A business plan contains many sections, and if you plan to seek funding for your business, you will need to include the funding request section. The good news is that this section of your business plan is only needed if you plan to ask for outside business funding.If you're not seeking financial help, you can leave it out of your business plan. There are a variety ofways to fund your businesswithout debt or investors.Below, we'll cover how to write the funding request section of your business plan.
Key Takeaways
- The funding request section of your business plan is required if you plan to seek funding from a lender or investors.
- You'll want to include information on the business, your current financial situation, how the money will be used, and more.
- Tailor each funding request to the specific funding source, and make sure you ask for enough money to keep your business going.
What Goes Into the Funding Request?
The funding request section provides information on your future financial plans, such as when and how much money you might need. You will also include the possible sources you could consider for securing your funds, such as loans or crowdfunding. Later, you can update this section when you need outside funding again for business growth.
Parts of the Funding Request
An Outline of the 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.
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.
Note
Provide financial details such as income and cash flow statements, and balance sheets in your funding request section.
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. 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 Will the Funds Be Used?
Detail how you'll be using the money, whether it's for inventory, paying a debt, buying equipment, hiring help, and more. If you plan to use the money for several things, highlight each and how much money will go to each.
Note
Most financial sources would rather invest in things that grow a thriving business than things that pay for debt or overhead expenses.
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'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 affect 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 (and how long before they can do that).
Important Points To Remember When Writing Your 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, such as loan repayment versus ROI, so create different reports for each.
- Keep your funding sources in mind: Each resource will have different questions and concerns. 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.
Frequently Asked Questions (FAQs)
How do you request funding for a nonprofit?
Most nonprofits seek funding in the form of grants. Write a grant proposal that includes information on the project or organization, preliminary budget needs, and more. Be sure to format it with a cover letter, proposal summary, the introduction of the organization, problem statement, objectives, methods, evaluation, future funding needs, and the budget.
What are three methods of funding?
Grants and scholarships, equity financing, and debt financing are the main three methods of funding for small businesses. Grants and scholarships do not need to be repaid and are often best for nonprofit organizations. Equity financing is when you receive money in exchange for ownership and profits. Debt financing is when you borrow money that needs to be repaid.
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