05/28/2010 04:03 pm ET | Updated May 25, 2011

Don't Trust SBA or Lender Endorsed Business Plans


I have been involved with the U.S. Small Business Administration since the 1970s. Initially it was during my lending career. More recently, it is as a business columnist. Yet, I have never known the agency to endorse a business plan.

Consequently I was startled by a press release with the following headline: "SBA Endorses 'Certified Business Plan'." It was blasted to the media by SoCalBizOps, a California company. "(It) is being endorsed by the Small Business Administration, major financial institutions and some of the largest venture capital firms in the country," the release continued.

So I e-mailed SBA's spokesperson Mike Stamler to find out if he was familiar with the company or its business plan. He had not heard of the company or its business plan. Stamler also forwarded the press release to SBA's legal department.

"Jerry - It's not true," Stamler responded to my e-mail. "SBA did not endorse the product." He added, "Apparently there's to be a retraction." I deduce that the legal folks were not happy with the false claim and asked that it be withdrawn.

It is illogical that SBA, or any lender, would endorse a specific business plan product. That is because creating a business plan is a unique process specific to each business. Even more important to know, each business plan should be crafted with the end result in mind.

In other words, a business plan used to manage your company is different from the one you would develop to convince a lender to make a loan.

In practice, a lender will flip through your business plan looking for key financial ratios before drudging through colorful charts, pages of financial details and extensive market research.

First, they want to see that you will have adequate cash flow to make the loan payments. And if your cash flow ratios are weak, they will scrutinize the quality of your collateral as the secondary way to repay the debt.

Even though your supporting documents are essential, it is important to highlight the salient financial ratios and collateral up front in your cover letter and executive summary. Also touch on your experience, skills and the ability of your management team to execute your plan.

Keep in mind what you are trying to achieve and use your sales skills ― just as you do when selling your products or services.

Establish credibility. Explain how you will repay the loan. And close the deal by asking the loan officer if she will recommend your application to her loan committee.

NewGround Publications sells a business plan manual called, "A Step-By-Step, Start-to-Finish, Anyone-Can-Do-it Business Plan Guidebook." Its author is an ex-banker. Check it out online at or call 1-800-207-3550 for more information.

SBA offers a free, comprehensive business plan at its website, Another worthwhile resource is It has sample business plans by industry, including financial statements. Keep in mind, however, that your business's numbers may vary from industry averages. Accordingly, sample financial statements are not a substitute for impeccable market research.

In the end, falsely promoted business plans and "plug-in-the-number-templates," will not help you get financing. There are no shortcuts to circumvent the lengthily process of doing it the right way.

Jerry Chautin
is a volunteer SCORE business counselor, business columnist and SBA's 2006 national "Journalist of the Year" award winner. He is a former entrepreneur, commercial mortgage banker, commercial real estate dealmaker and business lender. You can follow him at