How to Write a Business Plan for a Bank Loan

A business plan written for a bank loan has one job: prove the business will generate enough cash to make the repayments, and show what happens if it doesn't. Lenders read the numbers first and the prose second, so the whole document should be built around a monthly cash flow forecast, a specific use of funds and an honest account of the risks. Here's the structure, the documents that go with it, and the things that get applications declined.

What the lender is actually assessing

A credit assessor isn't grading your vision. They're working through four questions in roughly this order, and every section of your plan exists to answer one of them.

Everything else — the market analysis, the competitor grid, the mission statement — is context. Useful context, but nobody declines a loan because your SWOT was thin.

Start with the funding request, not the story

Page one states exactly what you want and what it buys. Assessors read dozens of these a week; make the deal obvious before they hit paragraph two.

Alongside the table, state the loan type you want (term loan, equipment finance, overdraft, or a mix), the term, and the security you're offering. Say whether your figures are GST-exclusive — they should be, with GST as a separate cash flow line.

Here the owner funds 14% of the project from their own cash. Lenders want the borrower carrying some of the risk, and for a commercial property purchase they'll want far more: the major banks generally cap lending at 65% to 70% of the assessed value of commercial property, against up to 80% for residential security (as at September 2026).

The narrative sections lenders actually use

Four sections, a page or two each. Write them for a busy stranger who doesn't know your industry.

The business and its track record. What you sell, to whom, since when, and what the numbers have done. Structure, ABN, ownership, directors, premises. If turnover dipped in a particular year, say so here and explain it — the assessor will find it in your tax returns anyway, and finding it themselves is worse.

Market and customers. Who buys, how often, and how concentrated your revenue is. Customer concentration is a genuine credit risk: if one client is 45% of your turnover, name it, disclose the contract term, and say what happens if they leave. Evidence beats adjectives — signed contracts, a quoted pipeline, repeat purchase rates.

Operations. How the work actually gets delivered: suppliers, lead times, capacity, staff, key equipment, licences and insurance. If the loan buys capacity, connect the dots explicitly — this van and this machine let us take on X more jobs a week, which is where the extra revenue in the forecast comes from.

Management and experience. Short, factual bios focused on relevant industry experience, not job titles. Time in the trade is a real credit factor. If there's a gap in the team — no one doing the books, no second person who can quote — name it and say how you're covering it.

The financial section decides it

This is where applications are won and lost. You need three things: history, a forecast, and the assumptions that connect them.

History. Two full financial years of profit and loss and balance sheets, plus tax returns, plus year-to-date management accounts. If you're not confident reading these, our guide to reading a profit and loss statement covers what each line means.

The forecast. Twelve months minimum, month by month, and 24 months for larger facilities or where you're refinancing tax debt. Show the loan drawdown in the month it lands and every scheduled repayment after it, so the assessor can watch the closing cash balance survive the new debt. A yearly total tells them nothing about the January you always lose money. A cash flow forecast template will give you the right shape.

The assumptions. One page, and it's the page that makes the forecast believable. For every material line, state the number and where it came from: "revenue grows 8% in months 4–12 based on the two signed contracts at Appendix C", "debtor days held at 41, our actual average over FY 2025-26", "wages include super guarantee at 12%". A forecast without assumptions is a wish list. Conservative and evidenced beats optimistic and bare, every time.

Serviceability: the number the credit team runs

Most lenders reduce your application to a debt service coverage ratio — the cash available to service debt divided by total annual repayments. Anything from 1.25 up is generally treated as bank-ready, with 1.25 to 1.50 considered sound (as at September 2026).

Work it out before you apply. Start with net profit before tax and add back the non-cash and one-off items:

Now the repayments. The business already pays $22,000 a year on an existing equipment loan. The new $180,000 over five years at 8.5% works out at $3,693 a month, or $44,316 a year.

• Total annual debt service: $22,000 + $44,316 = $66,316
• DSCR: $78,000 ÷ $66,316 = 1.18

That's under the 1.25 benchmark, and it's the sort of application that gets declined without much explanation. Stretch the same loan to seven years and the repayment drops to $2,851 a month, or $34,212 a year:

• Total annual debt service: $22,000 + $34,212 = $56,212
• DSCR: $78,000 ÷ $56,212 = 1.39

Same business, same loan, approved. Running this calculation yourself before you apply tells you what term to ask for — and whether you should be borrowing this much at all. Add-backs have to be genuine and documented; inventing them is how a marginal application becomes a rejected one.

The documents that go with the plan

Keep these records in order year-round and the pack takes an afternoon instead of a fortnight. You're required to hold most of it for five years regardless.

Security, guarantees and what you're risking

If you own property, expect the bank to want a mortgage over it. If you don't, secured equipment finance, invoice finance and unsecured lenders are still open to you at higher rates — we've compared the options when you don't own property separately.

Either way, if you borrow through a company, plan on signing a personal guarantee. It makes your own assets available to the lender if the business can't pay, and it survives the company being wound up. The 2025 Banking Code of Practice, which took effect on 28 February 2025, requires banks to meet a prospective guarantor without the borrower present and to wait until the third day after handing over the documents before accepting the guarantee — but both safeguards are relaxed for directors guaranteeing their own company's borrowing. A sole director guarantor is excluded from the waiting period outright, a director guarantor can elect to sign sooner, and the guarantor meeting isn't required for either. Read it, price it, and get legal advice before you sign.

Two things worth knowing if it goes wrong. The Banking Code now covers small business borrowers with total debt up to $5 million, up from $3 million under the old code. And AFCA can consider small business complaints about credit facilities up to $6,317,000, free of charge.

Red flags that get applications declined

• Undisclosed ATO debt. Disclose it with the payment arrangement attached. Hiding it doesn't work — it may already be on your commercial credit file.
• Bank statements that contradict the plan. Dishonoured direct debits, an account that lives at its limit, or turnover that doesn't match your BAS will kill an otherwise good application.
• Hockey-stick revenue. A forecast that triples turnover with no contracts, no marketing spend and no extra staff reads as fantasy and taints everything else in the document.
• Vague use of funds. "Working capital and growth" tells a lender nothing. Itemise it.
• Numbers that don't reconcile. The turnover in your plan, your tax return and your BAS should agree. Where they legitimately differ, explain why in a footnote.
• Shotgunning lenders. Five applications in a fortnight leaves five enquiries on your credit file. Pick one or two, or use a broker who'll place it once.

Being honest about risk works in your favour

Every credit assessor knows your business has risks, and a plan with no risk section reads as either naive or evasive. Name the four or five that genuinely matter — customer concentration, a key person, a lease expiry, an input cost you can't control — and against each one write the mitigation you already have in place, not a hypothetical. "Our largest customer is 45% of revenue; their contract runs to March 2028 and two accounts added this year take them to 38% by June" is a business owner in control. Silence isn't.

The same goes for a past problem. A bad year, a dispute, a former director's default: disclose it, explain it, show what changed. Lenders decline surprises far more readily than they decline bad news.

If you're starting from scratch, our guide to writing a business plan covers the fundamentals, and the free business plan builder gives you a skeleton you can expand into a lender-ready version.

Key takeaways

• Build the plan around the numbers. Serviceability, security, experience and honesty are what a credit team assesses — in that order.
• Put the funding request, use of funds and security offered on page one. Nobody should have to hunt for what you're asking for.
• A monthly 12–24 month cash flow forecast with a page of stated assumptions is the single most important document you'll submit.
• Calculate your own debt service coverage ratio first. Under about 1.25 you're likely to be declined, and a longer term is often the fix.
• Expect to sign a personal guarantee if you borrow through a company — the Banking Code's guarantor protections are wound back for directors of the borrowing company.
• Disclose tax debt, arrears and customer concentration up front. Lenders decline surprises far faster than they decline problems.

Where to get help

• business.gov.au — free business plan template and financial templates, plus the grants and programs finder for funding you don't have to repay.
• Australian Small Business and Family Enterprise Ombudsman — publishes a free Business Funding Guide and the companion FitsME guide, produced with Scottish Pacific, to help small businesses get finance-ready before a lending application.
• Your accountant — worth paying for a review of your forecast and add-backs before you submit. They can also produce the year-to-date management accounts lenders ask for.
• A commercial finance broker — knows which lenders have appetite for your industry and can place one application rather than five. Check they hold an Australian credit licence or are an authorised credit representative.
• Small Business Debt Helpline (1800 413 828) — free, independent financial counselling if existing debt is the reason you're borrowing.
• AFCA — free dispute resolution if a lender treats you unfairly on a credit facility up to $6,317,000.