Your executive summary is your first impression. It is probably one of the top 3 most important sections of your loan application. You need to understand that most banks, loan funds, and other small business lenders receive more applications than they can possibly keep up with. Therefore, most lenders are not going to read an entire business plan. They will probably read your executive summary and then move on. Below I am going to outline my proposed template for a microloan.
Executive Summary Template for a Microloan
Grab – Remember, your audience has read hundreds of these before, so your job is to grab their attention. Big words like “revolutionizing” and “ground-breaking” are not going to make anyone excited. Just start with the facts. A great way to grab the attention of a banker is to prove credibility and stability. I believe the best way to prove credibility and stability is to name drop a few of your customers that the lender would know and respect.
For example, let’s say that you sell a mold and mildew cleaning product. Your grab might sound like this, “We launched our company 2 years ago with a mold and mildew cleaning product, our line of products is now in over 400 retail stores including Home Depot and Lowes.” It doesn’t matter if you are only in 1 Home Depot and 1 Lowes store, the name alone gives you credibility, and will help demonstrate to a potential lender that you are serious about your business.
Problem – Next, you need to establish the problem that you are aiming to solve. Again, in order to build a sustainable business model you need to solve a problem, pain or annoyance. Make the reader feel the pain. Let me give you an example of a problem that one of our clients addresses. 15 to 20% of dogs are allergic to the traditional raw hide dog chew. This is a simple yet interesting problem. Everyone understands the problem, and it is immediately clear that is is a large problem in terms of numbers due to the fact that there are over 78 million owned dogs in the United States alone.
Solution – Next, your solution should be simple and straight forward. This company solved the problem of dog allergies by introducing an elk antler dog chew as an alternative to the traditional raw-hide dog chews that many pets are allergic to. The solution is unique and simple to understand. Your goal is to demonstrate that your solution is not only unique, but that you have a sustainable advantage compared to your competitors.
Customers – When it comes to debt financing it is all about proving credibility. Anyone can come up with a problem and a unique solution, but do you have customers? In this section I would list some of your larger customers if possible, or simply discuss how many customers you currently have and how many you are adding each week, month or quarter. Maybe your current customers are increasing their orders, this would be another great item to point out.
Business Model – You have customers, so you are generating sales, but are you making any money? You need to explain your business model in simple terms, and demonstrate that your model is both profitable and sustainable. This section is simply answering the question, “How do you make money?”
Use of Funds – Lenders want to know exactly how you will use the funds, and understand how the loan will help you grow your business. A great example of a use of funds section might look like this:
“We are currently purchasing our raw materials in $1,000 increments. We intend to use the loan to purchase raw materials in $20,000 increments which will lower the cost of materials since our supplier gives volume discounts, and it will lower our transportation cost per unit. Ultimately we will be able to bring our cost per unit down be 35% which will flow through straight to our bottom line.”
This is a simple but helpful use case that should be a no-brainer for most lenders.
Financial Projections – Your executive summary should include a quick snapshot of your financial projections. You will need a full 12 month cash flow projection to be included in your loan application, but your executive summary should pull out a couple highlights. Your executive summary might show cash on hand, sales, and profit for today, 6 months after you receive the loan, and 12 months after receiving the loan. Lastly, you should make a note for the reader to see your full financial projections in the application package. (Learn More From: Financial Projections for a Startup)
Request – Finally, you should include your request. Don’t make the lender search for what you are asking for. In fact, you might include a box on the top corner of your summary that includes details like:
- Company Name
- Your Name
- Amount Requested
- Date Founded
- Phone Number
- Email Address
Whether you include the request above, or not, you should definitely end by outlining your request. Include the amount and the payback period (ie. 36 months). I would suggest that you don’t include an interest rate in the request, because the lender will typically set that based on your credit profile. Of course, you can always try to negotiate the interest rate later, once you have been approved.
This is a basic outline for your executive summary.