Free Consignment Store Business Plan for Loans
Obtaining Business Financing
When obtaining a business loan for a consignment store business, it is imperative that you have a properly structured business plan that will assist you in showcasing how you intend to operate your Consignment Store, how the business will operate, how you intend to market the business, the anticipated financial results of your company, and how you intend to repay your debt obligations. This sample loan business plan will provide you with the framework that you need in order to acquire a business loan for starting or expanding this type of business.
When obtaining a business loan for a consignment store, it is imperative that your business plan has a clear and concise executive summary that provides an outline of what are seeking to accomplish, how much capital you are seeking to raise, the management biography of the business owner, and an overview of the anticipated profit and loss statements of the business. Here is an example of how the title paragraph should be written:
Consignment Store, Inc. (“the Company”) is seeking a business loan of $100,000 in order to launch the operations of a consignment store business that will be based in San Francisco, California. The Company was founded in (Insert Year). The business was founded by Mr. John Doe.
Products and Services
In the next segment of the business loan and business planning document, you should showcase the products and services that you will be providing to the general public. For instance:
The Consignment Store will provide customers with the ability to consign clothing and other items through the Company’s retail location. The business will receive a fee equal to 40% of the consigned products sold through the Consignment Store’s location. The business will specialize in the sale of clothing and other related small retail products.
Business Loan Terms
Now it is time to discuss the anticipated terms of the business plan that you are seeking. An example paragraph of how this is stated:
At this time, Mr. Doe is seeking a conventional business loan in the amount of $100,000. The interest rate, loan terms, and loan covenants are to be determined during negotiation. However, this business plan assumes that the business will receive a seven year business loan with a seven percent interest rate due on the outstanding principal balance.
Now that the summary of the business has been provided, it is time to provide a brief overview of the owner of the business. An example paragraph summing up the owner is as follows:
Mr. Doe is a highly experienced business person that has years of experience regarding the direct ownership and management of business. He will be able to effectively bring the operations of the Consignment Store to profitability while ensuring that the business loan’s payments and its covenants are met at all times.
The most important thing to your lender when applying for a business loan is how you intend to repay the bank. In this section of the business plan, you should provide an overview of the finance’s of the business discussing the anticipated revenues, expenses, and profits/losses. You can also discuss the applicable collateral within the business plan that will be used to secure your business financing.
One of the most important aspects of your business plan is how you intend to expand the business over a three to five year period. Banks and finance companies always want to see that the business will experience a moderate to strong level of growth. This is especially true in business lending because as your business grows the cash flow that secures your business loan will decrease proportionality against your monthly credit obligations. An example of how this is stated is as follows:
The Consignment Store will continue to expand through organic means including increasing the Company’s advertising budget via the reinvestment into the after tax cash flows of the business. Additionally, if the business is highly successful then the Company may seek to establish additional Consignment Store locations after the third year of operations.
Use of Business Loan Proceeds
In this section of the business plan you should focus on how the proceeds of the business loan will be used. An example of this would be as follows:
- Consignment Store Establishment – $50,000
- Opening Inventory – $10,000
- Working capital – $40,000
In this section of the business plan you should discuss the percentage ownership of the business among the owners of the business. For example:
Mr. Doe will own 100% of the Consignment Store.
Board of Directors
When applying for business financing, the bank will also want to know who serves as the board of directors. For small businesses, usually the owner serves as the director of the business. An example of how this is worded:
Mr. Doe will be the sole director of Consignment Store, Inc.
Any bank or financing company is also going to want to know what you intend to do with the business over a set period of time. Many business owners will develop and expand a business with the intent to sell the company to a third party at a later time. When drafting this part of the business plan you should focus on what you intentions are in regards to potentially selling the business. This is often worded as:
Mr. Doe would most likely sell the Consignment Store to a third party for a significant earnings multiple. Consignment Stores usually sell for approximately one to three times earnings given the financial strength of the business. In this event, the business would be sold by a business broker and the business loan sought in this plan would be repaid according to the covenants of the business loan agreement.
Products and Services
When developing a business plan that is appropriate for obtaining a business loan or other business credit facility you need to clearly showcase the services or products that you will be offering to the general public. An example of how this section is worded goes as follows:
As stated in the executive summary, the Consignment Store will specialize in the retail sale of items on behalf of individuals within the Company’s target market. The business will charge a fee equal to 40% of the sale of each consigned item. The business will use a number of means in order to generate sales through the Company’s store. This includes listing items on EBay and other popular websites so that the business can generate substantial sales outside of the Company’s retail location.
Industry and Market Analysis
The Current State of the Economy
It is important to let your financial institution know that you are well apprised of the financial situation of the general economy when you are applying for a business loan. This is especially true in today’s environment where lending has become more difficult and will remain more difficult in the foreseeable future. Specifically, you should gear this section of the business plan analysis towards the industry that you are operating within. For example:
The current economy has remained difficult over the past few years. However, Consignment Stores typically operate with a strong state of economy stability as these businesses are often used as a last resort among people that are seeking to sell their clothing or other retail items in exchange for a significant percentage of the value of the merchandise. As such, the business should be able to remain profitable and cash flow positive in any economic environment.
The Consignment Store Industry
In addition to providing your business loan officer with an understanding of the general economy, it is important that you showcase that you have an equal understanding of the industry in which you are operating within. As such, you will need to provide you business loan institution of a brief overview of your industry and any potential changes that may affect the way that your company does business. An example of how an industry overview is as follows:
In the United States there are over 17,000 businesses that specialize in the sale of consignment apparel to the general public. Among these businesses, the aggregate receipts generated from the sale of used merchandise are approximately $17 billion dollars per year. The industry employs more than 97,000 people and provides gross payrolls of $1.2 billion dollars.
In this section of the business loan application and business plan analysis, you should focus on the demographics of your localized market (or national market if applicable). This section should discuss how many people live in your area, the anticipated number of people that would require the use of Consignment Stores, the median household income of people living in the area, poverty line statistics, and any applicable laws that would apply to your operation of Consignment Stores.
Many people that are developing new businesses or expanding existing businesses often feel that their business does not have any competition or limited competition at best. However, this is almost never the case. Unless you have re-invented the wheel – you will have competition. When applying for a business loan, you should clearly showcase your competition in your business plan. This is especially important to your banker as they will be able to gauge your ability to be successful in your targeted market. Many business loan underwriters will aggressively confirm that competitive nature of your local market and your local industry.
When drafting this section of the plan you should heavily discuss the competitive advantages that you intend to have over your competition.
In addition to all of the above information that we have covered, your business loan officer is also going to want to know how you intend to market your business to the general public. Most people do not quite understand how to effectively market their business outside of prominent signage or flyer distribution. When applying for a business loan (again in this difficult lending climate), your banker is going to want to see that you have a clear methodology of how you intend to market your services or products to the general public. In this section of the business plan – we will overview how to showcase your services/products to the general public.
Marketing Overview Example
- The Consignment Store will place prominent signage on the facility to draw a significant amount of foot traffic.
- The business will maintain listings in the Yellow Books.
- The Consignment will also maintain an internet website that showcases the Company’s operations, hours of operation, and relevant contact information.
- The business will also using popular sites such as EBay in order to generate additional sales from outside of the retail location.
Marketing Strategies Overview
Additionally, you will be required to further drill down (in your business plan) how you intend to implement your strategies when you launch or expand your business’s operations. In this section of the business loan and business plan documents, you should amplify the bullet points from the section above. For instance:
The Consignment Store intends to use a number of strategies that will create instant traffic and customer flow to the Company’s location. These strategies include not only using prominent facility and road signage, but also distributing flyers to people that fall into he Company’s targeted demographics. The business will also regularly take out advertisements in localized newspapers that showcase the Company’s hours of operations, consignment store services, and specials that are occurring within the store on a regular basis.
The business will also maintain a highly informative website that showcases the Consignment Store’s services, its hours of operation, consigned product listing information, licensure information, and other relevant information in regards to the Company’s services. This website will be listed on major search engines such as Google as many people now use the internet to locate local businesses. The business will also use major sites such as EBay to generate sales of items consigned through the Company’s location.
The Financial Plan
Beyond any other part of your business loan application or business plan, the financials section of these documents are what matters most when applying for a business loan or any other type of credit facility. Ultimately, this section of the business plan showcases not only what your anticipated profitability will be, but also how you intend to repay the funds that you have borrowed through your business financing facility. An example of how this section is structure is as follows:
- Consignment Store, Inc. will have an average annual growth rate of 10% per year.
- Mr. Doe will acquire $100,000 through a business loan in order to launch the operations of the business.
Proforma Financials for a Business Loan
Now it is time to showcase how you intend to repay your loan, generate a profit, and increase the book value of your business over a three to five year period. BusinessPlansForLoan.com has developed an easy to use financial model that you can use when drafting out the financial model for your business plan and business loan application. Through your business loan application, you will be required to have the following:
- Profit and Loss Statement for your Consignment Store
- Cash Flow Analysis for the Consignment Store
- Balance Sheet for the Consignment Store
- Business Loan Amortization Tables