If you’re ready to launch a new business, you have to know how to ask for funding. Even the most entrepreneurial spirits understand the value of planning, especially when it comes to convincing investors and banks. There are many kinds of business plans, but some have a special section dedicated to funding requests.
For more detailed funding requests, you’re convincing investors and banks your business is worthwhile. Seeking out sources of external financing requires extra work. With nearly three-fourths of new businesses funded by business loans, credit cards, and lines of credit, you need to know how to ask for funding.
Read on and discover everything you need to include for your funding request business plan. By the end of this guide, you’ll have every important funding detail covered to win investors over.
Lengthy business plans include many things. Some plans are shorter and more of an overview, while other plans are more detailed. For funding requests, you’ll need to deep dive into each section of your outline, with an emphasis on financial details.
A funding request highlights both your current financial situation and future goals with each aspect of your plan. The financial data included in a funding request is broken up over other parts of your business plan, including:
- Business summary
- Amount requested
- Purpose of funding
- Financial data
Aside from current and future financial needs, these sections clarify other possible sources of funding. After securing funding, you can always update your funding request for future requests.
Your funding request business plan may be a standalone document. If not, you’ll need to include a summary of your business. This summary explains what your business does.
It also establishes your operating location(s), what goods or services you offer, and who your customers are. If your business is incorporated, you’ll also define the type of corporation in this section, its owners, and key stakeholders. Feel free to list any successes or accomplishments if your funding request is for a business expansion.
Financial projections or forecasts are critical for a funding request business plan. If you’re unclear about how much money you’re requesting, now’s the time to crunch those numbers. Make sure to plan your amount along a timeline, too.
Consider how much financing you need for the initial growth period of your business. Then, think about what you’ll need potentially years down the road—the more clarity in your planning process, the more accurate your funding request.
Make sure you clearly define the type of funding you need, too. There’s a big difference in the requirements between a loan or investment, especially in payback and usage terms.
Purpose of funding
Explaining how you’ll use any loans or investments is a critical part of asking for funding. If you need extra working capital to expand your business, explain it. If you want to pay off a high-interest loan, purchase new equipment, buy a building, etc., describe this purpose.
The clearer picture banks or investors have of your financial motivation, the more convinced they should support your business. Planning out every anticipated need also helps you think ahead for your business’s future growth.
Easily the most important part of your funding request business plan, financial data is critical. Any current and future funding information should be quantified and explained in this section. Let’s further explore which elements are part of this section.
- Balance sheet: a statement of assets, liabilities, and capital with past income balance and expenses
- Breakeven analysis: when you’ll cover all your expenses and begin profit generation
- Income statement: information on the income and expenses covering a specific period (i.e., profit and loss)
- Cash flow statement: the amount of cash on hand and spent during a specific period
Information like this can also help your financial projections or forecasting. When you request a certain amount, projections can help you assess current and future needs. The clearer your business growth timeline, the easier it is to estimate future needs.
With a better understanding of how to ask for funding, it’s time to start planning. Setting timelines is only a small part of building your company’s future. If you’re unclear before you create a funding request, you’ll have a better understanding of where your business can move forward.
Outlining payment timelines and planning your company’s financial future isn’t the only way to think ahead. If you truly plan for the long-term, you can also consider things like an exit strategy. A succession plan can even include the transfer of ownership much farther down the line.
You may not be anywhere near this kind of planning yet, but it’s a great way to consider a healthy work-life balance, too. How far ahead you plan can impact more than your business growth but your personal growth, too.
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