How to Write the Funding Request of Your Business Plan
How to Ask for Money to Finance Your Home Business
The good news is, this section of your business plan is only needed if you plan to ask for outside funding for your home business. If you're not seeking financial help, you can leave it out of your business plan document. There are a variety of ways to fund your business without debt or investors. Or you can use this section to provide information on your future financial plans, such as when and how much funding you might need, along with the possible sources you could consider for securing your funds.
Later, you can update this section when you need outside funding for business growth.
What Goes Into the Funding Request Section of Your Business Plan
This section of your business plan should cover the following:
- An outline of your business. Yes, you've done this already in past sections, but you want to give potential lenders and investors a recap of your business. In some cases, you might simply share the Funding Request Section so you need to have your business details such as what you provide, information about your target market, your structure (i.e. LLC), owners and members information (for partnerships and corporations), and any successes you've had to date in your business.
- Your current financial situation. Again, you've provided some financial information in the Financial Data section, but it doesn't hurt to summarize. If you're submitting just the funding request, you'll need this information to help financial sources understand your money situation. Provide financial details such as income and cash flow statements, and balance sheets. Offer your projected financial information as well. If you're asking for a loan for which you'll be offering collateral, include information about the asset as well. If the business had debt, outline your plan for paying it off. Finally, share how you'll pay the loan or what sort of return on investment (ROI) investors can expect by investing in your business.
- How much money do you need now and in the future? Indicate what type of funding you're asking for such as a loan or investment. Outline what you need now and what you might need in the future (as far as five years out).
- How funds will be used? Detail how you'll be using the money, whether it's for inventory, paying debt, buying equipment, hiring help, etc. If you plan to use the money for several things, highlight each and how much will go to each. Note that most financial sources would rather invest in things that grow a thriving business, than to pay for debt or overhead expenses.
- Current and future financial plans such as loan repayment schedule or plans to sell the business. If you're getting a loan, outline your plans for repayment (although most lenders will have their own schedules). If you have plans to sell the business, let the lender know that and how it will effect them.Other issues to consider are relocation (if you move) or a buyout. Finally, let investors know how they can exit the deal, such as cashing out (how long before they can do that?).
Important Points to Remember in Writing Your Funding Request
You're asking for money, so you need to always be professional and know your business inside and out. Here are some other things to keep in mind:
- Tailor your funding request to each financial source. Lenders and investors need different information (i.e. loan repayment versus ROI), so create different reports for each.
- Keep your funding sources in mind. Each resource will have different questions and conerns. Do a little research so you can address them in your report.
- Ask for enough to keep your business going. Don't be stingy, as you don't want your business to fail from a lack of money. At the same time, don't be greedy, asking for more than you need.
Updated 2016 Leslie Truex