Is a Business Plan Confidential?

Presenting a confidential business plan to a bank can raise necessary capital.

Business owners write business plans for a variety of reasons, some of which involve confidentiality while others do not. An entrepreneur making a public stock offering will want a wide variety of people to read his business plan, while a business owner presenting a business plan to a bank expects it to be confidential, allowing only a handful of loan officers to see his information.

Private Investors

When a business owner prepares a business plan as a way to interest a small number of private investors to invest in his company, he will show his business plan to parties who are not yet materially involved in company operations. This type of exploratory sharing of information usually involves a nondisclosure agreement, or a document that the potential investor must sign declaring that he will not use any of the information he gleans from reading the business plan to compete with the business owner presenting it.

Bank Loans

A business owner who seeks financing from a bank must show the loan officer enough information about his company for that bank official to determine whether his company is credit worthy. The loan officers reading his business plan act strictly as liasons from the bank, and the institution does not show the document to anyone who is not involved in making the loan decision. The entrepreneur shares his business plan with the bank, but the information is confidential between him and the loan officers.

Public Equity Offerings

When a business prepares a business plan as a vehicle for raising money through a public stock offering, its principals make the information in the plan public as a way to interest potential investors to purchase company stock. Such a business plan is unlikely to contain proprietary information, such as recipes, formulas or new product designs that competitors could appropriate. It will contain information about new markets and projected profit margins and returns on investments, providing enough detail for a small scale investor to decide whether or not to buy stock but not enough to empower competitors to steal company ideas.

Internal Planning

Some businesses prepare business plans strictly for internal purposes, as a way to assess current potentialities and vulnerabilities and chart a path for moving forward. Business plans prepared for internal company purposes are strictly confidential. It runs counter to the interests of the company to allow competitors access to a business plan that contains proprietary information about new products and new markets. A business owner is under no obligation to allow access to his business plan to anyone he does not want to see it.

References

• Sunrise: Confidentially Statement
• Sample Agreements: Business Plan Confidentiality Agreement
• Donald R. Simon, Esq.: Nondisclosure Statement