The business plan contains several sections, and if you plan to seek funding for your business, you will need to include a funding request section. The good news is that this section of your business plan is only required if you plan to request external funding for your business. If you are not seeking financial assistance, you can leave it out of your business plan. There are various ways to fund your business without debt or investors. Below, we will cover how to write the funding request section of your business plan.
What goes into the funding request?
The funding request section provides information about your future financial plans, such as when and how much money you may need. You will also include potential sources you can consider to secure your funds, such as loans or crowdfunding. Later, you can update this section when you need external funding again for business growth.
Parts of the funding request
Business Summary
Yes, you have already covered this in previous sections, but you want to give lenders and potential investors a summary of your business. In some cases, you may only share the funding request section, so it should contain details about your business such as what you offer, information about your target market, your structure (like an LLC), and information about owners and members (for partnerships and corporations), along with any successes you have achieved so far in your business.
Current Financial Position
Again, you provided some financial information in the financial statements section, but it wouldn’t hurt to summarize it. If you are only submitting a funding request, you will need this information to help the financial sources understand your financial position.
Provide financial details such as income statements, cash flow statements, and balance sheets in your funding request section.
Also provide your projected financials. If you are requesting a loan that will provide collateral, include information about the assets. If the company has debt, outline a plan to repay it. Finally, share how you will repay the loan or what type of return on investment investors can expect from their investments in your business.
How much money do you need now and in the future?
Specify the type of funding you are requesting such as a loan or investment. Identify what you need now and what you may need in the future, up to five years ahead.
How will you use the funds?
Specify how you will use the funds, whether it’s to purchase inventory, pay off debt, buy equipment, hire help, and more. If you plan to use the funds for multiple things, highlight each and how much money will go to each.
Most financial sources prefer to invest in things that will grow thriving businesses rather than things that pay off debt or cover overhead costs.
Current and Future Financial Plans
Current and future financial plans include items such as loan repayment schedules or plans to sell the business. If you are obtaining a loan, outline your repayment plans (although most lenders will have their own schedules). If you have plans to sell the business, inform the lender about that and how it will affect them. Other issues to consider are transitions (if you are transitioning) or purchasing. Finally, inform investors how they can exit the deal, such as cashing out (and how long before they can do that).
Key Points to Remember When Writing Your Request
You are asking for money, so you should always be professional and know your business inside and out. Here are some other things to keep in mind:
- Tailor your funding request for each financial source: lenders and investors need different information, such as loan repayment versus return on investment, so create different reports for each source.
- Keep the funding sources in mind: each source will have different questions and concerns. Do some research so you can address them in your report.
- Request
ما يكفي للحفاظ على استمرارية عملك: لا تكن بخيلًا، حيث لا تريد أن يفشل عملك بسبب نقص المال. في الوقت نفسه، لا تكن جشعًا وتطلب أكثر مما تحتاجه.
Frequently Asked Questions (FAQs)
How do you request funding for a nonprofit organization?
Most nonprofit organizations seek funding through financial support. Write a grant proposal that includes information about the project or organization, initial budget needs, and more. Make sure to format it with a cover letter, proposal summary, organization introduction, problem statement, goals, methods, evaluation, future funding needs, and budget.
What are three methods of funding?
Grants, scholarships, equity financing, and debt financing are the three primary methods for funding small businesses. Grants and scholarships do not require repayment and are often suitable for nonprofit organizations. Equity financing is when you receive money in exchange for ownership and profits. Debt financing is when you borrow money that must be repaid.
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Sources:
- Small Business Administration. “Funding Your Business.”
- Congressional Research Service. “How to Develop and Write a Grant Proposal.”
- Library of Congress Reference. “Types of Funding.”
Would you like to read more content like this? Subscribe to The Balance newsletter for daily insights, analyses, and financial tips, delivered straight to your inbox every morning!
Was this page helpful?
Thank you for your feedback!
Sources:
- Small Business Administration. “Funding Your Business.”
- Congressional Research Service. “How to Develop and Write a Grant Proposal.”
- Library of Congress Reference. “Types of Funding.”
Would you like to read more content like this? Subscribe to The Balance newsletter for daily insights, analyses, and financial tips, delivered straight to your inbox every morning!
Was this page helpful?
Thank you for your feedback!
Sources:
- Small Business Administration. “Funding Your Business.”
- Congressional Research Service. “How to Develop and Write a Grant Proposal.”
- Library of Congress Reference. “Types of Funding.”
Source: https://www.thebalancemoney.com/steps-to-write-a-business-plan-1794230
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