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Business Plans and Responsibility for their Contents

Business Plans

To obtain finance you need to satisfy the lender that you have a realistic prospect of servicing interest and other payments; that the loan security provided to the lender corresponds to the cost of the finance; and that you will be able to repay the borrowing when it falls due, either from your own resources or from new funding.

Business Plans and Responsibility for their Contents

To support any request for finance you will need to provide historical information and projections of future performance of your company. The business plans should cover financial information and your business strategy and must demonstrate your ability to repay the borrowings.

Business plans usually contain the following: a history of the company and its business (including financial information drawn from audited accounts); a current balance sheet; a detailed summary of the company's products or services; its markets and customers, competitors, trading prospects, executive profiles and budgets; cash flow and balance sheet projections for the following (usually up to five) years. A SWOT analysis can be also useful when presenting a business plan i.e. Strengths, Weaknesses, Opportunities and Risks.

You must consider if the company and/or its directors are willing to assume legal responsibility for statements in the business plan to be presented to lenders or investors. The investor or lender may want some level of warranty from the directors about the business plan. To minimise exposure, your directors should confirm that the plan is their best effort only and should also spell out clearly the assumptions upon which the financial projections are based.

If you are using accountants to prepare and support the business plan, their terms of appointment should confirm in particular whether they will be legally responsible for its contents and whether they will compensate you if you suffer loss through their errors. Expect them to wish to avoid legal responsibility.

When preparing and distributing business plans you also need to take care not to contravene the regulatory regime governing restrictions on marketing investments. You should also ensure that the business plan is kept confidential so that intended recipients do not disclose it to others and do not use it for any extraneous purpose.

Your bank will normally be able to provide you with a framework for a business plan if required.

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