Business Plan Writing: Financing & Funding Requests
Updated: Dec 12, 2019
"It is more rewarding to watch money change the world than to watch it accumulate." –Gloria Steinem
By now, you’ve made significant progress on your business plan. With this, the eighth article in our creating a business plan series, we’re going to focus on how to include a funding request.
Business plans are generally the catalyst for the explicit purpose of requesting banks, lenders and investors to invest money into a company. On most occasions, the business plan and funding is to help support business growth or rapidly scale a start-up company.
As you can imagine, this makes the funding request section extremely important. Business plans can be written even in the presence of ample existing funding and can be in stages to support different business expansion phases. If you aren’t looking for outside investment,
you can choose to omit a funding request.
How Much Money and Duration?
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 useful to spell out whether you’d prefer a loan, a grant, or a direct investment, and any other relevant terms that you would like included. Are you willing to give up equity in your business to secure the loan or will be you personally underwriting the loan from your assets?
How Do You Plan on Using the Requested Funds?
It’s unlikely that anyone will give you money if they don’t have a solid understanding of how you plan on using the funds. So be explicit when explaining the purpose of your request. Note if the funding will go toward working capital or additional equipment or business expansion to new premises or region. If you are growing your team or expanding your operation, describe your plans. If you plan on buying another company, explain what this will do for your bottom line and cash flow.
You might also be using the funds to retire debt, create and market a new product line, or possibly a combination of things. Whatever the use, be rigorous in your explanations.
Business banks and investors aim to secure a reasonable return on their investment. They’re far more likely to fund businesses that plan to use the money to grow and become more profitable. 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.
What Are Your Long-Term Plans for the Business?
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. If you plan on selling a portion of the company to focus your efforts in more profitable areas, describe your plans.
Mention any primary debt service you plan to make, mainly if it will put your company on a stronger footing for the future.
Why Should Investors Trust You?
This question is critical. It would help if you convinced your readers that you would be a good steward of their money and your business. They aren’t giving you money out of the kindness of their hearts, after all. They expect to be paid back and to realise a healthy return. If they feel they can’t trust you or your ability to make this happen, they likely won’t want to get involved.
Make sure to 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.
You Can Do It, and Noirwolf Can Help
Putting together a funding request can be daunting. Asking your accountant for help is always a good idea. You can also use tools such as Microsoft Excel and financial planning software like LivePlan. If you need further assistance, we’re ready to help out. To learn more about Noirwolf consulting services, and how we can be of great help to you, contact us today.
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