Ruth: Hey, that’s so much. I am just working on the planning part.
Janine: Oh, is there any way I can help you with it?
Ruth: Umm, I guess… maybe you can tell me how to write the funding request in the business plan.
Ruth: Oh sure. It is not that hard if you have the details right. And you understand it properly.
While writing a business plan to seek funding, you must be clear about what needs to be written under the section where you would request funding. This is an important and essential section of your business plan.
What Is the Funding Request?
A funding request section of your business plan allows you to ask for the required fund. While writing the request, you always have to mention the timeline in which you will utilize the funds. Usually, this timeline is up to the next 5 years from the request.
The funding request may differ on the age of your company. If your company is only a start-up, it will have to provide more details than any older company. Generally, any business up to its 7th year is called a startup company. Although this criterion may differ with respect to location and industry.
Step-by-Step Guide to Writing the Funding Request of Your Business Plan
Before you start writing your requests, be clear about your requirements. And, in the same line, be very clear explaining it. Your readers want you to get to the point. So, they can make accurate decisions just in time. Moreover, it will also save you a lot of time and effort.
Once the facts and figures are drawn (accurately), you need to draft them properly into your business plan. And you have to be very careful and precise while doing it.
So ideally, you need to figure out your requirements. And then put it into the context of the business plan.
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So, How to derive your funding requirements?
Deriving funding requirements get a little overwhelming. But if you take it one step at a time, it starts getting easier.
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First, determine what you need money for
It could be for hiring new staff, getting new equipment, or starting your business at a new location. Just be very clear with the goals. Then list down the requirements and the required fund for it. In the end, sum it up. If you want funds for recovering your debts, explain all your debts in detail.
Now, It Is Time to Know How Much Amount Can You Get on Your Own.
- Calculate the financial resources: Look out for your saved capital in cash as well as in personal assets. Other than that, see if you can gather the funds from friends and family.
- Grants and subsidies: Check if your company is eligible for any government grants and subsidies. If yes, apply for it and add the amount. Calculate and find the difference between the required amount and the amount you can already put together. And that will be the amount you will be needing from the third party, investors, or from the bank. Once you have the right fund requirement at hand, list out the investors, money lenders, and loans who can provide you with the sum.
Now, Let’s Start Writing Your Funding Request
1. Provide Business Information
Yes, you still have to give this brief even though you have already explained it in detail. No, it does not get redundant- It does not have to be. In fact, you can take it up as an opportunity to give a little recap to your potential prospects and money lenders.
Moreover, sometimes, you might have to only send the funding request section and not the entire business plan. In such cases, such information comes handy.
So, here’s what you will have to explain in the funding request section of your business plan-
- Target Market
- Your business structure like LTD, LLC, or more
- Brief about your product/service
- Partners involved
- Business heir, if there exists.
2. Mention the Current Financial Situation
You might have provided some financial information in the financial section. But, you have to add some figures here anyway. Not only will make it contextual but even easier to have a clear picture in one place.
Here are some financial details that you will have to include in this section:
- Quarterly as well as yearly cash inflow and outflow
- Balance sheets
- P&L statement
- Expected financial condition in the upcoming quarter and year
- Include the list of assets and their ownership details if you are asking loan from the bank
- If your business is in debt, explain the situation in the detail and a brief plan for paying it.
- Mention how much return on investment can they expect
- In the end, mention how will you pay off the loan or transfer the ownership of the business
3. Announce How Much Funds Do You Need?
When you explain the situation in brief and have all the facts and figures put aside, narrow it down to your requirements. Mention how much money you need.
4. Discuss Briefly How Will You Use the Money?
Here, you have to narrow down what you need the money for and how you are going to use it. Just list down the details and put the figure for it- so much like how you do your billing. If they are taking the money for multiple things, highlight every detail.
5. Dive Deep into Current and Future Financial Planning
You must have explained a little about the inflow and outflow in the financial section. But over here, you have to get into the details like-
- If you are getting a loan, outline your timelines for payments.
- If you are looking forward to selling, mention how it will affect the investors.
- And then, finally, mention the exit strategy. Your exit strategy includes how you will transfer the business ownership at the end.
Ruth: Oh just did a lot of research.
Janine: But, it was the implementation that was tough.
Ruth: Oh yes. How did you do it?
Janine: Oh, I picked up one business plan template and it has all the necessary step-by-step guides to writing it down effectively.
- You only have to add the funding request if only you want the funding from outside. If you don’t want to raise your funds from a third party, then you don’t have to include them in your business plan.
- Your investors would like to invest in your business if only it is thriving or promising. They are less likely to lend money if you are in debt.
- You see, you are asking for money. So don’t take this section casually. Know your business inside out and only involve people who know everything about your business.
- Be as specific about your requirements and the funding that you require.
- If you are planning to send it to different investors, tailor your funding request according to the reader.
- All your sources have different mindsets and different funding criteria. Be very specific about it. Do detailed research before starting to write your funding request.
- Don’t hesitate while asking for the funds. Be open and ask just as much as your business really requires. But at the same time, don’t be greedy.
