Why is a business plan important?

A business plan is important because it forces clarity on what the business does, who it serves and how it will make money (a vital factor when approaching lenders and investors for funding)

If you’re applying for a business loan, seeking external investment or bringing on a new partner, these stakeholders will want to see clear evidence of a transparent and well-thought-out business plan – it’s the blueprint for your overall business strategy.

Let’s dig a little deeper into what a business plan brings to the table. 

Note, this guide is for informational purposes only and should not be treated as financial advice. Funding Circle does not provide financial advice and will not be liable for any potential losses on this. 

What a business plan helps you do

Your business plan describes how your business works, your goals and objectives and how you’ll fund your operations and turn a profit.

This plan acts as the ‘architect’s drawings’, outlining the structure of the business and defining how the company will function.

The business plan will typically:

• Clarify the company’s business model, so you have a clear methodology behind your operations, sales process and revenue generation.

• Outline your target customer audience, with a description of your ideal customer profile, how you meet their needs and how you’ll convert this approach into sales.

• Describe your route to revenue, cash flow and profitability, by outlining your budget, working capital and the financial processes that will lead to income and profits. 

Key reasons to produce a business plan

You might think creating a business plan is a theoretical exercise – a document to produce and discard in a desk drawer. But your business plan is a living, breathing set of goals, not a static document. And making one helps you refine your entire business outlook.

Making a business plan helps you:

1. Identify strategic, operational and financial gaps and risks before they become real problems, helping to improve your strategy and reduce risk.

2. Work out your available budget and forecast cash-flow timings, giving you concrete financial projections to share with banks, lenders and potential investors.

3. Understand the market and your position as a new entrant, so you can make realistic forecasts of customer sales, market share and your sales pipeline.

4. Gauge how the business measures against your close competitors, so you can position your brand effectively against other entities. 

5. Set measurable goals and track progress, giving you a real-time way to review progress and performance against your key objectives. 

Your business plan is a shorthand way to describe the whole business. By sharing this short document with a lender, investor or new team member, they know why you’re in business, how you intend to trade and which customer segment you’re aiming to engage with.

When a business plan matters most

You might think that a business plan is only relevant at the start of the business journey – when you’re laying the foundations and setting out your stall for customers. 

But in reality, a business plan is a vital asset at multiple points across your journey.

Let’s explore the various points where a business plan helps to lead the way.

1. Starting a new business venture

At the formative stages of starting a new business, a business plan becomes vital. It’s the gameplan for the whole venture, taking your nascent business from being a theoretical idea to a fully formulated business concept, with viable goals, objectives and budgets.

2. Applying for external funding or investment

Debt finance is a method that allows your business to expand, invest and grow over time. When you’re looking for external funding, whether that’s through a business lender or private investment, stakeholders will typically want to see a business plan. 

A detailed plan gives lenders and investors confidence that the business is viable and well-managed; key considerations when assessing whether to lend to or invest in the company.

3. Planning your growth strategy

If the time is ripe to grow the business, a workable plan for this growth stage is essential.

When you’re looking to expand your branches, develop your product range or explore a new market, your business plan sets out the key objectives, the operational methodologies and the financial plan for funding this proposed expansion.

4. Bringing a new partner or senior hire into the business

Your business plan tells the story of the business, explaining the how, why and what of your company. This is an important narrative to share, especially when you’re taking on a new business partner, adding a senior hire to your C-suite or coming up with a company outline to onboard new team members. 

What a good business plan typically includes

Not all business plans are created equal. There’s a major difference between a plan sketched out on the back of a restaurant napkin and a fully-costed and researched business plan. 

To get the most from your business concept, you need to put the work in when writing your business plan. 

Here are some of the key elements to include:

• An overview of the business and what it offers.

• The target market and competitors.

• How the business will operate and run.

• Financial projections, including when funding needs are expected to arise.

How Funding Circle can help

A clear, well-described business plan is a fundamental tool for supporting your funding application. This is especially true if your plan includes detailed financial projections. 

Being able to share the overall plan and financials gives lenders the information needed to gauge the company’s business viability, financial health and wider risk rating. It shows why you’re applying for funding and that you have the financial clout to repay the loan.

Funding Circle has several ways to support your funding journey, especially if you can share your business plan and financial forecasts at the application stage.

Once your business is established and ready to apply, we can help with:

• A Funding Circle business loan, to provide a term loan that increases your working capital and fuels your growth strategy.

• A Funding Circle Flexipay line of credit, to open up this flexible credit line and fund your regular operational expenses and ad-hoc business costs.

• Asset finance via the Funding Circle Marketplace, to help you purchase or lease those essential new pieces of equipment and hardware. 

Who’s eligible for Funding Circle finance?

We’re here to help you fund the next stage in your business growth. To apply for finance with Funding Circle, you must:

• Be a UK-based limited company or LLP

• Have been trading for at least 12 months

• Meet our turnover requirements for the specific finance product.

• *Note, eligibility requirements vary by product. Please see our website for further information. 

If you’re a pre-trading business, you won’t meet the 1-year trading history requirement. But there are Government-backed start-up loans available through the Start Up Loan scheme for new startups and companies that have been trading for up to 60 months. Subject to eligibility. 

Want to know how much you could borrow? 

Take a look at our business loan calculator to see how much funding you could access.

As with any major financial decision, it’s sensible to talk to your financial, legal and business advisers before applying for any kind of debt finance. 

Funding to bring your business plan to life

Got the business idea, the trading history and a detailed business plan ready to go? We’re here to help you turn your growth plans from theory into reality.

Apply for a Funding Circle business loan of between £10,000 and £750,000 and see the difference this capital injection has on the next chapter in your success story.

Apply today with Funding Circle

FAQs

Why is a business plan important?

A business plan provides a strategic, operational and financial blueprint for your business. It’s a vital tool when planning out your goals, objectives and the key ways you’ll fund the operational side of the business, and generate revenue and profit. 

Do I need a business plan to get a business loan?

A business plan shows prospective lenders that you’re a well-managed company, with clear budgets and financial plans. This can help lenders feel confident that you’re a viable, low-risk business venture, capable of meeting loan repayments. 

Does an established business still need a business plan?

Yes. A business plan is not a static document. As an established business, your plans must be revisited, reviewed and updated regularly. This helps you track performance against key goals and pivot your strategy to meet new opportunities and threats in the market. 

How long should a business plan be?

The length of business plans can vary greatly. However, it’s essential to include an overview of the business, your target market and competitors, how the business will operate, and financial budgets and projections, including any need for external funding.

Disclaimer

10/10/26 – While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice.