How to make/present a 5-year business plan to a private lender

5 Replies

I need to know where to start to create a 5-year business plan. I recently contacted one of my old General Mangers at one of my jobs who i really got along with. In Short I asked him if he ever did any type of private lending before. He said he has but it hasn’t worked out well for him. But he Said for me if i can give him my 5-year business plan he will definitely take it into consideration and help me fund my first investment property. Which i told him will most likely be a Duplex which maybe I’m thinking can house hack it and live in it for a while then rent the whole thing out to two different tenants and create cash flow. I just need to know where do I start when creating my business plan and how can I present it too him well enough for him to trust me with what I’m doing?

Originally posted by @Zechariah Crosby :

I need to know where to start to create a 5-year business plan. I recently contacted one of my old General Mangers at one of my jobs who i really got along with. In Short I asked him if he ever did any type of private lending before. He said he has but it hasn’t worked out well for him. But he Said for me if i can give him my 5-year business plan he will definitely take it into consideration and help me fund my first investment property. Which i told him will most likely be a Duplex which maybe I’m thinking can house hack it and live in it for a while then rent the whole thing out to two different tenants and create cash flow. I just need to know where do I start when creating my business plan and how can I present it too him well enough for him to trust me with what I’m doing?

 He wants to see how he will get paid back. He also wants to see all of the numbers, cost of purchase, carrying costs, sales costs, taxes, profit, how it will ramp up, how you will use the profits, where the new properties will be coming from, contingencies, reserves, who is doing what, employees, sources, methods and so on.

You can hire someone to draft a business plan for you.  $800-2000 should be the range.  Make sure you get the Word and Excel files for this.

On the other hand, you might consider asking for an asset-based loan instead of a general business loan.

Or you can get very good with Excel.

@Zechariah Crosby

What are you doing? Single Family Flips or Rentals? Multi Family? If you're doing flips and rentals why are you doing a 5 year plan? That's generally for multi family when a bridge loan or syndication or transition to a long term or mezzanine lender is involved. 

@Zechariah Crosby

Ask another investor for theirs but if you have a business plan on a duplex it would not have to be more than 2-3 pages with comps to get me to lend on it. I would not need a 5 year proforma as I would only need 1-2 years out

and more concerned about strategy. If you give me a 25 page summary, one I am going to think you are probably copying and pasting off an appraisal of something and I won't see what I need to see. I don't make a ton lending on deals that small so all I want to know is will you pay and can you execute. I want to get a good idea of the deal in 10 minutes of less and if I like fundamentals I will read more so if you do have a detailed report make sure there is a quick summary page.

@Zechariah Crosby,

If you fail to plan, you are planning to fail. That is why people ask for a business plan. They want to see how well you though threw the proposition. You need to make a number of assumptions (income, expenses, events like vacancies, etc). The better you understand the business the safer the investment becomes. While stuff can happen, knowing what you are expecting and what you are going to do so the known risks are mitigated is important.