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The co-operative model business plan

This appendix provides a model business plan outline. Make the plan your own. Your cooperative is unique in many ways so you don’t want the business plan to look just like everyone else’s; you want it to be an expression of your co-operative’s unique structure, products, plans, principles, values, environment and people.

The business plan itself does not need to have all the sections listed in the Table of Contents below, but you should put some effort into every section listed in it to have the co-operative well prepared before it is open for business.

Following the title page, the business plan should, at a minimum, have an executive summary, co-operative overview, market analysis, and plans for marketing, operations, production and finances.

Executive summary 

Write the executive summary after you have finished the rest of the business plan. It’s an overview of the business plan, highlighting the main points and putting them into context. Consider organising the executive summary in the same order as the business plan.

The executive summary is placed at the start of the business plan to entice the reader to read the entire business plan, making it one of the most important sections.

It is not new information; it is a summary of information which is discussed in more depth throughout the business plan.

The executive summary should be able to stand on its own, and succinctly explain in one or two pages the distinctive characteristics of the co-operative and its products and why it will be successful.

It may include:

• the reason(s) the business plan has been written
• an overview of the co-operative and its market opportunities
• a description of the products or services
• a summary of its expected financial performance.

Complete it with conclusions and recommendations and a summary of how you’ve arrived at your conclusions.

Another way of looking at what the executive summary says is: What is the problem? What is the solution? What will be the outcomes?

Introduction 

This section provides background information about the co-operative and could very briefly describe the co-operative type, when it was formed, who formed it and why, its location, mission, vision, values and principles, objectives and strategy to achieve them, industry, products and services, target market, development stage and achievements to date, summary of members and management, and capital raised to date.

The mission statement should say what you do, how you do it, and why you do it.

The vision statement should be somewhat loftier – describing what you want the co-operative to be in the long-term; it should be a “planned wish”.

The objectives state what the co-operative wants to achieve, usually within a certain timeframe, and are guided by the mission and vision. Objectives are business, social and financial objectives. They should be measurable, and there should be both short-term and long-term goals.

Values are statements about why the co-operative is in business, and who it serves. Values consider the social and environmental factors which the co-operative will be mindful of in achieving its objectives.

The introduction may also explain why the business plan is being written, and for whom. If it is written to support an application for finance include the name of the bank or other financier, the amount of funding sought, the term of the loan, the use of the loan, how it will be repaid, and the security the co-operative will provide.

Make it brief; one to two pages should do.

The co-operative 

Co-operative structure

Outline the co-operative’s structure. Remember that many people do not understand the democratic and social principles of co-operatives, so briefly explain how it works, its rules, and how it will support your business and social objectives.

Describe the location, size and capacity of premises and any warehouse facilities. If the premises are leased state the cost of rent and length of the lease; if they have been purchased, state the value of the property. Explain how long the co-operative has been at the premises, if there is a strategic advantage in its location and, if any renovations or extensions are required, what they will cost.

Registrations and licences

List the registrations and licences that the co-operative has. If others are needed, explain what they are and when they will obtained.

Describe the insurance that the co-operative has and will be getting. It could include cover for premises, contents, workers’ compensation, liability, professional indemnity, business interruption, and motor vehicles.

Plant and equipment

Itemise the plant and equipment that the co-operative has and needs. If the business plan supports an application for funds, explain the importance of acquiring the equipment and provide details of quotes for their supply and installation. Consider listing the equipment in two tables: the first table showing the equipment already acquired and its cost and written down value; the second table listing equipment to be acquired, its value and when it is planned to be purchased or leased.

Products and services

In simple terms, describe the features of the products and services the co-operative currently provides, and those to be developed in the future. You may like to include photographs. Explain how they are different to others available in the marketplace, and why customers will buy products or services from your co-operative instead of from a competitor.

Describe the key components or raw materials used in making products, where they come from, and whether there are any restrictions on supply or agreements with suppliers. If there are likely to be price fluctuations, you might explain how they will be dealt with. You may wish to explain if there is a backup supplier available.

If it’s a new product under development, explain the progress made in research, product design and development, what tests are required and have been done, and any regulations applicable or licences or approvals that are needed. List any intellectual property protection sought to avoid duplication by competitors. Provide a timetable.

If there has been product testing in the marketplace, explain the results. Describe plans to upgrade the product or service or increase the range on offer. Describe quality assurance controls to be instigated.

If the co-operative provides a service, explain what it is, why it is needed, and how it is or will be delivered, monitored and improved.

If you have a product inventory, list the items in a table, or include an inventory list in the appendices.

You may wish to include here how you are going to minimise shrinkage of inventory due to theft, damage, loss or accounting errors.

Current performance

If the co-operative has already been trading, include a short summary of the co-operative’s turnover, gross profit and net profit for the current year and last year. More detailed information will be put into the financial section of the business plan. If the co-operative hasn’t begun trading yet, use the projected financial figures.

Members and directors

If the business plan is being written to assist you to ask for finance, use this section to show that the people who own and run the co-operative are competent and qualified. Give an overview of the number of members, active membership provisions, who the directors are, and the offices they hold.

Include a summary of their skills, qualifications, experience and industry knowledge. Consider including résumés in the appendices.

Key personnel

If you plan to engage employees or already have staff, list the positions, names (if already employed) and skills of employees, and whether their employment is full-time, part-time or casual. Résumés for managerial positions could be included in the appendices. If your cooperative is fairly large, draw an organisational chart which shows who reports to whom, and the positions they hold, and include it in the appendices.

Co-operative advisors

Include the business names and addresses of professional advisers who have helped to establish and grow the co-operative. These might be bankers, solicitors, financial advisors or planners, insurance agents, accountants, chambers of commerce, another co-operative or a co-operative peak body. This section shows that your co-operative is supported by a professional  team.

Risk management

List the risks, in order of likelihood that they could occur, that the co-operative faces. State the impact the risk could have, how likely it is to occur, and what action you will take to prevent or minimise the risk to the co-operative. Key risks may include property damage, theft, electrical outages, pollution, legal liability, injury, loss of data, shifts in the economy, loss of customers, loss of suppliers, security, theft of copyright or inability to raise capital.

Operational plan

A new co-operative should explain how the co-operative will be run: the daily routines, people and functions that will make the co-operative run smoothly and successfully. Keep in mind the democratic nature of your co-operative and its social purpose; make it the focus of your actions. Directors and managers should use the operational plan to lead and inspire members and staff.

Break your operational plan down into actionable steps so it will easier to implement. Identify what each task is, who will do it, when it will be done by, and how you’ll know it has been done. Attention to detail will make the co-operative’s operations run more efficiently.

The operational plan might include ways in which you intend to devise and implement operating, accounting and management systems required for the first year of activities. Plan for staff selection and recruitment, duties and salary policies, performance monitoring, training, health and safety policies, technologies, record-keeping, banking, taxation, accounts payable and receivable, meeting legal obligations, finding suitable premises and office equipment, use of professionals, service to customers, orders and delivery management, promoting innovation, further research and development, meeting schedules, developing a co-operative culture, appropriate management style, working with members and directors, conflict resolution, compliance with regulations and inspections, and alliances with other co-operatives.

Existing co-operatives will need to consider many of the same issues, but have the advantage of having procedures already in place. They should develop an operational plan to improve the day-to-day operations of the co-operative, reduce overheads, plan for growth, alleviate risk and increase efficiency.

Production plan 

The production plan will describe how the co-operative will manufacture, procure products or provide services, and provide the final product or service to customers.

It will describe:

• the complexity of the manufacturing
• the equipment and tools required
• the cost of raw materials and labour per unit
• the cost to produce a product or deliver a service
• the number of hours of production daily or weekly
• the number of units to be produced or the number of services to be delivered
• average selling price
• managing inventory levels
• forecast number of days stock is to be held
• cost control
• manufacturing staff requirements
• source and delivery partners and contract terms
• the time taken to produce the required stock levels
• environmental plans
• disposal of waste.

Quality assurance is crucial, whether the co-operative is providing a product or service. The co-operative relies on the loyalty of members and/or customers for repeat orders, so it needs to provide value for money and consistently high quality products or services. A strong quality assurance system will consider employee motivation and skills, standards and testing, feedback from customers, and minimising waste and product returns.

The market 

This is an important section of the business plan, as it demonstrates that you have done your homework and it is likely that your product or service will be accepted by customers. There’s not much point in having a great product if you don’t have a market.

Much research is involved: you’ll need to understand who your customers will be, what will make them spend their money on your products or services, who your competitors are, what environmental factors could affect you, and how you are going to sell and promote your product or service. There are many places to go for information – try the Australian Bureau of Statistics, government departments, councils, Regional Development Australia, trade and professional associations, chambers of commerce and consumer organisations.

Find which ANZSIC code is used for your business. ANZSIC is used by the government to produce and analyse industry statistics. ANZSIC codes for all industries are found at www.abs.gov.au .

An industry sector contains a range of other businesses which supply similar services or products. Provide an overview of the industry sector the co-operative is in, such as the size, growth, key clients and markets, the largest providers, and demand and supply trends that affect the industry now, or may in the future. Describe any other relevant factors that drive the industry, such as innovation, regulations, seasons, financial and technical issues, distribution and supply and whether the industry is new or mature.

Provide a summary of where the co-operative is positioned within that industry, and its vulnerability to competition and trends.

The environment

Describe important trends and issues that could affect your co-operative’s operations and identify how you plan to deal with them.

Issues may include changes of government, international relations and trade, employment, environment and competition regulations, taxation legislation, new policies and laws, consumer protection, and industrial relations.

Issues may include interest rates, government spending, consumer confidence, unemployment, exchange rates, inflation, national and state economic growth, global economic outlook, materials availability, import substitution and skills shortages.

Issues may include demographics, education, standards of living, multiculturalism, housing availability, fashion, health awareness and income distribution.

Environmental

Issues may include environmental awareness, waste, pollution, energy, climate change and water.

Technological

Issues may include efficiencies, obsolescence, NBN, costs, savings, research, innovation and social networks.

Market research

It’s crucial to understand the marketplace and your customers, whether they are likely to buy the co-operative’s products or services, and possible ways to motivate them. There are two types of research you can do that will help with this: primary research, done by observing competitors, meeting with potential customers, or by survey; and secondary research, which is gathered from existing data.

What you will research will depend on what your products and services are, who your customers are, where your market is, and the level of competition in the marketplace.

Your market research might include:

• customer profiles and characteristics – age groups, gender, occupation, income, location, buying habits
• customer preferences, needs and expectations
• target markets
• the customer fit, and demand for products and services
• your fit, barriers to entry and influence on the market
• product specifications, acceptance and new opportunities
• product pricing and sales forecasts
• market size (units and value)
• market growth and trends
• market segmentation and definition
• competitor analysis
• advertising and promotional opportunities
• seasonal variations
• methods of distribution.

Describe the research you have done, and what it has revealed.

Competitors

Do not underestimate your competition. You need to understand and describe who your competitors are and the effects they will have on the co-operative’s business. Provide details of their market share, resources, products and target market, strategies, strengths and weaknesses.

Explain where the co-operative fits within the industry, what level of market share you expect, any barriers to entry and how you will address them.

Also describe how the competitors are likely to react at your co-operative’s entry into the market and the co-operative’s response strategy.

Competitive advantage

Describe what is different about your products or services compared to those of competitors. Explain why customers are likely to buy enough of your products or services to make the co-operative sustainable.

• Do you have a different target market?
• Is there an unmet need in the target market you can fulfil?
• Do you offer something different or new?
• Does your product or service have superior quality or features?
• Will the co-operative advantage work for you?
• If your product or service is unique, describe difficulties competitors will have in copying it, giving a lead time from product launch to when a competitor can duplicate your product.

List the co-operative’s internal strengths and weaknesses.

Then list the external factors that could affect the co-operative’s activities – the opportunities (e.g. market trends) and threats (e.g. competitors, economic uncertainty).

Describe how you can capitalise on the strengths and opportunities, and reduce the effect of weaknesses and threats.

Target markets

Describe the target markets for your product or service. Who are your customers? If you already know who they are, list the major clients if they agree to this information being made available to external parties. If you don’t have major clients, or there are potentially many of them, you should define the markets you will be selling to.

How have you identified your target markets? What are the characteristics of the target markets? Are your customers a certain age or gender, do they live in a particular location, have a certain type of job, ethnicity or income level? Are they members of the co-operative? What are their needs and preferences? How big is your target market? How often will they buy from you? Why and how will they buy your product or service? Are they end-users?

Consider if there are different segments to your target market. For example, would both students and professionals buy your products? Each segment may have different needs, and may be willing to pay different prices. If you understand the needs of each segment, you can adapt your marketing mix to provide what each segment wants.

Product pricing and terms

In determining the prices of your products or services, consider the costs to produce, or to deliver services, your customers’ sensitivity to the price and to price changes, and what the price reveals about the product’s value or quality. Will you offer quantity discounts, or discounts for repeat sales? Will co-operative members receive a discount or rebate?

Describe the expected payment terms for customers, e.g. direct customers pay cash while distributors and members pay within 30 days from invoice date.

Product sales, margins and distribution

If your co-operative is new, estimate the number of products or services to be sold in the first year, and consider using a table to show your estimates. If the co-operative is already established, use both past and projected performance levels. You may wish to break the table down into weeks or months. The table can form the basis of sales volume records and pricing over time, and identify changes to help you to plan future sales targets and purchases of raw materials.

Describe how your products will be distributed – whether through direct sales, online marketing, direct mail, agents, wholesalers, representatives, retailers or consignments. Describe commissions or other fees involved.

Estimate the cost of other expenses such as shipping, warranties, contracts and liabilities.

Strategic alliances

List strategic partnerships the co-operative has, or plans to form, with other co-operatives or businesses.

These may be to work together in major ventures, or on market access, supplies or other resources. Provide information about the arrangements.

List key suppliers, and describe their history and reliability, location, what and how much they can supply, credit policy and delivery details, and the cost and availability of materials.

Marketing plan 

Explain your marketing objectives – what you aim to achieve and what you will do to achieve them. Ensure they can be measured and evaluated. An example might be “to obtain 20% of market share by the end of the first year”, or “to ensure 50% of our target market recognise our brand, and 10% buy our products”. Then determine what marketing activities will help you achieve your aim.

Determine your marketing strategies and activities for each month of the first year to create awareness and sales. This is your marketing mix, and relates to product, place, price, promotion, people and process.

Product strategy : consider the products’ qualities, consistency, features, adaptability, packaging and design, how the customers will perceive the products’ features, and how you will market them.

Place strategy : consider distribution channels, location of retail outlets, the geographic area your products will be available in.

Price strategy : consider the selling price to various customers and markets, including discounts for quantity and early payment.

Promotion strategy : consider what advertising, selling, sales promotion, trade shows, website, media and public relations activities you will undertake to differentiate your product and make consumers aware of your product or service.

People strategy : consider who will sell the product and delivery it. People may include staff, strategic partners and agents.

Process strategy : this is the strategy where you plan, target, cost, develop, implement, document and review the systems to attain the other aspects of the marketing plan. You’ll plan to have the right product, in the right place, at the right price, in the right quantity, at the right time for the right customers.

The finances 

Often the last part in the business plan, the finance section is important as it demonstrates the likely financial viability of the co-operative, and is vital information for anyone considering investing in the co-operative.

It shows what financial resources are needed to set up and operate the co-operative, forecasts of the co-operative’s performance based on expected sales levels, and it details the timing and the amount of investment needed from external sources.

Commencement capital – new co-operatives

List the amount of capital that has been raised and will be raised from members, and funding confirmed from other sources.

List the costs to start the co-operative (below) in a table, and show the month when the costs are expected to be paid.

• Set up the co-operative: these costs might include accounting and legal fees, registration of the co-operative and domain name, website, insurances and licences.
• Set up the premises: these costs might include a bond and advance rent, fit-out, electricity connection, telecommunications connections and stationery.
• Purchase plant and equipment: these costs might include machinery, tools, office furniture, vehicles, telecommunications, computers and software.
• Start of operations: these costs might include advertising, raw materials and supplies, wages, interest – and working capital to tide the co-operative over until it trades sustainably.

Subtract the set-up costs from the confirmed capital raised; the balance is the amount of borrowings you will require.

Financial objectives

List the co-operative’s financial objectives and how long you expect to take to achieve them. These may be profit targets, investment levels, returns to members and debt repayment.

Assumptions

Explain the key assumptions made in developing your financial forecasts:

• sales and purchases forecasts
• the time it will take to collect from debtors
• the time it will take to pay creditors
• interest rates
• time between manufacture and sale
• timing of member contributions
• timing of external capital injections
• increasing membership.

If the co-operative has already been trading, describe its financial history, including equity, debt and profit levels.

Include at least four key financial ratios:

• Debt equity ratio = total liabilities/members’ equity
• Return on investment = % of interest over total loans received, and % dividend over members’ capital injected
• Break-even point = the sales volume level where revenues and expenses are equal and provide no profit or loss. This will change each year with changes in costs, income, and interest levels.
• Working capital = current assets – current liabilities

Monthly cash flow forecasts

The cash flow forecast demonstrates how and when cash comes into and goes out of the co-operative. Hopefully it also shows that income from sales will pay for bank loan repayments and other expenses. It will show you when you need an injection of cash to cover monthly bills, and when you need to conserve cash to pay for upcoming bills.

For the first year of trading, present monthly cash flow forecasts. After the first year, show yearly forecasts for at least two years.

Monthly income and expenditure forecasts

Also called profit and loss forecasts, and forecasts of financial performance, income and expenditure forecasts show the co-operative’s projected income less expenditure, resulting in a profit (or loss) over a specific period of time. For the first year of trading, provide monthly or quarterly forecasts, and annually for the following two years.

Just a few quick tips for the financially challenged – income is usually from sales, and expenditure is usually the costs to run the co-operative and interest payments. Loans (liabilities), purchased equipment and inventory (assets), capital injections from members (equity) are all items for the balance sheet.

When you receive an invoice it is an expense, even if you haven’t paid it yet; so it is shown in the month the expense was incurred. Show all items as GST exclusive (i.e. without GST).

Balance sheet forecasts

The balance sheet, also known as the statement of financial position, shows the co-operative’s net worth at a particular point in time – usually the last day of the financial year. Assets are usually objects and cash the business owns, liabilities are usually debts owed, and equity is the capital contribution and accrued profits. Assets minus liabilities equals equity.

Provide balance sheet forecasts for three years.

Financial plan

Describe your plans for the co-operative’s financial viability. What is the total investment required for start-up? What are your short and medium-term investment plans? Where will funds come from? Have they been confirmed? How much comes from each source, and what conditions do funds come under (e.g. interest rates, repayment terms)? What security is offered?

When is the co-operative expected to make a profit? What level of sales is required to make a profit? When will members see a return? How much are profits expected to grow each year? How will costs be kept down? If non-distributing, will you retain surpluses, and where do you plan to donate excess surpluses?

Do you have an exit strategy?

A note on financial management

This note on financial management is not meant for inclusion in the business plan, but nevertheless is very important. (A summary of the financial management systems used could be included in the financial plan.)

Members (and investors) need to know how the co-operative is performing and need to receive regular accurate reports. Systems must correctly identify, measure and communicate financial information.

You need to understand and abide by accounting principles.

Complete, accurate, and up-to-date financial records must be kept. These may be handwritten, or on computer spreadsheets, but we recommend that unless the co-operative is very small, you should use financial software. Such software doesn’t replace an accountant, but usually knows what to debit and credit, and has a useful help function.

Develop strong systems for handling cash. Provide numbered and dated receipts for money received. Provide numbered and dated invoices (tax invoices if the co-operative is GST registered) for purchases and to others who owe you money.

Every month, reconcile your expenses paid and income received with the bank statement. Produce a balance sheet and profit and loss statement to help you keep an eye on finances and to allow you to plan and control the co-operative. Watch your creditor and debtor levels; ensure you collect money owing and pay expenses when due.

The strategic plan

A strategic plan is usually a long-term plan for the next three to five years. It explains the goals and objectives to be reached, and the path to achieve them. It’s a bit like a GPS for a very long journey, if you zoom out and ignore the minor roads.

Focus on a small number of key priorities. Too many priorities will mean you lose focus on the major objectives.

Make the priorities easy to translate into action plans, and have clear timelines to achieve outcomes.

Information that might distract from the business plan’s flow should be included as appendices. Provide a summary of the information within the business plan, and more detail in the appendices. It’s also a good place to include information that is not part of the business plan. Start a new page for each appendix.

Appendices might include the following:

• Disclosure statement.
• Co-operative rules.
• Past three years’ financial statements.
• Directors’ and key staff members’ résumés.
• Pictures of products, premises or location.
• Forecasts of purchases and payments to creditors.
• Forecasts of sales and debtor collections.
• Letters of support.
• Promotional materials.

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How to Write a Successful Business Plan for a Loan

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Table of Contents

What does a loan business plan include?

What lenders look for in a business plan, business plan for loan examples, resources for writing a business plan.

A comprehensive and well-written business plan can be used to persuade lenders that your business is worth investing in and hopefully, improve your chances of getting approved for a small-business loan . Many lenders will ask that you include a business plan along with other documents as part of your loan application.

When writing a business plan for a loan, you’ll want to highlight your abilities, justify your need for capital and prove your ability to repay the debt. 

Here’s everything you need to know to get started.

How much do you need?

with Fundera by NerdWallet

We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

A successful business plan for a loan describes your financial goals and how you’ll achieve them. Although business plan components can vary from company to company, there are a few sections that are typically included in most plans.

These sections will help provide lenders with an overview of your business and explain why they should approve you for a loan.  

Executive summary

The executive summary is used to spark interest in your business. It may include high-level information about you, your products and services, your management team, employees, business location and financial details. Your mission statement can be added here as well.

To help build a lender’s confidence in your business, you can also include a concise overview of your growth plans in this section.

Company overview

The company overview is an area to describe the strengths of your business. If you didn’t explain what problems your business will solve in the executive summary, do it here. 

Highlight any experts on your team and what gives you a competitive advantage. You can also include specific details about your business such as when it was founded, your business entity type and history.

Products and services

Use this section to demonstrate the need for what you’re offering. Describe your products and services and explain how customers will benefit from having them. 

Detail any equipment or materials that you need to provide your goods and services — this may be particularly helpful if you’re looking for equipment or inventory financing . You’ll also want to disclose any patents or copyrights in this section.

Market analysis

Here you can demonstrate that you’ve done your homework and showcase your understanding of your industry, current outlook, trends, target market and competitors.

You can add details about your target market that include where you’ll find customers, ways you plan to market to them and how your products and services will be delivered to them.

» MORE: How to write a market analysis for a business plan

Marketing and sales plan

Your marketing and sales plan provides details on how you intend to attract your customers and build a client base. You can also explain the steps involved in the sale and delivery of your product or service.

At a high level, this section should identify your sales goals and how you plan to achieve them — showing a lender how you’re going to make money to repay potential debt.

Operational plan

The operational plan section covers the physical requirements of operating your business on a day-to-day basis. Depending on your type of business, this may include location, facility requirements, equipment, vehicles, inventory needs and supplies. Production goals, timelines, quality control and customer service details may also be included.

Management team

This section illustrates how your business will be organized. You can list the management team, owners, board of directors and consultants with details about their experience and the role they will play at your company. This is also a good place to include an organizational chart .

From this section, a lender should understand why you and your team are qualified to run a business and why they should feel confident lending you money — even if you’re a startup.

Funding request

In this section, you’ll explain the amount of money you’re requesting from the lender and why you need it. You’ll describe how the funds will be used and how you intend to repay the loan.

You may also discuss any funding requirements you anticipate over the next five years and your strategic financial plans for the future.

» Need help writing? Learn about the best business plan software .

Financial statements

When you’re writing a business plan for a loan, this is one of the most important sections. The goal is to use your financial statements to prove to a lender that your business is stable and will be able to repay any potential debt. 

In this section, you’ll want to include three to five years of income statements, cash flow statements and balance sheets. It can also be helpful to include an expense analysis, break-even analysis, capital expenditure budgets, projected income statements and projected cash flow statements. If you have collateral that you could put up to secure a loan, you should list it in this section as well.

If you’re a startup that doesn’t have much historical data to provide, you’ll want to include estimated costs, revenue and any other future projections you may have. Graphs and charts can be useful visual aids here.

In general, the more data you can use to show a lender your financial security, the better.

Finally, if necessary, supporting information and documents can be added in an appendix section. This may include credit histories, resumes, letters of reference, product pictures, licenses, permits, contracts and other legal documents.

Lenders will typically evaluate your loan application based on the five C’s — or characteristics — of credit : character, capacity, capital, conditions and collateral. Although your business plan won't contain everything a lender needs to complete its assessment, the document can highlight your strengths in each of these areas.

A lender will assess your character by reviewing your education, business experience and credit history. This assessment may also be extended to board members and your management team. Highlights of your strengths can be worked into the following sections of your business plan:

Executive summary.

Company overview.

Management team.

Capacity centers on your ability to repay the loan. Lenders will be looking at the revenue you plan to generate, your expenses, cash flow and your loan payment plan. This information can be included in the following sections:

Funding request.

Financial statements.

Capital is the amount of money you have invested in your business. Lenders can use it to judge your financial commitment to the business. You can use any of the following sections to highlight your financial commitment:

Operational plan.

Conditions refers to the purpose and market for your products and services. Lenders will be looking for information such as product demand, competition and industry trends. Information for this can be included in the following sections:

Market analysis.

Products and services.

Marketing and sales plan.

Collateral is an asset pledged to a lender to guarantee the repayment of a loan. This can be equipment, inventory, vehicles or something else of value. Use the following sections to include information on assets:

» MORE: How to get a business loan

Writing a business plan for a loan application can be intimidating, especially when you’re just getting started. It may be helpful to use a business plan template or refer to an existing sample as you’re going through the draft process.

Here are a few examples that you may find useful:

Business Plan Outline — Colorado Small Business Development Center

Business Plan Template — Iowa Small Business Development Center

Writing a Business Plan — Maine Small Business Development Center

Business Plan Workbook — Capital One

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U.S. Small Business Administration. The SBA offers a free self-paced course on writing a business plan. The course includes several videos, objectives for you to accomplish, as well as worksheets you can complete.

SCORE. SCORE, a nonprofit organization and resource partner of the SBA, offers free assistance that includes a step-by-step downloadable template to help startups create a business plan, and mentors who can review and refine your plan virtually or in person.

Small Business Development Centers. Similarly, your local SBDC can provide assistance with business planning and finding access to capital. These organizations also have virtual and in-person training courses, as well as opportunities to consult with business experts.

Business plan software. Although many business plan software platforms require a subscription, these tools can be useful if you want a templated approach that can break the process down for you step-by-step. Many of these services include a range of examples and templates, instruction videos and guides, and financial dashboards, among other features. You may also be able to use a free trial before committing to one of these software options.

A loan business plan outlines your business’s objectives, products or services, funding needs and finances. The goal of this document is to convince lenders that they should approve you for a business loan.

Not all lenders will require a business plan, but you’ll likely need one for bank and SBA loans. Even if it isn’t required, however, a lean business plan can be used to bolster your loan application.

Lenders ask for a business plan because they want to know that your business is and will continue to be financially stable. They want to know how you make money, spend money and plan to achieve your financial goals. All of this information allows them to assess whether you’ll be able to repay a loan and decide if they should approve your application.

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Why Do I Need a Business Plan?

Sections of a business plan, the bottom line.

• Small Business

How to Write a Business Plan for a Loan

How to secure business financing

Matt Webber is an experienced personal finance writer, researcher, and editor. He has published widely on personal finance, marketing, and the impact of technology on contemporary arts and culture.

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A business plan is a document that explains what a company’s objectives are and how it will achieve them. It contains a road map for the company from a marketing, financial, and operational standpoint. Some business plans are more detailed than others, but they are used by all types of businesses, from large, established companies to small startups.

If you are applying for a business loan , your lender may want to see your business plan. Your plan can prove that you understand your market and your business model and that you are realistic about your goals. Even if you don’t need a business plan to apply for a loan, writing one can improve your chances of securing finance.

Key Takeaways

• Many lenders will require you to write a business plan to support your loan application.
• Though every business plan is different, there are a number of sections that appear in every business plan.
• A good business plan will define your company’s strategic priorities for the coming years and explain how you will try to achieve growth.
• Lenders will assess your plan against the “five Cs”: character, capacity, capital, conditions, and collateral.

There are many reasons why all businesses should have a business plan . A business plan can improve the way that your company operates, but a well-written plan is also invaluable for attracting investment.

On an operational level, a well-written business plan has several advantages. A good plan will explain how a company is going to develop over time and will lay out the risks and contingencies that it may encounter along the way.

A business plan can act as a valuable strategic guide, reminding executives of their long-term goals amid the chaos of day-to-day business. It also allows businesses to measure their own success—without a plan, it can be difficult to determine whether a business is moving in the right direction.

A business plan is also valuable when it comes to dealing with external organizations. Indeed, banks and venture capital firms often require a viable business plan before considering whether they’ll provide capital to new businesses.

Even if a business is well-established, lenders may want to see a solid business plan before providing financing. Lenders want to reduce their risk, so they want to see that a business has a serious and realistic plan in place to generate income and repay the loan.

Every business is different, and so is every business plan. Nevertheless, most business plans contain a number of generic sections. Common sections are: executive summary, company overview, products and services, market analysis, marketing and sales plan, operational plan, and management team. If you are applying for a loan, you should also include a funding request and financial statements.

Let’s look at each section in more detail.

Executive Summary

The executive summary is a summary of the information in the rest of your business plan, but it’s also where you can create interest in your business.

You should include basic information about your business, including what you do, where you are based, your products, and how long you’ve been in business. You can also mention what inspired you to start your business, your key successes so far, and your growth plans.

Company Overview

In this section, focus on the core strengths of your business, the problem you want to solve, and how you plan to address it.

Here, you should also mention any key advantages that your business has over your competitors, whether this is operating in a new market or a unique approach to an existing one. You should also include key statistics in this section, such as your annual turnover and number of employees.

Products and Services

In this section, provide some details of what you sell. A lender doesn’t need to know all the technical details of your products but will want to see that they are desirable.

You can also include information on how you make your products, or how you provide your services. This information will be useful to a lender if you are looking for financing to grow your business.

Market Analysis

A market analysis is a core section of your business plan. Here, you need to demonstrate that you understand the market you are operating in, and how you are different from your competitors. If you can find statistics on your market, and particularly on how it is projected to grow over the next few years, put them in this section.

Marketing and Sales Plan

Your marketing and sales plan gives details on what kind of new customers you are looking to attract, and how you are going to connect with them. This section should contain your sales goals and link these to marketing or advertising that you are planning.

If you are looking to expand into a new market, or to reach customers that you haven’t before, you should explain the risks and opportunities of doing so.

Operational Plan

This section explains the basic requirements of running your business on a day-to-day basis. Your exact requirements will vary depending on the type of business you run, but be as specific as possible.

If you need to rent office space, for example, you should include the cost in your operational plan. You should also include the cost of staff, equipment, and any raw materials required to run your business.

Management Team

The management team section is one of the most important sections in your business plan if you are applying for a loan. Your lender will want reassurance that you have a skilled, experienced, competent, and reliable senior management team in place.

Even if you have a small team, you should explain what makes each person qualified for their position. If you have a large team, you should include an organizational chart to explain how your team is structured.

Funding Request

If you are applying for a loan, you should add a funding request. This is where you explain how much money you are looking to borrow, and explain in detail how you are going to use it.

The most important part of the funding-request section is to explain how the loan you are asking for would improve the profitability of your business, and therefore allow you to repay your loan.

Financial Statements

Most lenders will also ask you to provide evidence of your business finances as part of your application. Graphs and charts are often a useful addition to this section, because they allow your lender to understand your finances at a glance.

The overall goal of providing financial statements is to show that your business is profitable and stable. Include three to five years of income statements, cash flow statements, and balance sheets. It can also be useful to provide further analysis, as well as projections of how your business will grow in the coming years.

What Do Lenders Look for in a Business Plan?

Lenders want to see that your business is stable, that you understand the market you are operating in, and that you have realistic plans for growth.

Your lender will base their decision on what are known as the “five Cs.” These are:

• Character : You can stress your good character in your executive summary, company overview, and your management team section.
• Capacity : This is, essentially, your ability to repay the loan. Your lender will look at your growth plans, your funding request, and your financial statements in order to assess this.
• Capital : This is the amount of money you already have in your business. The larger and more established your business is, the more likely you are to be approved for finance, so highlight your capital throughout your business plan.
• Conditions : Conditions refer to market conditions. In your market analysis, you should be able to prove that your business is well-positioned in relation to your target market and competitors.
• Collateral : Depending on your loan, you may be asked to provide collateral , so you should provide information on the assets you own in your operational plan.

How Long Does It Take to Write a Business Plan?

The length of time it takes to write a business plan depends on your business, but you should take your time to ensure it is thorough and correct. A business plan has advantages beyond applying for a loan, providing a strategic focus for your business.

What Should You Avoid When Writing a Business Plan?

The most common mistake that business owners make when writing a business plan is to be unrealistic about their growth potential. Your lender is likely to spot overly optimistic growth projections, so try to keep it reasonable.

Should I Hire Someone to Write a Business Plan for My Business?

You can hire someone to write a business plan for your business, but it can often be better to write it yourself. You are likely to understand your business better than an external consultant.

Writing a business plan can benefit your business, whether you are applying for a loan or not. A good business plan can help you develop strategic priorities and stick to them. It describes how you are going to grow your business, which can be valuable to lenders, who will want to see that you are able to repay a loan that you are applying for.

U.S. Small Business Administration. “ Write Your Business Plan .”

U.S. Small Business Administration. “ Market Research and Competitive Analysis .”

U.S. Small Business Administration. “ Fund Your Business .”

Navy Federal Credit Union. “ The 5 Cs of Credit .”

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How to Craft a Winning Business Plan for a Co-Operative Bank

By alex ryzhkov, get full bundle.

Welcome to our blog post on how to write a business plan for a Co-Operative Bank! In today's ever-changing financial landscape, it is crucial to ensure that everyone has access to banking services. According to recent statistics, there are millions of individuals who are excluded from traditional banking solutions, either due to lack of eligibility or accessibility. This is where a Co-Operative Bank can make a significant impact, by offering affordable banking solutions and empowering those who need it the most.

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To successfully establish a Co-Operative Bank, it is essential to follow a well-structured plan. The following checklist of nine crucial steps will guide you through the process of creating a compelling business plan:

• Conduct market research
• Identify target market and competitors
• Determine the legal structure
• Develop a comprehensive business model
• Create a financial plan and projections
• Determine funding requirements
• Identify key personnel and management team
• Create a marketing and promotional strategy
• Develop a risk management plan

By following these steps, you will be able to lay a solid foundation for your Co-Operative Bank and ensure its success in providing accessible and innovative banking services to a broader community.

Now, let's dive into the details of each step to help you write a business plan for your Co-Operative Bank efficiently!

Conduct Market Research

Market research is an essential step in developing a business plan for your Co-Operative Bank. It provides valuable insights that will help you understand the needs, preferences, and characteristics of your target market. By conducting thorough market research, you can identify potential opportunities and challenges, as well as gain a competitive advantage in the banking industry.

Here are some important aspects to consider when conducting market research for your Co-Operative Bank:

• Analyze the demand: Determine the demand for banking services in the market you plan to serve. Identify the specific needs and challenges faced by individuals who lack access to traditional banking solutions or fail to meet their criteria. Consider conducting surveys, interviews, or focus groups to gather relevant data.
• Identify your target audience: Pinpoint the specific demographic and psychographic characteristics of your target market. These may include income level, occupation, age, gender, and lifestyle preferences. This will help you tailor your services to meet their needs effectively.
• Assess the competition: Identify existing competitors in the market and study their business models, pricing strategies, and customer service approach. This will allow you to differentiate your Co-Operative Bank and create a unique value proposition that appeals to your target audience.
• Evaluate market trends: Stay updated on emerging trends in the banking industry. Research new technologies, innovative banking solutions, and changing regulations. This will help you understand how to utilize these trends to deliver an easy, low-cost, and fast banking experience.
• Consider regulatory requirements: Familiarize yourself with the legal and regulatory framework within which your Co-Operative Bank will operate. This will ensure that you comply with all relevant laws and regulations and can handle potential risks and challenges effectively.

Market Research Tips:

• Utilize online resources: Take advantage of online databases, industry reports, and market research tools to gather valuable information.
• Engage with potential customers: Conduct surveys, interviews, or focus groups with individuals who would benefit from your Co-Operative Bank's services. This will provide insights into their needs, preferences, and expectations.
• Stay updated: Continuously monitor market trends and changes in regulations to adapt your business plan accordingly and remain competitive in the banking industry.

By conducting thorough market research, you will gain a deep understanding of your target market and be better equipped to develop a comprehensive business plan that meets the needs of individuals who lack access to traditional banking solutions. This will ensure the success and sustainability of your Co-Operative Bank in providing affordable and empowering financial services.

Identify Target Market And Competitors

In order to create a successful business plan for your Co-Operative Bank, it is essential to identify your target market and competitors . This step will help you understand the needs and preferences of your potential customers, as well as the existing competition in the banking industry. Here are some key considerations to keep in mind:

• Research your target market: Start by conducting thorough market research to gain insights into the specific segment of the population you aim to serve. Identify the demographics, financial habits, and banking requirements of your target market. This will enable you to tailor your banking services and effectively meet their needs.
• Analyze competitor offerings: Study the products and services offered by existing banks and financial institutions in your target market. Take note of their pricing, features, customer experience, and overall value proposition. This analysis will help you identify any gaps in the market and opportunities for differentiation.
• Identify your unique selling proposition (USP): Differentiate your Co-Operative Bank from the competition by identifying your USP. This could be offering lower fees, more personalized service, simplified account opening processes, or innovative digital solutions. Understanding your competitors will help you determine how to position your bank and highlight its unique advantages.
• Consider conducting surveys or focus groups to gather direct feedback from your target market about their banking needs and preferences.
• Stay updated on industry trends and new technologies that could impact the banking landscape. This will allow you to adapt your offerings and stay ahead of the competition.

Identifying your target market and competitors is a crucial step in developing a solid business plan for your Co-Operative Bank. It provides the foundation for understanding the specific market segment you aim to serve and allows you to differentiate your bank from existing competition. By conducting thorough research and analysis, you can create a banking institution that meets the unique needs of underserved individuals and empowers them with financial stability.

Determine The Legal Structure

When starting a Co-Operative Bank, it is crucial to determine the legal structure that will govern its operations. The legal structure not only defines how the bank will be organized and managed, but it also affects its liability, tax obligations, and ability to raise capital.

There are several options for the legal structure of a Co-Operative Bank. One common and recommended structure is to register it as a Cooperative Society under the applicable cooperative laws and regulations. This structure allows the bank to be owned and controlled by its members who also become shareholders, ensuring that their interests are represented.

Another option is to establish the Co-Operative Bank as a non-profit organization or a not-for-profit company . This structure is suitable for banks that prioritize social impact over profit-making. It may also provide certain tax benefits and exemptions.

Here are some important considerations when determining the legal structure for a Co-Operative Bank:

• Compliance with Cooperative Laws: Ensure that the chosen legal structure aligns with the cooperative laws of your jurisdiction to meet all legal requirements and obligations.
• Member Rights and Governance: Define the rights, responsibilities, and decision-making processes for members to ensure effective governance and member participation.
• Capital Structure: Determine how the capital will be raised and distributed among the members. Consider whether the bank will issue shares or require member deposits.
• Liability and Risk: Evaluate the degree of liability and risk that the chosen legal structure imposes on the bank and its members.
• Accountability and Reporting: Determine the reporting and transparency requirements to ensure accountability to members and regulatory bodies.

Tips for determining the legal structure:

• Consult with legal experts who specialize in cooperative laws and regulations to ensure compliance and make informed decisions.
• Consider researching successful Co-Operative Banks in other jurisdictions to gain insights into their legal structures and governance models.
• Assess the potential impact of the chosen legal structure on the bank's ability to attract funding and collaborations with other financial institutions.

Develop A Comprehensive Business Model

Developing a comprehensive business model is a crucial step in creating a successful co-operative bank. This model will serve as the foundation of your bank's operations, outlining the key components and strategies that will drive your business forward. Here are some important factors to consider when developing your business model:

• Value Proposition: Clearly define the unique value your co-operative bank will offer to its customers. This could include lower fees, personalized service, or access to financial products tailored to their specific needs.
• Target Market: Identify the specific market segment you will serve. In the case of a co-operative bank, this could be individuals who are underserved by traditional banking institutions or those who do not meet their criteria.
• Revenue Streams: Determine the various sources of revenue for your co-operative bank. This could include interest on loans, fees for specific services, or income from investment activities.
• Partnerships: Explore potential partnerships with other organizations or businesses that align with your mission and can help enhance your banking services. These partnerships can provide additional resources, expertise, and customer reach.
• Operating Costs: Create a detailed breakdown of your bank's operating expenses, including personnel costs, rent, technology infrastructure, and regulatory compliance requirements.
• Key Activities: Outline the core activities your bank will undertake to deliver its services, such as account management, loan processing, and customer support.
• Key Resources: Identify the key resources your bank will need to operate effectively, including skilled personnel, robust banking systems, and regulatory compliance expertise.
• Marketing and Distribution Channels: Develop a marketing and distribution strategy to reach and engage your target market. This could include online and offline channels, partnerships with community organizations, or targeted advertising campaigns.

Tips for Developing a Comprehensive Business Model:

• Research successful co-operative banks to gain insights into their business models and adapt them to your unique circumstances.
• Seek feedback from potential customers and stakeholders to fine-tune your value proposition and ensure it resonates with your target market.
• Consider the potential challenges and risks your co-operative bank may face and incorporate risk mitigation strategies into your business model.
• Regularly review and update your business model as market conditions and customer needs evolve.

Create A Financial Plan And Projections

Creating a solid financial plan and projections is crucial for the success of your co-operative bank. It helps you understand the financial viability of your business and provides a roadmap for your future financial goals and objectives.

Financial Plan: Start by outlining your financial goals and objectives. This includes determining your revenue sources, such as interest income, fees, and other revenue streams. Identify your expected expenses, such as salaries, marketing costs, and operational expenses. Analyze your profit margins and determine how your bank will generate profits. This will help you assess the financial feasibility of your business model.

Projections: Develop a comprehensive financial projection for your co-operative bank. This includes forecasting your income statement, balance sheet, and cash flow statement. Use historical data, market research, and industry trends to make realistic and reliable projections. Consider different scenarios, such as best-case and worst-case, to understand potential risks and opportunities.

Tips for creating a financial plan and projections:

• Consult with a financial advisor or accountant to ensure accuracy and reliability of your financial projections.
• Consider conducting sensitivity analysis to understand the impact of changing market conditions on your financial performance.
• Ensure your financial plan aligns with your co-operative bank's overall business strategy.
• Regularly review and revise your financial projections to reflect any changes in the market or your business environment.

A well-designed financial plan and projections will not only help you attract potential investors or external financing but also serve as a guide for making informed financial decisions as your co-operative bank grows and evolves.

Determine Funding Requirements

Once you have conducted your market research, identified your target market and competitors, and developed a comprehensive business model, it is crucial to determine the funding requirements for your co-operative bank. This step will help you assess the financial resources needed to start and sustain your venture.

Here are some important factors to consider when determining funding requirements:

• The initial capital required to set up the co-operative bank, including expenses such as licenses, permits, and infrastructure.
• The operational costs, such as rent, salaries, utilities, and technology expenses, for running the bank.
• The marketing and promotional expenses to create awareness and attract potential customers.
• The funds needed to develop and maintain innovative technologies to provide efficient banking services.
• The contingency fund to cover unexpected expenses or financial downturns.

Tips for determining funding requirements:

• Conduct a detailed analysis of your expected expenses and revenue projections to estimate the funding needed.
• Consider seeking advice from financial experts or consultants who specialize in co-operative banking to ensure accuracy in your calculations.
• Explore different funding options, such as loans, grants, investors, or partnerships, depending on your financial needs and business model.
• Prepare a compelling business case and financial projections to present to potential funders or investors.
• Regularly review and update your funding requirements as your co-operative bank grows and evolves.

Determining the funding requirements is a crucial step in the business planning process as it helps you secure the necessary financial resources to bring your co-operative bank to life. By carefully considering all financial aspects and exploring various funding options, you can ensure the sustainability and success of your venture.

Identify Key Personnel and Management Team

Building a strong and capable key personnel and management team is crucial for the success of your Co-Operative Bank. These individuals will be responsible for making important strategic decisions, ensuring the smooth operation of the bank, and representing the bank's values and mission to the public.

When identifying key personnel, it is important to consider their qualifications, experience, and expertise in the banking industry. Look for individuals who have a strong background in banking, finance, and customer service, as they will have the necessary skills and knowledge to navigate the challenges and complexities of running a bank.

Additionally, you should seek individuals who are passionate about your Co-Operative Bank's mission of providing accessible and affordable banking services to those who are underserved by traditional banking solutions. These individuals should demonstrate a commitment to addressing financial inequalities and be driven to make a positive impact in the community.

• Start by identifying the key positions that are essential for the smooth functioning of your Co-Operative Bank, such as the CEO, CFO, Chief Risk Officer, and Head of Operations. This will help ensure that all important areas of the bank are covered.
• Recruit individuals who have a strong track record of success in their respective fields. Look for candidates with proven leadership skills, a demonstrated ability to manage and motivate teams, and a track record of driving growth and profitability.
• Consider reaching out to industry professionals, networking events, or utilizing recruitment agencies to find potential candidates who align with your Co-Operative Bank's values and goals.
• Create a detailed job description for each position, clearly outlining the required qualifications, responsibilities, and expectations. This will help attract top talent and ensure that potential candidates are aware of what is expected from them.
• Conduct thorough interviews and background checks to ensure that candidates possess the necessary skills, experience, and professional integrity required for the positions.
• Once you have identified your key personnel and management team, foster a culture of collaboration and open communication within the bank. Encourage teamwork, empower your team members, and provide ongoing training and professional development opportunities to further enhance their skills.
• Consider including individuals with diverse backgrounds and perspectives on your management team. This can bring fresh ideas and unique insights to the decision-making process.
• Regularly review and reassess the performance and effectiveness of your key personnel and management team. Provide constructive feedback and address any issues or concerns promptly to foster continuous improvement.
• Stay connected with industry trends and advancements to ensure that your management team is equipped with the latest knowledge and skills needed to adapt to a rapidly changing banking landscape.

Create A Marketing And Promotional Strategy

Developing a strong marketing and promotional strategy is essential for the success of your Co-Operative Bank. It will enable you to attract and retain customers, and differentiate your bank from competitors. Here are some steps to help you create an effective marketing and promotional strategy:

• Understand your target market: Conduct thorough market research to gain insights into the needs, preferences, and financial behaviors of your potential customers. This will help you tailor your marketing efforts to effectively reach and resonate with your target audience.
• Define your unique selling proposition: Determine what sets your Co-Operative Bank apart from other banking solutions. Identify the key features, benefits, and values that make your bank stand out. This will serve as the foundation for your marketing messages.
• Establish your brand identity: Develop a strong brand identity that aligns with your bank's mission, values, and target market. This includes creating a compelling brand name, logo, tagline, and visual assets. Consistency across all marketing channels will enhance brand recognition and trust.
• Utilize a mix of marketing channels: Implement a multi-channel approach to reach your target market effectively. This can include traditional marketing methods such as print advertising, direct mail, and radio, as well as online channels such as social media, email marketing, and search engine optimization.
• Content marketing: Create valuable and educational content that addresses the financial needs and challenges of your target audience. This can include blog posts, articles, videos, and infographics. Sharing useful information will position your bank as a trusted authority and attract potential customers.
• Engage in community outreach: Establish connections within the communities you aim to serve. Sponsor local events, participate in charity initiatives, and collaborate with other organizations that share your mission. These activities will not only create awareness but also demonstrate your bank's commitment to social responsibility.
• Regularly monitor and analyze the results of your marketing efforts to identify what strategies are most effective in attracting and retaining customers.
• Consider partnering with influencers or community leaders who can amplify your message and reach a broader audience.
• Use digital analytics tools to track website traffic, social media engagement, and conversions to fine-tune your marketing tactics and improve your overall campaign performance.
• Stay up-to-date with industry trends and emerging technologies in the financial sector. This will help you identify new marketing opportunities and stay ahead of the competition.

Develop A Risk Management Plan

Creating a risk management plan is crucial for the success and sustainability of a Co-Operative Bank. By identifying potential risks and developing strategies to mitigate them, you can protect your bank and its customers from financial losses and reputational damage.

To develop an effective risk management plan, you must start by assessing the risks specific to the banking industry and the target market you serve. Risks may include regulatory compliance, operational inefficiencies, cybersecurity threats, or economic downturns.

• Identify potential risks: Conduct a thorough analysis of the potential risks your bank may face. This includes internal risks, such as inadequate infrastructure or employee fraud, as well as external risks like changes in government policies or economic instability.
• Evaluate the impact of risks: Determine the potential impact each identified risk could have on your bank and its stakeholders. Assess the financial, operational, and reputational consequences associated with each risk.
• Develop risk mitigation strategies: Once you have identified and evaluated the risks, develop strategies to mitigate them. This may involve implementing safeguards, policies, or procedures to minimize the likelihood and impact of each risk.
• Establish risk monitoring mechanisms: Set up systems and processes to continuously monitor and assess the effectiveness of your risk mitigation strategies. Regularly review your risk register and update it as new risks emerge.
• Train employees on risk management: Ensure that all employees are aware of the risks and the procedures in place to manage them. Provide training sessions and resources to enhance their risk awareness and response capabilities.

Tips for Developing an Effective Risk Management Plan:

• Include a diverse team of experts from various areas of the bank to contribute to the risk assessment process.
• Regularly review and update your risk management plan to stay ahead of emerging risks and changing regulatory requirements.
• Create a culture of risk awareness and accountability within your bank by promoting open communication and transparency.
• Establish a contingency plan to address unforeseen risks and ensure business continuity.
• Consider seeking external assistance from risk management consultants or industry experts to provide valuable insights and guidance.

By developing a comprehensive risk management plan, you can safeguard your Co-Operative Bank and its customers, enabling you to navigate potential challenges with resilience and ensure long-term success.

In conclusion, creating a business plan for a Co-Operative Bank involves thorough research, strategic planning, and a clear understanding of the target market and competition. It is important to consider the legal structure, develop a comprehensive business model, and create a financial plan with projections. Additionally, identifying funding requirements, key personnel, and developing marketing and promotional strategies are crucial steps. Lastly, a risk management plan should be developed to ensure the long-term success and sustainability of the Co-Operative Bank.

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• Mar 30, 2023

The Ultimate Guide to Writing a Business Plan for a Loan: A Step-by-Step Walk-Through

The Ultimate Guide to Writing a Business Plan for a Loan: A Step-by-Step Walkthrough

As a business plan specialist and expert business planner, I'm here to guide you through the process of writing a comprehensive business plan for securing a loan. Whether you're a start-up or an established business looking to expand, a well-crafted business plan is essential for impressing potential lenders and securing the funding you need.

In this extensive, 5,000-word article, I'll cover everything you need to know about creating a top-notch business plan that will boost your chances of loan approval. We'll go through each section in detail, providing you with practical examples and tips to optimize your plan for success. So, let's get started!

Executive Summary

The executive summary is the first and most critical section of your business plan. It's a brief overview of your entire plan, highlighting the key points and giving readers an insight into your business.

Key elements to include in your executive summary:

Business concept: Briefly explain your business idea, the products or services you plan to offer, and the target market.

Company overview: Provide essential information about your company, including its legal structure, location, and mission statement.

Management team: Showcase the expertise and experience of your management team, emphasizing their ability to lead the business.

Market opportunity: Describe the market demand, trends, and target audience, highlighting the opportunity for your business to succeed.

Financial highlights: Summarize your financial projections, including sales, profits, and cash flow.

Loan purpose: Clearly state the purpose of the loan and the amount you're seeking.

Remember, the executive summary is often the first thing lenders read, so make it engaging and informative to grab their attention.

Company Description

The company description section is where you provide a more in-depth look at your business. It should give readers a clear understanding of your company's purpose, goals, and competitive advantages.

Key elements to include in your company description:

Business history: If your company has an existing history, briefly describe its origins and milestones achieved.

Mission statement: Articulate the purpose of your company and the value you aim to provide to customers.

Objectives: Outline the specific goals you want to achieve with your business, both short-term and long-term.

Products and services: Provide a detailed description of the products or services you plan to offer, emphasizing the benefits they provide to customers.

Target market: Identify your target audience, specifying their demographics, psychographics, and buying habits.

Competitive advantage: Explain what sets your business apart from the competition and how you plan to maintain this edge.

Market Analysis

The market analysis section demonstrates your understanding of the industry, market, and competition. It's crucial to show lenders that you've done your homework and have a comprehensive understanding of the market landscape.

Key elements to include in your market analysis:

Industry overview: Provide a high-level view of your industry, including its size, growth trends, and key players.

Market segmentation: Break down your target market into smaller segments, identifying their unique needs and preferences.

Target market characteristics: Describe the specific characteristics of your target market, such as demographics, psychographics, and geographic location.

Market demand: Present evidence of market demand, using data on customer needs, market trends, and buying behaviors.

Competitor analysis: Evaluate your main competitors, analyzing their strengths, weaknesses, and market share.

SWOT analysis: Conduct a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) to assess your business's position in the market.

Marketing and Sales Strategy

In this section, outline your marketing and sales strategy to show lenders how you plan to attract and retain customers, as well as generate revenue. A well-defined marketing and sales strategy is crucial to demonstrate that you have a clear plan for growth and profitability.

Key elements to include in your marketing and sales strategy:

Marketing objectives: Define your marketing goals, such as brand awareness, lead generation, or customer retention.

Target audience: Reiterate your target market, emphasizing their needs and preferences.

Unique selling proposition (USP): Highlight your USP, the main reason customers should choose your products or services over the competition.

Marketing channels: Identify the marketing channels you plan to use, such as social media, email, content marketing, or paid advertising. Explain the rationale behind your choice of channels and how they align with your target audience.

Sales process: Describe your sales process, from lead generation to closing deals. Include details on your sales team structure, training, and compensation plans.

Key performance indicators (KPIs): List the KPIs you'll use to measure the success of your marketing and sales efforts, such as conversion rates, average deal size, or customer lifetime value.

Operations Plan

The operations plan section details the day-to-day activities required to run your business. It shows lenders that you have a clear understanding of the operational aspects of your company and the resources needed to support your growth.

Key elements to include in your operations plan:

Facilities: Describe your business's physical location, including its size, layout, and any equipment or machinery required.

Production process: If applicable, detail your production process, including the steps involved, quality control measures, and production capacity.

Supply chain: Outline your supply chain, identifying key suppliers, procurement processes, and inventory management practices.

Staffing: Explain your staffing requirements, including the roles, responsibilities, and qualifications of each team member.

Management structure: Provide an organizational chart, showcasing your company's management structure and reporting lines.

Legal and regulatory requirements: Identify any relevant legal or regulatory requirements, such as licenses, permits, or certifications needed to operate your business.

Financial Plan

The financial plan is arguably the most crucial section of your business plan when applying for a loan. It demonstrates your ability to manage finances, make informed decisions, and, ultimately, repay the loan.

Key elements to include in your financial plan:

Revenue projections: Estimate your future sales, breaking them down by product or service category and showing growth rates over time.

Expense projections: Forecast your expenses, including fixed costs (e.g., rent, utilities) and variable costs (e.g., marketing, salaries).

Cash flow statement: Provide a detailed cash flow statement, showing how cash will flow in and out of your business over a specified period (typically 12 months).

Profit and loss statement: Create a profit and loss statement that projects your business's profitability over time.

Balance sheet: Prepare a balance sheet that showcases your business's assets, liabilities, and equity.

Break-even analysis: Calculate the point at which your business will break even, meaning your revenues equal your expenses.

Loan repayment schedule: Detail your proposed loan repayment schedule, including the loan amount, interest rate, repayment terms, and projected date of full repayment.

The appendices section is where you can include any additional documents or supporting materials that are relevant to your business plan. These documents may provide further evidence of your company's viability and help strengthen your case for securing a loan.

Examples of items to include in the appendices:

Resumes of key team members

Product samples or prototypes

Market research data or surveys

Letters of intent or contracts with suppliers, partners, or customers

Intellectual property documentation, such as patents, trademarks, or copyrights

Relevant licenses, permits, or certifications

Writing a comprehensive business plan for a loan can seem like a daunting task, but with the right approach and guidance, it's an achievable goal. By following the step-by-step instructions outlined in this article, you can create a well-structured, persuasive business plan that will greatly improve your chances of securing the funding you need. Remember to:

Pay close attention to your executive summary, as it sets the tone for the entire plan.

Be thorough and detailed in your market analysis, showing a deep understanding of your industry and target audience.

Develop a solid marketing and sales strategy to demonstrate your ability to attract and retain customers.

Address the operational aspects of your business, including staffing, facilities, and supply chain management.

Present a robust financial plan, complete with projections and a loan repayment schedule.

By doing so, you'll showcase your expertise, commitment, and preparedness to potential lenders, significantly increasing the likelihood of obtaining the loan your business needs to grow and succeed.

In addition to following the steps outlined in this guide, consider seeking professional assistance from a business plan consultant or specialist to review and refine your plan. Their expertise can help you identify any areas that may need improvement and ensure that your business plan is optimized for success.

Finally, remember to continuously update your business plan as your business evolves. Regular updates will ensure that your plan remains relevant and accurate, providing you with a valuable roadmap for your business's future growth and development.

With dedication, persistence, and a well-crafted business plan, you can secure the funding you need to bring your business vision to life. Good luck, and here's to your success!

• Writing Your Business Plan
• Funding Your Business

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How To Write A Business Plan For A Loan

A solid business plan is often critical to securing funding for your small business. Learn how to create a business plan for a loan that includes the information lenders want to see.

WRITTEN & RESEARCHED BY

Lead Staff Writer

Last updated on Updated August 18, 2024

REVIEWED BY

Editor & Senior Staff Writer

• Elements of a good business plan include an executive summary, company description, products and services, market analysis, marketing and sales plan, organizational structure, and other important information.
• Your business plan should address the "5 Cs of Credit" by demonstrating your business's financial health, investment, repayment ability, market conditions, and available assets.
• To improve loan approval chances, avoid jargon, show clear cash flow projections, document personal investment, seek professional help if needed, and be willing to revise your plan

A business plan is a crucial business document you need to have on hand when applying for business loans. However, the mere thought of writing a business plan for a loan is intimidating to a lot of business owners.

A one-page business plan may be sufficient for certain types of small business loans (for example, online loans), but bank loans and SBA loans typically require a more in-depth business plan that delves further into your financials.

If you need to write a business plan for a loan, you’ve come to the right place. Keep reading to learn more about everything you need to include in your business plan to improve your chances for loan approval.

Table of Contents

What Is A Business Plan For A Loan?

10 key sections to include in your business plan, what do lenders look for in a business plan, business plan examples, resources for writing a business plan for a loan, final thoughts on writing a business plan for a loan.

A business plan is a written document that provides a complete overview of your business, including information about your business’s services, strategies, finances, and goals. All businesses should have a business plan, but a business plan is especially important when applying for a business loan.

Most business plans should include some version of the following sections. Depending on your industry and other factors, such as whether you own a startup or established business, some sections could be condensed or combined. The exact verbiage for section titles can vary, as well.

For a business plan that’s longer than one page, it’s a good idea to preface these sections with a cover page and table of contents.

Executive Summary

This section is a condensed version of your entire business plan. It will likely include:

• Details of when, how, and why you started your business
• Your company mission statements
• High-level financial information about your business
• An explanation of how funding will help your business

Depending on whether you’re a startup or an established business, you may use this section to focus on your growth strategy or your past successes.

Company Description

Use this section to delve deeper into your company’s offerings, core principles, legal structure, and leadership. Your company description should also include your unique value proposition . Describe your company’s unique strengths that will ensure your success.

Products & Services

This section should detail the products and/or services your company provides. Make clear the problem that your offerings solve. Include information such as:

• Information on your raw materials and production process (if applicable)
• Profit margins
• Whether you have or plan to file patents or copyrights

Market Analysis

Use this section to demonstrate your understanding of your overall industry and the specific markets you serve, including market trends, competitors, and the demographics of your target customers. Some companies hire a consultant or agency to perform the research for the market analysis section.

Marketing & Sales Plan

Building off your market analysis, how will you market to your target customers and beat your competitors? How will you sell to them and distribute your product? What are your sales goals and projections? Provide these details in this section.

Organization & Management

Use this section to include your organizational and leadership structure, ideally including an organizational flowchart. Also include job descriptions, qualifications, and years of experience to demonstrate why your team is capable of delivering on your company goals and is worthy of investment.

Operational Strategy

This section is used to describe your day-to-day operational processes, including information about your location, facility, equipment, inventory, and daily production. If you have a service-based business, this section may focus more on your team’s daily activities and how they contribute to long-term goals.

Financial Outlook

This section should tell lenders how much you spend and how much you make in profits. Include up to five years of data if possible, including financial documents such as:

• Income statements
• Cash flow statements
• Balance sheets
• Capital expenditure budgets
• Sales forecasts
• Projected income statements
• Information on any collateral you have to secure the loan

Depending on how much financial documentation you have, you might refer to specific documents in this section and indicate that the full documents can be found in the Appendix section.

Though startups may not have all of this data, you can make projections based on monthly or quarterly data and industry averages.

Funding Request

Now that you’ve laid out your expenses and financial projections, it’s time to make your case for a loan. Be clear about how much money you need, how you will spend it, and how you will repay the loan. Be as detailed as possible.

In the Appendix, include any supporting documents, such as financial documents referred to in the Financial Outlook section. Some other types of documents you might include in this section are:

• Business licenses  or permits
• Credit reports
• Product photos
• Marketing materials
• Letter of intent to purchase business

If you know what lenders are looking for in a business plan for a loan, you will increase your chances of approval. Learn the five things lenders want to see in your business plan, followed by five tips to create a loan-worthy business plan.

The 5 Cs Of Credit

The Five Cs of Credit is a phrase that summarizes what lenders look for when deciding whether to extend a loan to a business. Lenders will, accordingly, look for the five Cs when reviewing the business plan in your loan application. The five Cs are:

• Character: Your knowledge, experience, and creditworthiness
• Capacity: Your ability to repay the loan
• Capital: How much you have already invested in your business
• Conditions: Your market viability, considering your industry as well as overall economic conditions
• Collateral: Assets you can use to secure the loan

5 Business Plan Tips For Loan Approval

Besides emphasizing your “5 Cs,” there are a few other things you can do to make the best impression with your business plan to increase your chances of securing funding.

• Avoid Industry Jargon: Use plain English rather than industry terminology that the lender might not be familiar with. Remember that the loan underwriter may not have deep knowledge of your specific industry.
• Show Cash Flow: Cash flow is one of the most important factors that determine loan eligibility. You can even get a loan with bad credit as long as your cash flow is sufficiently high. The more insight you can provide into your past, current, and future cash flow, the better.
• Show Your Investment: Before extending a loan, the lender will want to see that you have already invested some of your own resources, such as personal savings, into your business. Be sure to include documentation that demonstrates your investment.
• Enlist Help: You will likely need some professional assistance in creating your business plan, whether that means hiring a writer, an industry consultant, or both. At the very least, you should have a third party review your business plan before you submit it as part of a loan application.
• Revise Your Plan As Needed: If this is the first time you’ve taken a close look at your business strategy and financials, you will surely learn some things about your business while creating your plan. For example, you may realize you cannot afford a business loan as large as you planned to ask for. Rather than trying to justify the number you started with, it’s better to modify your funding request (and other aspects of your plan) to align with your financial reality.

It’s easy to find templates and examples of business plans online. Though you may not want to copy and paste from a template verbatim, these samples provide a starting point and show you different ways a business plan can be structured. Here are a few to start with:

• Business plan template for a startup (from SCORE)
• Business plan template for traditional businesses  (from the SBA)
• Business plan template for retail or eCommerce (from Shopify; requires email address)

These tools and resources can help you create a solid business plan for a loan. While some free business plan creation tools are available online, you will have to pay for some options.

SBA Business Plan Resources (Free)

The SBA has a great resource in its online learning center that includes business plan worksheets . In addition to business plan templates, the SBA also helps you connect to free local business counselors who may be able to help you with your business plan.

Business Plan Software ($)

If you need extra help creating a business plan and don’t mind spending a little bit of money, consider business plan creation software. For example, LivePlan ($20/month) is business plan software that connects with QuickBooks to import your financial data to your plan.

Business Plan Writer/Consultant ($$$)

If you’re willing to invest more heavily into your business plan, consider hiring a writer or consultant that specializes in creating business plans. This option costs anywhere from $2,000 to $20,000, with the lower end of that scale typically including only basic writing services and the higher end representing a specialized industry consultant agency.

While it’s helpful to know how to write a business plan for a loan, you can always hire someone to help you draft the plan if the task is too daunting. A business plan is a worthwhile investment no matter what type of business you have or whether you are currently trying to secure business funding. Even if you don’t need a loan right now, it’s important to maintain an updated business plan to serve as a guide for your own business decisions.

Was your loan denied because of your business plan (or another reason)? Learn what to do if your business loan was denied .

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Resources for Worker Cooperatives

• Resource Library
• Finances & Tax

Financing a Cooperative

Outside equity: issues specific to cooperative corporations, (1)  member capital contributions, (2)  donations , (3)  micro loans, (4)  pre-selling, (5)  loans with return of principle only, (6)  product discounts, (7)  bartering, (1)  preparation, (2) understanding the bank’s perspective, (3) pay attention to detail, (4) follow-up/be creative/keep at it, how to comply with security laws, what is a security, ways to raise capital without securities registration, california limited offering exemption, california cooperative equity exemption, direct public offering (dpo), angel investors and venture capital, socially responsible investing or community investment, crowdfunding exemption (2012 jobs act), government funding, outside investors and new generation cooperative statutes.

Due to their unique ownership structure, cooperatives often have a difficult time finding money to start and operate their enterprise. Traditionally, businesses look to three sources of capital: contributions from the owners of the business (internal equity), loans (debt), and outside investors (outside equity).

The initial source of funding for a cooperative is often capital contributions provided by the founding members (e.g., each founding member contributes an amount as a membership share). Membership share is a term used to refer to the contribution required for a person to become a member of the cooperative. The initial funding provided by founding members is also known as equity capital. Equity capital reflects the member’s ownership stake in the cooperative.

Equity capital is one of the measures by which financial institutions will gauge a business’ potential for receiving loans. Equity financing is typically received in exchange for an ownership share in the business. By contrast, debt financing is borrowing money that the business will have to pay back. The lender, such as a bank, does not receive an ownership share in the business. When analyzing the creditworthiness of a business, lenders like to see that the members of the business have invested their own money in the business first, before seeking outside funding. Lenders are also more comfortable giving loans if they feel that a business has its own resources to pay the loan back. Banks are not in business to lose money, so you need to convince them that lending to your cooperative is a worthwhile investment. Thus, in the eyes of banks and other lenders, the more equity capital the cooperative holds in the form of membership shares and other capital contributions, the more deserving of the loan it is.

It is important to note that cooperatives come in multiple forms and have unique, and sometimes complex accounting, tax, and financing issues. This website does not substitute for the advice of a qualified attorney, business advisor, or financial advisor.

Outside equity is more complicated for a cooperative business than a traditional for-profit business. First, in California, cooperatives are not permitted to have “outside” or non-member investors. Thus these investors need to become members of the cooperative most likely as a separate class of “investor” members. Second, cooperative businesses follow the principle that voting rights are based on one’s membership in the cooperative, not on one’s investment of capital. This is different from a traditional capitalist enterprise in which ownership and voting are based on the number of shares an individual owns. In a cooperative, ownership and voting are based on your membership. Thus, no one member should have more votes than another.

This is a problem when a cooperative tries to attract capital investors, because such investors typically would like to have increased ownership and voting rights based on their capital investment. They may not be familiar with the concept of cooperative ownership and may not be interested in giving up the rights they would otherwise have in a conventional corporation.

Cooperative businesses have sought ways around these obstacles to raising capital by issuing memberships to a separate class of “investor members” who do not work in the business. These memberships may allow the outside investors limited additional voting protections related to transformative events, such as mergers, acquisitions, or the dissolution of the cooperative. In addition these shares can offer dividends, which may incentivize people to invest. However, dividend distributions (i.e., returns that are not based on patronage) from a cooperative corporation are often limited by statute (e.g., in California, they are limited to 15% of the capital contribution per year). As a result of obstacles to obtaining equity capital, most cooperatives are debt financed, as opposed to outside-equity financed.

Alternative Ways to Raise Capital for a Cooperative

Here are examples of ways to raise capital that are well suited to cooperatives:

If cooperative member will be participating in the management of the business, the members’ capital contributions are generally not considered a security.

When people give money without the expectation of receiving anything in return, they are donating. Many entrepreneurs are using so-called crowdfunding websites such as Kickstarter .com and Indiegogo .com to raise money for various enterprises. Entrepreneurs that solicit donations often provide non-monetary rewards to donors.

For example, the Isla Vista Food Co-op launched Project We Own It in 2012 as an effort to purchase its property. The National Cooperative Bank lent them $1.2 million for the purchase and they successfully raised $200,000 for the down payment through crowdfunding.

While traditional banking loans are sometimes difficult for cooperatives to obtain, an alternative is a micro loan. A micro loan is a small, low interest rate loan, supplied through various sources. . Typically, the organizations that provide micro loans are socially conscious about the difficulties that community entrepreneurs face when trying to secure financing.

Two examples of micro lenders are Kiva Zip and Working Solutions. Team Works, a cooperative home cleaners based in San Jose, had two successful Kiva Zip campaigns in 2012. They were lent $10,000, enough working capital to be able to provide health care for their members and expand their membership. This article from Grassroots Economic Organizing gives a good overview of the process they went through to find a trustee and promoting the loan.  Though these loans can be very demanding, Kiva Zip requires the first repayment within one month of disbursement, they are zero interest and can work well for coops that have outside support.

If you’re an existing business and want to expand your business, one possible way to raise funds is to pre-sell gift certificates. For example, you might sell a $150 gift certificate that a customer can redeem at your business, but only charge $100 for the gift certificate. Charging less than the value of the certificate gives the buyer an extra incentive to purchase the gift certificate.

Return of principle only means giving back the money that the funder gave, and not offering a return on the investment. Not offering a return means that the business will not offer anything more than the original investment amount, such as an additional dividend, interest, or appreciation in value. It is important to note that, in California, this is likely considered to be a security, so you should proceed with caution and consult with a lawyer if you choose to utilize this funding method.

Another way to raise capital for your business is to charge a membership fee and offer product discounts in exchange. REI provides an interesting model for product discounts funding. REI is a consumer cooperative that sells memberships to its customers. At the end of the year, REI members receive a “dividend” based on the amount spent at REI during the year. This “dividend” can then be used to shop at REI.

One unique and often overlooked way to gain needed resources is to avoid money altogether for certain goods or services your business needs. Bartering, or exchanging services or goods directly, is a means of obtaining resources. If you need to raise money to pay for something such as web design or compostable cups, consider whether you might be able to barter your goods or services to get what you need. This is not a traditional means utilized by businesses when financing their business; however, it can be utilized as an alternative way to obtain much needed resources for your business. However, you should note that bartering may be subject to taxation.

Best Practices for Cooperative Owners Interested in Traditional Sources of Funding

Thus far you have been presented with an overview of financing available for your cooperative business and some alternative means for financing that business. You may still be interested in attempting to secure a bank loan or other traditional financing methods. The following page outlines best practices when approaching a bank for financing. The goal of this section is to help you understand the difficulties that cooperatives face when approaching a lender, more importantly, preparing you to overcome, to the best of your abilities, these challenges. Here are some best practices:

Preparation is a key step in both business development and obtaining funding for your business. Very few people can simply walk into the bank without preparation and obtain a significant loan. To prepare for your interactions with financial institutions start by evaluating your financial situation and the financial situation of your fellow founding co-op members. You will want to collect documents from all founding members and evaluate personal income, credit scores, debts etc. You will then want to decide whether it is in the best interest of your cooperative to obtain funding individually (e.g., one member has outstanding credit and is willing to try and obtain a loan) or collectively (e.g., you all pool your resources and sign together for a loan). You can receive one free credit score per year at the government sponsored site www.annualcreditreport.com , beware of credit report scams at other websites. You will want to bring all financial documents with you when speaking to financial officers. Be sure to cast a wide net, bringing more documents is better than bringing less. Do not neglect any information that is less favorable to you (e.g., a bad credit score or default on loans). You need to realistically consider the pros and cons of your financial situation, individually or as a group, and be prepared to discuss these pros and address the cons where necessary.

A bank is a business. They want to reduce their risk and increase their returns. It is important to understand that bankers, loan officers, or whomever you are dealing with at a financial institution has to follow institutionally determined standards. These standards are not all the same and some are less difficult to overcome than others. Ultimately, a financial institution will be interested in knowing how much money you want, what you plan on doing with it, and how you are going to pay the money back (on time!).

Details are key! Neglecting a negative financial history or failing to point out the strengths of your business are just two important details that might get skipped in the process of obtaining a loan. A financial institution should not have to search for necessary and persuasive information about you or the business. Present all the details of your unique financial circumstances to the bank clearly. Also, being detailed and thorough will only make the process run more smoothly.

Receiving financial assistance in the form of a loan is undoubtedly a difficult and time-consuming process; however, persistence is the key. Many small businesses face hurdles when they are just beginning. Do not let a few undesired events get in the way of your business’ success. Be creative when preparing for and communicating with financial institutions and potential investors. Remember not to burn bridges and do not stop trying when one door closes.

Securities Law and Cooperatives

Don’t just ask for loans and investments! Make sure you follow the law. Even asking a potential investor for money can be considered a violation of securities law, unless you’re just applying for a regular business loan from your bank as described above. This section of the manual does not substitute consultation with a qualified lawyer in the field of securities law. Securities law is highly complex and failure to comply with securities regulations may lead to civil and criminal sanctions. Consult an attorney before trying to raise money. This section of the manual will attempt to provide you with a basic overview of securities law as it relates to finding funding for your cooperative business.

A security is a financial instrument representing ownership, a debt agreement, or the rights to ownership. Examples include stocks, bonds, derivatives, and many other types of financial assets. You create a security when you ask people to put money into your business or venture, and you offer them a return . For example, a security could be:

• Selling stock in your business
• Asking people to lend money to your business
• Offering a share of your business’ profits
• Interests in limited liability companies

Most financing and fundraising options require compliance with securities laws. This is true when the funders are looking for a “return” on their investment.

It is important to know what is or is not a security because when you sell or even offer to sell a security, it needs to either: 1) be registered with the U.S. Securities and Exchange Commission and with the state agency where you want to raise money (in California, state registration is called “qualification”); or 2) qualify for an exemption from registration. Registration/qualification is an expensive, time-consuming process. If possible, your business should try to find an exemption, which is simpler and less expensive.

The seven alternative methods to funding your cooperative, mentioned above, are examples of ways that you can raise capital without triggering securities law.

Ways to Raise Capital With Securities

California Corporations Code Section 25102(f) offers a special securities law exemption to certain kinds of private securities offerings, if they meet the following criteria:

First, you must be exempt from federal securities filing requirements:

• Your company must be formed under California law (i.e., if you are a corporation you filed your articles of incorporation in California, etc.)
• You plan only to offer securities to California residents
• Your contract with your investors includes that they will not resell the security to anyone outside the state for nine months
• You get at least 80% of your revenues from California
• At least 80% of your assets are in California
• You plan to use at least 80% of the money you raise within California

Then, you must meet the requirements for 25102(f)

• The investors have a preexisting personal or business relationship with you “consisting of personal or business contacts of a nature and duration such as would enable a reasonably prudent purchaser to be aware of the character, business acumen, and general business and financial circumstances of the person with whom such relationship exists.” These investors can be friends or family;
• The investors have enough financial experience to protect their interests; or
• The investors have experienced professional financial advisors.
• You can sell an unlimited number of securities to officers and directors of the company and accredited investors. Accredited investors are 1) people with $1 million in net worth (excluding their home) or $200,000 in annual income, or 2) entities with more than $5 million in assets.
• Your securities offering cannot be advertised to the public.
• The investors must sign something saying that they are not investing for the purpose of reselling the securities to someone else.
• You have to file a simple form with the California Department of Corporations.

Under California Corporations Code Section 25100(r), a California cooperative can raise up to $1,000 from each member without qualifying the securities. For example, a cooperative might set its initial capital contribution requirement at $1,000. However, any person who purchases a security under this exemption becomes a member and must have voting rights in the cooperative. Also, you cannot use a “promoter” to sell these securities. As with the California Limited Offering Exemption above, you could use the federal intrastate offering exemption to satisfy the federal securities regulations.

Note that if a cooperative member will be participating in the management of the business, the members’ capital contributions are generally not considered a security, which means each member can contribute more than $1,000 to the cooperative. It is primarily for non-managing cooperative members that you would need to use the 25100(r) exemption.

Worker cooperatives in California may sell shares to community investors for up to $1,000 per person, with minimal voting rights, and avoid securities registration. Read more about this financing strategy here .

Registering a DPO is not simple and it may require assistance from a lawyer, but it’s a nice option if you need to raise a lot of money and you want to offer shares of your business to local community members. A DPO is a securities offering that is registered at the state level and allows a business to publicly advertise investment opportunities to both accredited and non-accredited investors.Unlike an initial public offering (IPO), which requires an investment bank to underwrite the security, or the anticipated Crowdfunding exemption, which will require the online funding portal to be registered as an intermediary, a DPO allows an entity to sell securities directly to the public without a third party intermediary. Upon the state’s approval of your DPO plan, you can begin offering securities directly to the public.

The formation of a cooperative waste management company called CERO in the Boston area provides a great case study of a cooperative successfully raising money through different financing options. They have used crowdfunding , CDFI loans and a DPO to raise the money needed to purchase their trucks and enter into waste removal contracts. CERO hired Cutting Edge Capital, one of the leading consultants in the field of community capital development, to help them with launch their DPO. CERO reached its goal, raising $340,250 by early June 2015. All investments came from Massachusetts residents and ranged from $2,500-$25,00. Cutting Edge recently launched CuttingEdgeX , a marketplace which has provided a centralized place for investors to find social enterprises with open DPOs.  

Finding an angel investor or venture capitalist to invest in your business can be competitive and challenging. At the same time, angel and venture capital funds have helped to launch and grow many successful businesses.

Socially responsible investment organizations have grown rapidly over the past 30 years and continue to expand, even in the down economy. Many of them are located in the Bay Area.

In April 2012, President Obama signed the Jumpstart Our Business Startups (JOBS) Act. Among other things, the JOBS Act includes a provision that would exempt certain small investments from securities registration requirements. More info here . Crowdfunded investing occurs when many members of the general public invest smaller amounts of money in a business. Instead of relying on a small pool of wealthy “accredited” investors, crowdfunded investing allows a business to gather support from their customers, neighbors, friends, family, and other community members, most of whom might be non-wealthy people who otherwise want to support your business. Although this new exemption is not specific to cooperatives, some cooperatives might consider using this exemption at some point, after considering related issues such as how crowdfunded investing might affect a cooperative’s governance or control by its members. Cutting Edge Capital  is also a good resource for information on crowdfunding.

There are also some decent government financing options, the most notable of which is the Small Business Administration (SBA) Loan.

• Most relevantly, the SBA offers the CDC/504 Loan Program
• A Certified Development Company (CDC) is a private, nonprofit corporation which is set up to contribute to economic development within its community. CDCs work with SBA and private sector lenders to provide financing to small businesses, which accomplishes the goal of community economic development.
• Must be used for fixed-asset projects:
• The purchase of land, including existing buildings;
• The purchase of improvements, including grading, street improvements, utilities, parking lots and landscaping;
• The construction of new facilities or modernizing, renovating or converting existing facilities; and
• The purchase of long-term machinery and equipment.
• Cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing.
• There is also the California Small Business Loan Guarantee.
• It allows a business to not only acquire a loan it could not otherwise obtain, but to establish a favorable credit history with a lender so that the business may obtain future financing on its own.
• Eligible Applicants: Any small business as defined by the SBA (typically businesses that employ 100 people or less).
• Eligible Uses: Proceeds must be used primarily in California and for any standard business purpose beneficial to the applicant’s business, such as expansion into new facilities or purchase of new equipment.

The issue of “outside investors” in cooperatives is the subject of a great deal of debate.  Cooperatives must serve the interests of their members and must not subordinate member interests to outside investors.  Most cooperatives avoid taking investments from non-members to avoid the potential for conflict between those two interests.  However, it is becoming increasingly difficult for cooperatives to rely exclusively on member capital and bank loans, since bank loans for cooperatives are very scarce.  Capital-intensive cooperatives such as agricultural processors or restaurants may find it impossible to start up and operate without outside capital.  While most cooperative statutes permit outside investors, they do not allow outside investors to have any voting rights and they cap their returns.  This is consistent with the principles laid out in Puget Sound Plywood , 44 T.C. 305 (1965).  Unfortunately, it is very difficult to attract outside investors without offering them any voting rights to protect their investment.  Some cooperatives, like Organic Valley and Equal Exchange, have successfully sold non-voting preferred stock have successfully sold non-voting preferred stock, but most cooperatives would have a hard time selling an investment like that because most investors would not feel comfortable making a large investment unless they have some right to influence major decisions, at least.

Because of this problem, some states, including Iowa, Wyoming, Wisconsin, Minnesota, and Tennessee, have adopted a statute called the Limited Cooperative Association (also known as “new generation cooperatives”).  (The National Conference of Commissioners on Uniform State Laws adopted a Uniform Limited Cooperative Association Act that is the model legislation for the new generation cooperative statute.) This is a hybrid between a traditional cooperative corporation and an LLC.  These statutes allow outside investors to have limited voting rights while still ensuring that members retain control and majority ownership.  For example, Wisconsin’s Chapter 193 authorizes the formation of Cooperative Associations.  Investor-members’ voting rights may not exceed 49 percent, but the bylaws may provide such members with the power to veto certain unusual decisions, such as merger or dissolution.  In addition, the investors’ may not receive more than 70 percent of the profit allocations and distributions of the cooperative.

Because these cooperatives essentially are LLCs, they can elect to be taxed under Subchapter K which has many of the same advantages as Subchapter T.  It remains to be seen whether a cooperative that has a significant amount of outside investment and that provides limited voting rights to these investors would be deemed by the IRS as not “operating on a cooperative basis.”

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• Subchapter T and How Money Flows Through a Cooperative 16
• Legal Analysis & Law Articles 1
• Case Law and Administrative Rulings 49
• Tax Considerations for Worker Cooperatives 7
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How To Get A Small Business Loan Using These 7 Easy Steps

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Starting a small business is an exciting journey, but it often requires a significant amount of capital to get off the ground and you’ll need to know how to get a small business loan. Whether you need funds for inventory, equipment, marketing, or working capital, securing a small business loan can provide the financial boost necessary to turn your business idea into reality.

However, obtaining a loan as a start-up can be challenging, especially if you’re navigating the process for the first time.

Let’s walk through the steps to get a small business start-up loan and set your business on the path to success.

1. understand the types of business loans available.

Before applying for a loan, it's crucial to understand the different types of start-up loans available. Here are some of the most common options:

Traditional Bank Loans: Banks offer loans to start-ups, but they typically require a strong credit history, a solid business plan, and collateral. These loans often come with lower interest rates but are harder to qualify for.

SBA Loans: The Small Business Administration (SBA) offers several loan programs for start-ups, including the SBA 7(a) loan and SBA Microloan Program. These loans are partially guaranteed by the government, which reduces the lender’s risk and can make them more accessible to start-ups.

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Online Lenders: Online lending platforms offer start-up loans with varying terms and interest rates. These lenders may be more flexible with their requirements, making it easier for start-ups with less established credit to qualify.

Business Credit Cards: While not a traditional loan, business credit cards can provide short-term funding for start-ups. They can be a good option for covering immediate expenses but should be used with caution due to high-interest rates.

Microloans: Microloans are small loans, typically under $50,000, offered by nonprofit organizations and community lenders. These loans are often easier to obtain for start-ups, especially those focused on underserved communities.

2. Prepare a Solid Business Plan

When you're applying for a small business loan, having a solid business plan is crucial. It’s your chance to show lenders that you’ve thought things through and have a clear direction for your business. They need to see that you not only have a vision but also a practical plan for how the loan will help you achieve your goals. A well-prepared business plan demonstrates your commitment and makes it easier for lenders to trust you with their money.

3. Evaluate Your Creditworthiness

Your personal and business credit scores play a significant role in your ability to secure a start-up loan. Before applying, review your credit report and address any issues that could negatively impact your score. Lenders will look at:

Personal Credit Score: As a start-up, your personal credit score will be heavily considered. A score above 700 is typically preferred by lenders.

Business Credit Score: If your business has been established for a while, lenders will also consider your business credit score. If you’re just starting out, focus on building your business credit by opening a business bank account and using business credit cards responsibly.

4. Gather Necessary Documentation

When you're applying for a small business loan, be prepared to provide a variety of documents that lenders will need to evaluate your application. These typically include your personal and business tax returns for the past two to three years, financial statements like profit and loss statements , balance sheets, and cash flow statements, and any relevant legal documents such as business licenses and registrations.

You'll also need to share personal financial details, including your assets, liabilities, and net worth. If you're offering collateral, you'll have to provide proof of ownership and its value. Having these documents ready can streamline the process and improve your chances of securing the loan.

5. Choose the Right Lender

When choosing a lender , it's essential to recognize that not all lenders offer the same experience, and selecting the right one can greatly impact your loan process. Begin by comparing loan terms, including interest rates, repayment conditions, and any associated fees, to find the most advantageous terms for your business.

Evaluate the lender's reputation by researching reviews and ratings, prioritizing those known for excellent customer service and transparency. Ensure that you meet the lender’s eligibility requirements, which may include specific criteria such as credit score, business revenue, and the length of time your business has been operating.

Consider the loan process itself and pay attention to the application steps, the time it takes to get approved, and the speed at which funds can be disbursed. These factors combined will help you choose a lender that best meets your business needs.

6. Apply for the Loan

Once you’ve prepared your business plan, evaluated your creditworthiness, gathered the necessary documentation, and chosen a lender, it’s time to apply for the loan. Be prepared to answer questions about your business, provide additional documentation if requested, and negotiate loan terms if necessary.

7. Use the Loan Wisely

After securing your start-up loan, it’s crucial to use the funds wisely. Stick to your business plan, track your spending, and ensure that the loan is used to grow your business in a sustainable way. Responsible management of your loan funds will not only help your business succeed but will also build your credibility with lenders, making it easier to secure additional financing in the future.

The bottom line is that securing a small business start-up loan can be a complex process, but with the right preparation and approach, it is entirely achievable. By following these steps you can obtain the funding you need to launch and grow your business. Remember, the key to success is not just getting the loan but using it effectively to build a thriving business.

Melissa Houston, CPA is the author of Cash Confident: An Entrepreneur’s Guide to Creating a Profitable Business and the founder of She Means Profit . As a Business Strategist for small business owners, Melissa helps women making mid-career shifts, to launch their dream businesses, and I also guide established business owners to grow their businesses to more profitably.

The opinions expressed in this article are not intended to replace any professional or expert accounting and/or tax advice whatsoever.

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Boost Your Co-Op Bank's Performance: Top 7 KPI Metrics to Track

Number of microloans approved.

• Percentage of underrepresented businesses served

Customer satisfaction rating

• Amount of funds directed towards community outreach programs

Percentage of profits allocated to member dividends

Number of active members enrolled in financial education courses, average balance per account..

Welcome to the world of co-operative banks, where serving the community has always been the utmost priority. These banks have come a long way, establishing themselves as one of the most sustainable financial institutions. As the industry is growing, it's essential to track the right metrics to ensure the banks' performance and progress. We bring to you the Top Seven Co-Operative Bank KPI Metrics that allow you to track and calculate your co-op bank's performance.

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• Unveiling the Hidden Profits of the Co-Operative Bank: Discovering the True Wealth behind the Veil
• Breaking Down the Costs: How to Start Your Own Cooperative Bank and Build a Better Banking Industry
• 10 Steps to Launch Your Own Co-operative Bank and Serve Your Community
• Microloan Approval: It is a pivotal metric for co-operative banks, as it measures the number of loans disbursed with minimal documentation. The higher the number of microloans approved, the more impactful the bank is to support underrepresented businesses.
• Customer Satisfaction Rating: Happy customers are a sign of the bank's efficiency. This metric measures the overall satisfaction of the customers based on their experience with the bank's services. A higher rating can result in positive word-of-mouth and membership growth.
• Community Outreach Programs: A co-operative bank's primary objective is to uplift the local community. This metric determines the bank's contribution to community outreach programs and sheds light on its commitment to social responsibility.

As we dive into more metrics, you'll find yourself gaining more knowledge about how these KPIs can impact your bank's performance. So, let's get started!

In the banking industry, microloans are small loans issued to entrepreneurs, start-ups, and small businesses with little or no collateral. The number of microloans approved is an important KPI for cooperative banks as it indicates the bank's support for local businesses and micro-entrepreneurship.

The number of microloans approved is a KPI that measures the total number of microloans approved by the cooperative bank during a specific period, typically a quarter or year.

This KPI is essential for measuring the cooperative bank's efforts in supporting businesses and creating job opportunities for the community. A higher number of approved microloans indicates that the bank is providing affordable credit access to businesses that may not qualify for traditional loans.

How to Calculate KPI

The formula for the number of microloans approved KPI is:

(Total number of microloans approved during a specific period) / (Total number of loan applications submitted during the same period)

For example, if a cooperative bank approved 300 microloans out of 600 loan applications in a quarter:

(300) / (600) = 0.5 or 50%

The KPI result would be 50% for that quarter.

Calculation Example

Suppose XYZ cooperative bank approved 450 microloans out of 1000 loan applications in Q1. The calculation for Q1 would be:

450 / 1000 = 0.45 or 45%

Therefore, the number of microloans approved KPI for Q1 is 45%.

KPI Advantages

• Indicates the bank's support for small businesses and micro-entrepreneurship.
• Allows the bank to track its effectiveness in providing affordable credit access to businesses that may not qualify for traditional loans.
• Enables the bank to identify areas for improvement in its microloan application process.

KPI Disadvantages

• Doesn't account for the quality of the approved microloans; a higher number of approved microloans does not necessarily mean more successful businesses.
• Doesn't consider other factors relevant for measuring a bank's success, such as customer satisfaction, employee turnover rates, etc.

KPI Industry Benchmarks

The number of microloans approved KPI benchmark varies widely based on several factors, including the bank's geographic location and lending specialization. However, a range of 40-60% is considered a good benchmark for cooperative banks in most regions.

Tips & Tricks

• Encourage microloan applicants to provide detailed information about their businesses to make a better-informed decision about approving microloans.
• Offer business development resources to help borrowers succeed.
• Implement a system to track the success rates of microloan recipients to build a portfolio of successful businesses facilitated by the bank.

Percentage of Underrepresented Businesses Served

The percentage of underrepresented businesses served is a crucial Key Performance Indicator (KPI) for measuring a cooperative bank's inclusivity. As a pro serial entrepreneur who has started and running many businesses, I have learned that a cooperative bank must serve underrepresented businesses to achieve sustainable growth.

The percentage of underrepresented businesses served is a KPI that measures the percentage of businesses belonging to historically marginalized groups, such as women, people of color, and LGBTQ+ individuals, that a cooperative bank serves.

This KPI helps cooperative banks identify gaps in their services and improve inclusivity. A high percentage of underrepresented businesses served is an indicator of a bank's commitment to diversity and inclusion. In contrast, a low percentage may signal that the bank is not reaching its full potential.

The formula for calculating the percentage of underrepresented businesses served is:

Suppose a cooperative bank serves a total of 100 businesses, and out of those, 20 are underrepresented businesses. Using the formula above:

The percentage of underrepresented businesses served would be 20%.

• Helps measure a cooperative bank's inclusivity
• Identifies gaps in the bank's services
• Improves the bank's reputation
• May not reflect the quality of services provided by the bank
• May not consider factors such as geographic location, industry, or business size

Industry benchmarks for the percentage of underrepresented businesses served vary depending on the region and demographics of the bank's customer base. However, a benchmark of 25% or higher is generally considered a good indicator of inclusivity.

• Conduct surveys or outreach to identify underrepresented businesses in the bank's target market
• Collaborate with organizations that support underrepresented businesses to improve outreach
• Prioritize training and development for staff to mitigate unconscious bias

As a serial entrepreneur who has started and managed several businesses, I have always placed a high value on customer satisfaction. It is not only a reflection of how well my company is doing but also an indicator of the quality of my products and services. That's why one of the key performance indicators (KPIs) that I use to track the success of my co-operative banks is customer satisfaction rating.

A customer satisfaction rating measures how well a co-operative bank meets the expectations of its customers. It is a reflection of how satisfied, or dissatisfied, customers are with the products and services provided by the bank. This KPI can help co-operative banks identify areas for improvement in customer service and other areas that can impact customer satisfaction.

Co-operative banks can use customer satisfaction ratings to understand how well they are meeting the needs of their customers. This can be used to improve customer service, products, and services offered by the bank, marketing campaigns, and overall customer experience. Co-operative banks can also use customer satisfaction ratings to benchmark themselves against other co-operative banks and financial institutions in the industry.

How To Calculate KPI

The formula for calculating customer satisfaction rating is as follows:

Suppose a co-operative bank has 500 customers, and out of these, 400 are satisfied with the products and services offered by the bank. To calculate the customer satisfaction rating, we can apply the formula as shown:

This means that the bank has a customer satisfaction rating of 80%

• Helps co-operative banks understand customer satisfaction levels
• Identifies areas for improvement in products and services offered by the bank
• Provides benchmarks for comparing performance against other co-operative banks and financial institutions
• Can be subjective, as customer satisfaction is based on individual experiences and perceptions
• May not take into account other factors that can impact customer satisfaction, such as the quality of the products and services offered by the bank
• May not be representative of the entire customer base of the bank, as not all customers may respond to surveys or provide feedback

Industry benchmarks for customer satisfaction rating vary depending on the country and region. In general, a score of 80% or higher is considered good, while scores below 70% may indicate areas for improvement.

Tips & Tricks:

• Regularly conduct customer satisfaction surveys to gauge customer satisfaction levels.
• Use customer feedback to identify areas for improvement and inform product and service development strategies.
• Benchmark customer satisfaction ratings against other co-operative banks and financial institutions in the industry to identify areas of strength and weakness.

Amount of Funds Directed Towards Community Outreach Programs

As a pro serial entrepreneur, I understand the importance of community outreach programs and their impact on the cooperative banking industry. Co-operative banks operate under the principle of cooperation among individuals to achieve common goals. Community outreach programs are one such initiative, allowing co-operative banks to give back to the community they operate in. The 'Amount of Funds Directed Towards Community Outreach Programs' is one of the key performance indicators (KPIs) that co-operative banks can use to track their community involvement.

'Amount of funds directed towards community outreach programs' is a KPI that measures the total amount of funds directed towards community outreach programs initiated by the co-operative bank.

This KPI is essential for assessing the bank's social responsibility towards the community it operates in. It helps the management to evaluate the effectiveness of the initiatives taken towards community development. Further, it also gives insights into the bank's commitment towards sustainable developmental goals.

To calculate the KPI, you can use the formula:

Let's assume that the total assets of a bank are $10 million, and the total funds directed towards community outreach programs is $100,000. Using the KPI formula, the calculation can be:

• The KPI helps the co-operative bank to showcase its commitment to the community.
• It helps the bank attract more customers who are socially responsible.
• Improves brand recognition in the community and helps gain trust of the members.
• The KPI does not reflect the effectiveness of outreach programs.
• It also does not indicate the real impact of the programs on the community.
• If the KPI is low, it may not be an accurate indicator of inefficacy of the outreach programs unless analyzed along with other relevant KPIs.

Currently, there is no industry benchmark for this KPI as community outreach programs vary for each co-operative bank based on community demographics, branch locations, and other factors.

• Partner with local NGOs to identify critical issues affecting communities and design targeted outreach programs.
• Encourage employees to participate in community outreach activities to promote the bank's commitment towards social responsibility.
• Conduct periodic surveys to evaluate the impact of outreach programs and identify areas of improvement.

Cooperative banks exist to serve their members, one of the key ways they do so is by distributing profits among the member's base. This KPI measures the percentage of profits a co-operative bank allocates to member dividends.

• What is it? The percentage of profits that a cooperative bank allocates to members as dividends.
• Why is it important? It measures the level of return that members receive for their investment in the bank.

A cooperative bank uses this KPI to motivate members and attract potential investors. When the bank enjoys a good fiscal year, the benefits will be shared among the members through dividends.

The formula to calculate this KPI is:

(Net profit / Total dividends) x 100

For example, if a cooperative bank has a net profit of $3 million, and a total of $1 million in dividends issued, the percentage of profits allocated would be:

($3,000,000 / $1,000,000) x 100 = 300%

• Member loyalty: Distributing profits among members shows the commitment to their interests, making them more loyal to the bank.
• Attractive to potential investors: A high percentage of profits allocated could attract new investors to the bank.
• Risk to bank: Allocating a high percentage of profits to members may lead to cash flow problems or threaten the bank's capital base.

There is no universal percentage benchmark for this KPI as it depends on the bank's size, growth stage, and investment profile.

• Regular communication on dividends (such as an annual report) can help increase member loyalty and satisfaction.
• Limit the number of dividend payments to avoid cash flow issues.
• Combine the returns with other member benefits, such as exclusive financing or discounts on services to maximize member satisfaction.

One of the most important key performance indicators (KPIs) for cooperative banks is the number of active members enrolled in financial education courses. This metric measures the effectiveness of the bank in educating its members about financial management, budgeting, savings, and investment opportunities. It can be used to monitor the bank's performance in promoting financial literacy among its members and to identify areas where improvements may be needed.

The number of active members enrolled in financial education courses refers to the total number of members who have attended at least one financial education course offered by the cooperative bank in a given period, usually a year or a quarter.

The KPI provides insights into the bank's effort to promote financial education among its members. A high number of members enrolled indicates that the bank is successful in reaching out to its members and convincing them to participate in financial education. It is also an indication that the members are interested in learning about financial management, which can lead to increased trust in the bank, loyalty, and customer retention. Additionally, it can be a determinant of the bank's financial performance, as it may attract more deposits and investments.

The formula for calculating this KPI is:

The total number of active members refers to the total number of members that have an active account with the bank.

Suppose a cooperative bank has a total of 10,000 active members, and 2,000 of them attended one or more financial education courses in the last quarter. The number of active members enrolled in financial education courses would be:

• Indicates the effectiveness of the bank in promoting financial literacy among its members.
• Provides insights into the bank's customer retention, loyalty, and trust.
• May attract more deposits and investments, leading to increased financial performance.
• Does not measure the quality of the financial education provided.
• May not reflect the bank's performance accurately if the financial education courses are not mandatory.
• May not provide accurate insights into customer behavior and preferences.

According to industry benchmarks, a good number for this KPI is around 20-30%.

• Offer a variety of financial education courses to cater to the diverse needs of the members.
• Provide incentives, such as discounts on loan rates or free bank products, to encourage members to enroll in financial education courses.
• Track and analyze the performance of financial education courses regularly to ensure that they are meeting the members' needs and to identify areas where improvements may be needed.

Cooperative banks use various key performance indicators (KPIs) to measure their performance. Average balance per account is a vital KPI for tracking the bank's financial performance. In this chapter, we will discuss the definition, use case, calculation, advantages, disadvantages, and industry benchmarks for this KPI.

Average balance per account is a KPI that measures the average amount maintained by the customers in their accounts over a given period, say a month or a year. This KPI provides insights into customer behavior towards their accounts.

Cooperative banks use this KPI to determine their account holders' behavior and satisfaction. They use this KPI to measure the effectiveness of their deposit mobilization strategies, understand the change in customer preferences, analyze the product performance, and study the impact of external factors and market trends.

How to calculate KPI

The formula to calculate average balance per account is:

Average balance per account = Total balance / Total number of accounts

Here, the total balance is the sum of all deposit account balances, which includes savings, current, and other deposit accounts. The total number of accounts is the sum of all deposit accounts.

Calculation example

Let's consider an example to understand this KPI better. Suppose a cooperative bank has a total deposit balance of $10,000,000 in a given month, and it has 5,000 accounts in total.

Average balance per account = $10,000,000 / 5,000 = $2,000

So, the average balance per account for this period is $2,000.

• Helps in evaluating the bank's deposit mobilization strategies and their effectiveness.
• Provides insights into customer behavior and satisfaction.
• Helps in studying market trends and external factors affecting the bank.
• Enables the bank to compare its KPI with industry benchmarks and identify areas of improvement.
• It does not provide insights into the deposit account's value proposition to the customers.
• It does not differentiate between active and inactive accounts, making it difficult for analysis.

Industry benchmarks

The industry benchmark for average balance per account varies based on the bank's size, demographics, and markets served. For example, a regional bank's benchmark may differ from a national bank's benchmark. However, as per industry standards, the benchmark for this KPI for most cooperative banks falls between $1,500 to $2,500 per account.

Tips and tricks:

• Encourage customers to maintain a high balance by offering high-interest rates.
• Offer a range of savings and deposit accounts that align with different customer needs and preferences.
• Provide personalized offers and discounts to loyal customers, incentivizing them to maintain a high balance.

To sum up, co-operative banks have a long-standing reputation for serving their communities while maintaining sustainable financial practices. Keeping in mind the industry's growth, it's important to track key performance indicators to ensure the bank's progress and success.

• Microloan Approval is a crucial metric for co-operative banks as it measures the bank's ability to support underrepresented businesses with minimal documentation.
• Customer Satisfaction Rating is an essential indicator of the bank's operational efficiency, as happy customers can lead to positive word-of-mouth and growth in membership.
• Community Outreach Programs support the banks' primary objective of uplifting the local community and demonstrate their commitment to social responsibility.

Other metrics such as Percentage of underrepresented businesses served, Amount of funds directed towards community outreach programs, Percentage of profits allocated to member dividends, Number of active members enrolled in financial education courses, and Average balance per account can significantly impact a co-operative bank's performance. By tracking these KPIs, co-operative banks can align their performance with their community-serving mission while staying financially stable.

Overall, tracking these performance metrics can help co-operative banks stay accountable to their mission while achieving financial stability and growth.

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Cooperative Business Planning

This resource includes several templates for cooperative business plans from actual housing cooperatives in North America. Other references provided are a blueprint for the development process, of which the business plan is a part, and a cooperative business plan presentation given at the 2009 NASCO Institute.