another as the plan as a whole will be used for guidance.
The question the lender has to ask is if the plan is reasonable and realistic. They will look at collateral - what it is, value and marketability, debt service capability, and the viability of the business itself.
Talk to more than one lender. A proposal that one bank doesn't like, may be attractive to another. You won't know until you ask.
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A lender wants to know what the funds will be used for, what income the business will generate, and if this income will service all the debts and expenses to make the business profitable. Yes, a strong and well thought out business plan indicates that there is a thought process that provides a direction. That direction should be to profitability that may be sustained. There is no part that is more important than another as the plan as a whole will be used for guidance.