If you’ve got plans to start a new business, it’s more than likely that you need funds to do so. Most entrepreneurs don’t have an insanely wealthy uncle who decides to hand over some cash willy-nilly. If you’re in the minority, good for you. However, if you need outside funding, you will need a business plan, and notably, a section that requests the money you need.
A funding-request section is where you’ll detail what you believe your future funding requirements are going to be in a business plan. In most cases, you’ll outline a period of five years. You’ll need to provide information on your company’s financial plans for that time frame. For example, you’re expected to sketch out the different sources of capital you think you’ll require, as well as the amount of financing you’ll need as you reach various milestones.
In the article below, we’ll show you how to write a funding request correctly.
Provide information on your future financial plans
As previously mentioned, you’ll need to give details on your company’s future financial plans in your business-plan funding request. You should provide information on how much money you’ll ask for and lay out the possible sources you’re considering to secure those funds. Keep in mind that you can revisit this section of your business plan in the future should you need to ask for money to grow your business.
Outline your business
You may have already given a broad overview of your company in other sections of your business plan. However, you still need to provide a brief recap in this section to benefit investors and potential lenders. There are times when they’ll ask only to see your funding section without looking at your entire business plan, so don’t leave these details out.
Business information you should include are details such as:
- The products or services you offer
- Information on the target market
- Your business structure (sole proprietorship, LLC, corporation, etc.)
- Information on key team members and partners
- An outline of any early successes you’ve achieved with your business
Give details on your current financial situation
Just as you’ve given information on your business as a whole in other sections of the business plan, you’ve also provided detailed information on your financial situation in the plan’s section on financial data. However, you should still recap that financial situation inside your funding request.
Remember, the funding-request section is sometimes the only section at which an investor or lender might look. In that case, you’ll want to include financial information to help them understand your present money situation.
Details to include here are things such as:
- Balance sheets
- Income and cash-flow statements
- Financial projections
- Information on your assets (especially if you plan to use them as collateral)
- Any plans for paying existing debt (if you have any)
- What you believe an investor’s return on investment might be
- Your plan to repay any loans you’re given
Be clear as to what kind of money you’re requesting
You should be precise as to whether you’re seeking a loan or investment. Perhaps you’re seeking one or the other, or even both. However, whatever the case may be, you should have clear subsections for each type of funding for which you’re asking. Don’t jumble everything together and expect lenders or investors to automatically understand. Also, be sure to provide a clear picture of exactly how much money you’re asking for. Your request should cover a period of at least five years.
Talk about how you’ll use the money
Anyone who lends or invests will want to know how you will spend the money. You’ll therefore need to provide details on where the money’s going. For instance, will the money be spent on:
- Hiring a team?
- Buying equipment?
- Paying debts?
- Purchasing inventory?
Be clear and concise on these matters. If there are multiple things you need to use the money for, list out everything and how much cash will be dispensed to each. Keep in mind that getting money to pay for your business’ overhead or debts is harder than for things that will help your business to grow and expand.
Do your due diligence
Remember that when asking for funds, everything you do needs to scream “professionalism.” That means you need to know what you’re talking about. The ins and outs of your business need to be imprinted on your brain. You should be able to spit out information on request. Because the truth is that there are many would-be entrepreneurs out there with startup ideas. To compete, you have to be prepared and ready to go if a lender or investor takes an interest.
With that in mind, do your due diligence. Research what kinds of questions money people will ask of you. Then, do more research and get the answers you’ll need. Tailor your funding request to the types of financial sources you plan to approach. Investors and lenders aren’t the same, and the information they need isn’t exactly the same, either.
If you put information for both in the same funding request, be sure to separate the two and make whom you’re speaking to clear. Finally, don’t ask for too little and don’t ask for too much, but don’t be afraid to ask for what you know you need.
