“It is more rewarding to watch money change the world than to watch it accumulate.” –Gloria Steinem.
By now, you’ve made significant progress in developing your business plan. With this, the eighth article in our Creating a Detailed Business Plan series will focus on including a funding request.
Business plans are generally the catalyst for requesting banks, lenders, and investors to invest money into a company. Usually, the business plan and funding help support business growth or rapidly scale a startup company.
As you can imagine, this makes the funding request section extremely important. Business plans can be written even with ample existing funding and can be in stages to support different business expansion phases. You can omit a funding request if you aren’t looking for outside investment.
The funding request section of your business plan is required if you plan to seek funding from a lender or investors.
A business plan typically consists of various areas, and if you intend to secure funding for your business, it’s crucial to include the funding request section. Fortunately, this part of your business plan is only necessary if you plan to seek external financial assistance. If you don’t require any funding, you can skip this section.
There are various ways to fund your business without debt or investors. This article will help you create a persuasive funding request for your business plan.
The business plan funding request section of your plan outlines your financial needs for the future, including how much money you require and when you will need it. You should also mention the various sources you could use to secure funding, such as loans or crowdfunding.
Remember that you can constantly update this section in the future if you require additional funding for business expansion.
A funding request is no time to be shy. Your readers will know what funding you’re after when they get to this section, so be forthright. Declare your business funding needs now and in the future. Give exact figures, and spell out any further infusions you’ll require over the next five years.
Explain how long the funds will be needed, when you plan on repayments, and when the investor can expect a return. It’s also helpful to spell out whether you’d prefer a loan, a grant, a direct investment, and any other relevant terms you would like included. For example, are you willing to give up equity in your business to secure the loan, or will you be personally underwriting the loan from your assets?
It’s unlikely that anyone will give you money if they don’t understand how you plan on using the funds. So be explicit when explaining the purpose of your request. For example, note whether the funding will go toward working capital, additional equipment, or business expansion to new premises or regions.
Describe your plans if you are growing your team or expanding your operation. If you plan on buying another company, explain what this will do for your bottom line and cash flow.
You might also use the funds to retire debt, create and market a new product line, or combine things. Whatever the use, be rigorous in your explanations.
Business banks and investors aim to secure a reasonable return on their investment. So, they’re far more likely to fund businesses that plan to use the money to grow and become more profitable.
But, on the other hand, if they get the sense that the money is just helping to string along a failing enterprise or the owner is not clear on the funding required, they’ll stay away.
If you have any solid, situational plans for the business that might positively impact investors, you should spell them out.
Consider your plans for scaling your business. If there’s an expectation of a lucrative buyout or acquisition after meeting specific benchmarks, mention this. Describe your goals if you plan on selling a portion of the company to focus your efforts on more profitable areas.
Mention any primary debt service you plan to make, mainly if it will put your company on a firmer footing for the future.
This question is critical. It would help convince your readers that you would be a good steward of their money and your business. It’s essential to remember that those who are providing you with money are doing so with the expectation of being paid back and making a profit. If they don’t trust you or doubt your ability to make this happen, they may not be willing to get involved.
Explain the assumptions you’re making in your plans and provide the proper financials to support your contentions. Let the data speak. If you’re correct, the research will bear out our position.
When it comes to financial planning and funding your growth, it’s essential to consider factors such as loan repayment schedules and potential business sales. If you are seeking a loan, it’s wise to detail your repayment plans, although lenders will likely have their agenda in place. If you plan to sell your business, it’s crucial to inform the lender and explain how this may impact them. Additionally, you should consider possible relocation if you plan to move or a buyout if that’s on the table. Lastly, informing investors of their exit options, such as the ability to cash out and the timeline for doing so, is essential.
Our upcoming article will focus on creating financial projections for a business plan.
Putting together a funding request can be daunting. Asking your accountant for help is always a good idea. You can also use tools like Microsoft Excel and financial planning software like LivePlan. If you need further assistance, we’re ready to help out.
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