What to Include in Your Small Business Funding Request

In the world of small business, securing funding can be a pivotal moment that propels your venture to new heights. Whether you’re seeking financial support as part of your comprehensive business plan or preparing a stand-alone funding request, the information you provide is critical. This guide will delve deeper into what you should include in your funding request, ensuring that you present a compelling case to potential investors or lenders.

A Summary of the Business

Intrigue them from the start.

Your funding request should kick off with a concise but captivating summary of your business. If it’s an integral part of your business plan, you’ve likely already crafted a comprehensive business summary. However, if it’s a standalone document, here’s your chance to shine.

• Define your company What is its core identity? Where are you located?
• Products or services What do you sell or offer? How do they stand out?
• Customer base Who are your customers, and what’s your market reach?
• Legal structure Are you incorporated? Specify the type of corporation.
• Key personnel Highlight key staff members and owners.
• Milestones Briefly list your notable successes and accomplishments.

Real-Life Example

Imagine you’re seeking funding for your artisanal coffee roastery, “Beans & Brews.” Your summary could start with “Beans & Brews, a thriving artisanal coffee roastery nestled in the heart of Seattle, has garnered a loyal following of coffee enthusiasts seeking unparalleled quality. With a strong presence in the Pacific Northwest, our company, established as an LLC, is led by passionate coffee aficionados.”

How Much Money You’re Requesting

Specify the numbers clearly.

The crux of any funding request is, of course, the amount of capital you’re seeking. Be transparent about your current financial needs, and if this is just one step in your growth plan, outline your future financial requirements.

• Immediate funding How much do you need now?
• Future plans Are you foreseeing more funding requests? When?
• Funding type Is it a loan or investment?
• Terms What are the terms you’re proposing?

Real-Life Example

For “Beans & Brews,” if you’re looking for an initial infusion of $200,000 to expand your roasting capacity and open a second café, make it clear. Additionally, if you anticipate needing an additional $500,000 in two years to further expand regionally, mention this as part of your long-term plan.

What You Will Use the Money For

Break down the dollars.

It’s not enough to state the total amount needed; you must also elucidate how you intend to allocate those funds.

• Working capital Is it for inventory, day-to-day operations, or both?
• Debt repayment Are you settling existing loans?
• Capital investments Specify if it’s for a property, equipment, or acquisitions.
• Growth initiatives Will it fund marketing campaigns or staff expansion?

Real-Life Example

In the case of “Beans & Brews,” a breakdown might include $100,000 for equipment upgrades, $50,000 for inventory expansion, $30,000 for marketing to fuel growth, and $20,000 for hiring and training new staff.

Financial Information

Show them the money.

Investors and lenders scrutinize your financials, seeking evidence of stability and growth potential.

• Historical data Provide income statements, balance sheets, and cash flow statements for the last three to five years (if applicable).
• Collateral If it’s a collateral-backed loan, detail the assets you can offer.
• Investment history Mention any personal investments or external investors.
• Projections Offer realistic financial forecasts for the future.

Real-Life Example

For “Beans & Brews,” display your financial history, demonstrating steady revenue growth over the past five years. If you’ve invested $50,000 of your own money and secured an additional $100,000 from investors, state this. Then, provide clear projections, showcasing expected revenue and expenses for the next five years.

How You Plan to Repay or Offer Returns

Address the investor’s bottom line.

Potential funders want to know how and when they’ll see returns on their investment. Be explicit about your repayment strategy or the return on investment (ROI) you can offer.

• Debt repayment Outline your plan to pay off the borrowed funds.
• Investor ROI Explain how investors can profit from their investment.
• Exit strategy If you’re targeting investors, discuss your exit plan.

Real-Life Example

For “Beans & Brews,” elucidate how the increased revenue from expanded operations will enable timely loan repayments. If you’re offering investors a 15% equity stake, detail how they can expect returns through dividends or a potential buyout in five years.

Factors Affecting Repayment

Address potential challenges.

Lastly, consider and address any external factors that might impact your ability to repay or offer returns. Whether it’s a potential acquisition, business expansion, or any other significant event, provide a brief assessment.

Real-Life Example

For “Beans & Brews,” mention that if a larger coffee chain expresses interest in acquiring your business, it could positively impact investor returns. Conversely, if unforeseen market shifts occur, discuss how you plan to adapt.

In conclusion, crafting a compelling funding request is a crucial step in securing the financial support your small business needs. By meticulously addressing these key elements, you can present a persuasive case to potential investors or lenders, increasing your chances of success.

Key Takeaways

• Start with an engaging summary of your business.
• Clearly state the amount of funding required and future funding plans.
• Break down how the funds will be used.
• Provide comprehensive financial information and projections.
• Outline your repayment strategy or investor ROI.
• Address external factors that may affect repayment.