How to finance your business without a business plan

Many people assume that in order to start their business and gain the financing they need they will have to have an extensive business plan.While this is true in some circumstances there are options now for small business owners who want to proceed without one.Writing a business plan can be one of the least favorite activities of many small business owners. The traditional rule of credit has been that if you want to grow and operate your business you will need a business plan to find capital. However this is now quickly changing as more and more business owners learn about business plan-free financing. This is due to change that has swept through industries, society and careers. Over the last few years, change and information technology, is altering the face of small business lending. The relationship-based banking in the small loans and credit market is becoming highly irrelevant. This has happened since the decision of loan approval is most often determined by a computerized credit scoring program unless a business requires a loan or credit product over $100,000. There are many benefits to this new trend.Some of them are:

• There is no business plan required. Automated credit scoring removes the need for a business plan and only financials are required. No business plan can mean a large saving of time or money as opposed to hiring a business plan consultant or doing it yourself.
• There is access to quick money. This is especially important since many opportunities are limited. This faster access to capital allows a business owner to capture a window of opportunity before it closes. This follow the trend of a faster paced society and market as well.
• There is reduced subjectivity. Automated credit scoring dramatically reduces the subjectivity of the loan process. For example, a commercial lender with many failed restaurants in his credit portfolio will be more inclined to decline your loan for your restaurant. The credit scoring system would remove any bias that is present in the decision-making process.

It is important to keep in mind that the downfall of these lending approaches for small business is that your relationship with your banker may still be beneficial but less on the credit approval side. Also, the lack of planning will place more risk on your business decision process. In light of these "new rules" governing the credit process for small business at many banks, the savvy business owner should adopt these strategies:

• Carefully determine your needs. Assess your credit needs and if the amount needed is closer to $100,000, then you should apply for $110,000 or more. Keep in mind though that usually at this amount the bank wants a business plan, it may not be using a credit scoring model.


• Assess your credit history. Before making any loan or credit application, obtain your credit report and check for errors and omissions.


• Always insure data integrity. If you are applying for less than $100,000 and the bank is using credit scoring automation be sure to go over all questions for the loan or credit application. You must insure the data you provide is accurate and ask any questions needed in order to understand the information in the application.


• Review your industry codes. It is extremely important to make sure you provide an accurate description of your business. The bank may code your company by SIC codes and an inaccurate coding can alter the outcome of the approval.


• Go to a big bank. You should carefully consider the type of bank you select when applying for the loan. A larger bank or institution will use the automated credit scoring system more than smaller institutions and thus not require a business plan.