Session notes: how to write a business plan a lender will read

These are the notes from the session on Thursday, June 18 at 6:00 p.m., part of the programme.

The June masterclass opened season one. It was taught by two founders who have each raised money on a plan and a commercial lender from a credit union’s business banking team who has read, by her count, “several hundred, most of them bad.” Eighteen came. Three members took a plan from this session to a lender within two months; two were approved. These are the notes.

What a plan is for

The lender started with the sentence that reframed the evening: “I do not read business plans to find out if the idea is good. I read them to find out if the person understands their own business.” A plan is not a pitch. It is evidence that you know your numbers, your customer, and what you do not know yet.

Most plans, she said, are written to be finished. The useful kind are written to be used: opened monthly, compared against what happened, and corrected.

The one-page version first

Before the spreadsheet, one page, five headings. If you cannot fill this in, the forty-page version will not help.

The problem, in the customer’s words, not yours.
The product, in one sentence, and what it costs to make (landed, not invoice).
The customer: who, where they buy today, what they pay.
The unit economics: price, landed cost, gross margin, at retail and at wholesale.
The ask: what you need, what you will do with it, and what happens if you do not get it.

Build the model from the unit up

The founders’ segment was about the financial model, and their rule was: never start from the market. “One percent of a billion-dollar market” is the sentence that makes a lender close the document. Start from one unit: what it costs to make and land, what you sell it for, through which channel, at what margin. Then how many you can make. Then how many you can sell, and to whom, and what it costs to reach them. Revenue is the last line you fill in, not the first.

Three tabs: unit economics, monthly cash flow for eighteen months, and an assumptions register. The register is the one nobody has and everybody needs.

Cash flow is not profit

The example that got the room quiet: a product business with a healthy margin that runs out of cash in month seven, because it pays the supplier in month one, pays freight and duty in month two, sells through in months three to six, and gets paid by its wholesale accounts on net-sixty in month eight. Profitable on paper every month. Broke in July. The plan has to show the cash line, not just the profit line, and the lender said she reads the cash line first.

What the lender is checking

Line	What she checks	What makes her say no
Gross margin	Is it real, at wholesale, with landed cost	Margin calculated from the invoice price
Cash flow	The low point, and whether you know when it is	A plan with no month below zero
Assumptions	Whether they are named and which one you will test first	Growth rates with no source
The founder	Whether you can explain any number without looking	Reading the plan to her
The ask	Specific, and tied to a use	“Working capital”

What she is usually underwriting is a Canada Small Business Financing Program loan, which is why the ask must be tied to equipment, leaseholds or inventory: that programme does not fund working capital, and neither does she. The other doors she named: Futurpreneur, if you are under forty, and BDC.

The assumptions register

Every guess in the model, written down: the conversion rate at a market, the reorder rate, the duty rate, the price the retailer will accept. Next to each: how confident you are and how you will find out. The founders said this one page is what turns a plan into a tool, because next month you replace a guess with a fact and the plan gets better instead of staler.

I do not read business plans to find out if the idea is good. I read them to find out if the person understands their own business.

The assumptions register has been on the whiteboard in the team room since this session; members add a line when they learn something. The one-page template and the three-tab model are at the front desk. Bring your numbers, however rough, to the next one.