In this post, we explain how to write a business plan for a loan. With a loan, you can grow your interior design firm without the pressure of funding the entire venture by yourself. Nearly every entrepreneur with an existing business must submit this document as part of their loan proposal. A business plan explains to loan officers how your business functions and how it will evolve if provided the funds in question. Business plans also describe where within the competitive landscape your business sits, how it differs from others in the industry, and who it serves. A business plan includes details about your firm’s target market, financials, organizational structure, services, and so much more. It is designed to show lenders that your plans for the future of your firm are well-researched. A business plan should also persuade lenders that your firm is a solid investment with a true competitive advantage in its industry. Follow below to learn how to write a great interior design business plan.

FAQs About Writing an Interior Design Business Plan for a Loan

Before we get started, let’s answer a few frequently asked questions about writing a business plan for a loan.

Do You Always Need a Business Plan to Get a Loan?

Not every lender requires a business plan as part of your loan application, but a bank or credit union probably will. Of course, loan approval is not the only reason interior designers should draft a business plan. Business plans also provide designers with the clarity they need to scale their firms.

According to Francis J. Greene and Christian Hopp in an article for Harvard Business Review, business plans can actually impact a firm’s success. Hopp and Greene write that “entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical nonplanning entrepreneurs.”

What Do Lenders Consider Before Issuing a Small Business Loan?

The details lenders consider before issuing a business loan will depend on the age of your business. They will also depend on your business credit history and your specific industry. According to this resource from Capital One, “they’ll consider household income, business revenue, cash flow, outstanding debt [and] unused credit lines.”

Lenders often look at “the amount of money the owner has personally invested into the business.” Assets purchased for the business and other cash invested can indicate an owner’s commitment to their business and a reluctance to walk away.

In addition, lenders will keep an eye out for any lawsuits or liens that could affect your ability to pay back the loan. A lender might also consider your personal credit history if your business credit history is not well-established.

Where Do You Get a Business Loan?

Nearly every traditional financial institution offers some sort of business lending opportunity. Many banks and credit unions issue business loans, but owners often turn to the Small Business Administration for funding. Some consider personal loans from private investors, though the terms are rarely as favorable for the borrower.

Which Loans Are Available to Small Business Owners?

Financing options include term loans, equipment loans, merchant cash advances, RLOCs, micro-loans and personal loans. Short-term alternative loans, CRE mortgages, SBA-insured loans and medium-term alternative loans might also be available to certain firms.

Some firms could qualify for interior design research grants through ASID and other professional organizations. We will delve deeper into the different types of business loans in our upcoming post about which are best for interior design businesses.

Of course, the loan that’s right for your own business might not be right for another interior designer. It depends on your unique business goals, your local market, your financials, and more.

What’s the Difference Between a Traditional Business Plan and a Lean Startup Plan?

Some business owners will submit a traditional business plan, while others will submit a shorter document that loosely outlines their business idea. This shorter business plan is typically called a “lean business plan” or a “startup business plan.”

If your business is young and its trajectory uncertain, but you still need seed money, a lean business plan might make more sense. The latter also makes sense when applying for less traditional sources of funding.

Plans for Existing and Acquired Businesses

The former makes more sense when pursuing a revolving line of credit, bank loan or loan backed by the Small Business Administration. A traditional business plan will provide a more in-depth look at the way your business currently operates and your vision for its future.

For an existing business, provide your marketing plan, outline an operations plan, describe your organizational structure, disclose financial information and a whole lot more. If you hope to acquire another business with funds provided by a loan, you will follow a similar business plan template.

Steps to Take Before You Apply

Before applying for small business loans, interior designers should establish business credit history, choose an appropriate legal structure and begin to foster banking relationships.

Choose a Legal Structure That Separates You from the Business

We typically recommend that interior designers start by picking an appropriate legal structure. For example, an S-Corporation or Limited Liability Company appears more professional to prospective lenders and equity partners than a sole proprietorship.

Establish Business Credit History

Next, we suggest establishing and building business credit. In a recent post, we note that owners need a few years of business credit history before a traditional lender will consider their applications. Lenders check multiple business credit scores — from their FICO SBSS score to their Intelliscore℠ — before approving loans and lines of credit.

Given this, it’s important to stay on top of your business credit scores. Do so by monitoring your credit report and building relationships with vendors, banks and other partners as you grow your business.

Figure Out How Much Money You Need and How You Will Use It

Small business owners should also figure out how much money they need. They should determine which loan terms are acceptable and what they will do with the funds upon receipt.

Will you use the money to expand your team? Open a new studio? Cover operating costs while you expand into a new market?

Determine Which Type of Funding Makes the Most Sense

Business owners should weigh the pros and cons of different forms of financing too. Would a revolving line of credit make more sense for your firm than an SBA loan? Should you sell equity in your firm instead of taking on debt?

An interior design business coach can guide you through all the steps detailed above. Small business coaches help determine which forms of funding will take your firm to the next level without reducing your control over the business. They can also help new business owners choose the right legal structure to protect yourself and your business.

How to Write a Business Plan to Get Approved for a Loan

What does a successful business plan include? A good business plan starts with a branded cover page and ends with an appendix of supporting documents. Learn how to write an interior design business plan for a loan with the following outline.

Cover Page and Table of Contents

Every business plan will start with a cover page and table of contents. If possible, the cover page of your business plan should bear your firm’s branding.

Your cover page serves as an introduction to your business plan. As such, it should express the personality of your brand while also providing a bit of insight. Incorporating your brand’s color scheme, fonts and other visual elements is important.

However, take care to avoid anything that makes your cover page difficult to decipher. Choose high-contrast colors and a crisp typeface that ensure your logo and text are easy to read.

In a post for Bench, Paula Kehoe recommends adding your business name, contact information, company logo and tagline to your cover page. Pick an appropriate title for your document too. A succinct yet specific title like “Interior Design Business Plan” or “Expansion Business Plan” provides the loan officer reading your business plan with context.

Given that your business plan will include private information about your firm’s inner workings and finances, adding a confidentiality statement makes sense. Place this section at the bottom of your cover page.

Draft your table of contents, which you can complete after the plan is complete.

Executive Summary

While the cover page introduces your business plan, the executive summary explains what to expect within the plan. It also describes your business strategy. Within one or two pages, briefly outline your plans for the business and how a loan will help you achieve those goals.

Include your mission statement and vision statement. Describe your current business model — touching on your firm’s differentiators and what you offer your target market.

If you have attended one of our Vision Building workshops, you’ll already have a lot of this information hashed out. You might also mention your marketing strategy and org structure, but this will be explained in further detail later on in your plan.

Company Description

After your executive summary, the Small Business Administration recommends adding a section about your company’s value proposition. According to this post from the SBA, “your company description is the place to boast about your strengths.”

This section is where your firm should shine. Detail what your firm contributes to the industry, how it serves your target market and what makes it special.

Market Analysis and Industry Analysis

As alluded to above, including both an industry analysis section and a market analysis shows loan officers that you have done your research. Your loan application is a carefully considered request — not a whim.

In some cases, an industry analysis is considered one segment of a broader market analysis. Some use the terms interchangeably, though this is usually incorrect.

Industry Analysis

An industry outlook tells loan officers where your firm might fit within the interior design industry. According to this resource from UpCounsel, an industry analysis should help you “mitigate risks and take full advantage of growth opportunities.” This makes you and your business a better bet for the lender.

In this section, you should identify key competitors in your niche. List a few who have achieved success pursuing a similar trajectory to your firm’s vision. How did those firms achieve success? Can you replicate their process or prove that your process is just as effective? Is there space for your firm, and how hard will it be to make an impact? What share of the market will you be able to capture?

This section also explains where the industry is headed — pointing to recent trends in hiring, sales, and spend. Your firm does not exist within a vacuum. The interior design industry — and tangential industries like construction and architecture — play a part in your firm’s success or failure. A loan officer might not be familiar with the industry. Providing this context is a valuable element of your business plan.

Market Analysis

A market analysis briefly touches on your competitors, but focuses more so on your target market. When describing your competitors, this section might point out their weaknesses — thus identifying an underserved niche.

Writing for Business News Daily, Max Freedman notes a market analysis typically includes information about “volume and value, potential customer segments [and] buying patterns.” According to Freedman, the goals of a market analysis are to reduce risk, provide “targeted services,” and offer educated revenue projections.

Tax Structure

Next, identify your tax structure. You can provide documentation to this effect — i.e. your business license and Articles of Incorporation — in the appendix of your business plan.

If your business is currently structured as a sole proprietorship, it might be time to switch. As we note in a recent post, banks and credit unions prefer a degree of separation between the firm and its owner.

Switching from a sole proprietorship or partnership to an LLC or corporation can help secure financing. This is because the owner’s assets and liabilities are distinct from those of their business. If you need help choosing a business structure, consult this resource.

Org Structure and Management Plan

In this section, you will provide an organizational chart that identifies management and/or owners, details reporting roles and describes your firm’s general structure. If you have a Board of Directors or outside investors, include information about those actors here as well.

Young firms — i.e. interior design startups or businesses planning an entirely new department — should consider adding a management plan too. Explain how current team members will execute the expansion and note which people you will need to hire with funds from the loan.

Business Operations Plan

This resource from Experian recommends adding an “Operations Plan” as well. An operations plan will explain how your business “operates” day-to-day.

This section should describe current operations and detail how your business will run in the future if you achieve your goals. Note any relevant expenses — like buying a studio or purchasing equipment — in this section too.

A Description of Your Interior Design Services or Product Lines

Next, describe your service and product offerings. Do you offer renovation in addition to decorating or interior design? Does your firm take on both residential and commercial projects? List every interior design service and product line your company provides.

If you have multiple studio locations, mention that too. Similarly, describe locations, services and markets you hope to add upon receiving the loan.

How You Plan to Market Your Services or Products

Once you have identified your target market, you must present your marketing strategy and/or sales strategies. This section should refer back to your marketing analysis section.

How will you connect to your ideal client avatar? Which platforms will you use? Also explain your pricing strategy and how it compares to others in your niche.

Financial History and Financial Projections

Perhaps the most detailed section of your business plan is the financial history and planning segment. Most loan proposals require business owners to include a detailed description of their firm’s current, past and future financials.

You will need accounting and financial statements including cash flow statements, balance sheets, budgets and more. Information about tangible assets tied to the business — like valuable equipment, commercial real estate, vehicles, etc. — should be included too. If your firm is established, the lender might request statements reaching back several years.

You must also forecast how the business will perform over the next few years. Create documents forecasting balance sheets, cash flow, income statements and more over the next several years of operation if granted the loan.

Include These Financial Ratios

If relevant to your design firm, your lender will probably consider some or all of the financial ratios listed below:

• Leverage Ratios or Market Ratios (i.e. DTE, DTA and Dividend Payout)
• Liquidity Ratios (i.e. Current, Quick and Days Working Capital)
• Profitability Ratios (i.e. ROA, ROE and Profit Margin)
• Activity or Asset Management Ratios (i.e. Inventory, Accounts Receivable and Accounts Payable Turnover)

Funding Request

Next, explain why you want the money, which type of financing you want, how much you want and what you will use it for. Outline your financial plan for the business. How will you use the money if approved for a loan? Will you hire additional team members? Open a second studio location? Buy a commercial building instead of renting? Move your business out of your house? Diversify your service or product offerings?

Be explicit about where the funds will go and how spending in that manner will further the business.

Appendix With Other Relevant Info

Lastly, add an appendix with other relevant information. In an article for Fit Small Business, Tom Thunstrom elaborates. Thunstrom recommends including your resume, projects from your portfolio and “any legal documents pertaining to your business.”

Provide information about your business credit scores and relationships with partners, vendors and others in the industry. Listing a few references can also set your application apart from others.

A Few More Tips as You Write Your Interior Design Business Plan

• Make sure your vision is viable.
• Conduct thorough market research, so you can explain to a loan officer where your industry is headed and where your firm fits in.
• Decide whether to use an interior design business plan template or software. You can also consult other business resources (like this business plan PDF checklist from the SBA).
• Boost your business credit score while working on your business plan to improve terms. A great business credit score can impact the size of loan payments, the loan’s interest rate and payback period.
• Be honest and realistic about absolutely everything you include.
• Ask a colleague, team member or business coach to review your plan before submitting.
• Keep an eye out for our Interior Design Business Plan Template.