All business loan and venture capital deals begin with the clear communication of the facts, which influence a Funding Source to consider the transaction. This communication comes in the form of a business plan.
Great insight into the Client's company comes from the business plan. Therefore, a plan needs clear and concise data stating the Client's product, or service, who they are, their track record, the funding request, financial statements, and other informative information. Clients must use the plan to effectively communicate their strategies, and their commitment to the success of the project.
An effective plan will always start with a one page Executive Summary. This one page will be written with facts, no fluff, so that the reader has a clear understanding about the company and what they do. Statements made in the Summary are supported by the documentation within the body of the plan. It is the summary that encourages the reader to spend valuable time digesting the rest of the business plan.
It is advisable for the Client to have a good understanding of all the elements necessary to make a successful plan. There are always Clients who spend too much time trying to market projects to funding sources, when the project has no chance of being funded due to the poor quality of the business plan. The business cannot be funded if no one is willing to read their plan and accept the information as being of sound business and financial reasoning.
There are a number of books and sources available to assist the Client develop a better understanding of writing and presenting a business plan. Along with other information on this site there is a list of books, which focus on the development of business plans. These books were the ones recommended by professionals who participated in a national survey concerning books on business plans.
When approaching a Funding Source, Clients should take into consideration: if a person is job hunting, does a quality resume, or a sloppy one have the greatest possibility of landing the job? The answer, of course is A quality. When seeking capital for projects, the same is true concerning business plans.
Currently, there are a tremendous number of deals already in the marketplace, and there are many more people looking to expand their business. Many of these deals submitted for financing are turned down due to the fact the A Plan is not adequate and will never be successfully accepted by a Funder.
Clients need to understand the chances of successfully funding a project, diminishes greatly when they are unable to present a quality business plan. Submitting an inadequate plan, or completing a plan with partial effort, will not get successful results.
When a Client submits an ineffective business plan to a Consultant who will then in turn submit the plan to multiple funding sources, the Consultant has choices: one, trash the deal and move onto the next deal, two, the Consultant can waste time and money calling other Consultants and Funding Sources in a fruitless attempt to find Funding, or three, determine whether the project is at least viable then discuss with the Client the facts of submitting a quality package.
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Business Plan Funding Sources and Uses
Your business plan's financial section should include a chart showing where you intend to find the necessary funding to launch the business, the amounts from each source, and the specific uses of the capital you will raise. You must account for the use of each dollar of funding within this chart. To be convincing to funders, the uses must be complete, but not padded with unnecessary or inflated costs. The sources must also seem reasonable to readers.
Choosing Sources
The sources of your funding will depend on the type of business, the size of the investment needed, and the financial return you project. For small businesses needing only tens of thousands of dollars, venture capital funding is generally out of the question, but angel investor funding or bank loans are certainly possible. As the financial return expected increases, investors and lenders with higher tolerance for risk will become more interested.
The sources should generally include partner contributions. If you have no cash to put in, or choose not to, funders will get the idea that you are not "on the hook" in the same way they are, and may be less driven to keep the business afloat and protect their investment. They would like to know that you are in the same boat as them and have made personal financial sacrifices as well as the usual sacrifices of time and energy.
Categories of Uses
The uses of funding will fall into different categories depending on the type of business you are launching. These may include legal and permitting expenses, leasehold improvements on a rented facility, equipment purchases, starting inventory purchases (if you cannot buy inventory on credit at this stage), marketing expenses, cash to cover the shortfall between your early operating revenues and operating expenses, and additional cash reserves. Use a cash flow statement to determine these final two categories, as only by looking at how the inflows and outflows will work over your first months or year will you be able to see what cash requirements the business will have to keep a healthy reserve in the bank to prepare for any contingencies.
Eric Powers is associated with Growthink, a business plan consulting firm. Since 1999, Growthink's business plan consultants have developed more than 2,000 professional business plans for entrepreneurs and business owners who have raised more than $1 billion in growth capital. Call 800-506-5728 today for a free business plan consultation with a Growthink business plan writer.
Choosing Sources
The sources of your funding will depend on the type of business, the size of the investment needed, and the financial return you project. For small businesses needing only tens of thousands of dollars, venture capital funding is generally out of the question, but angel investor funding or bank loans are certainly possible. As the financial return expected increases, investors and lenders with higher tolerance for risk will become more interested.
The sources should generally include partner contributions. If you have no cash to put in, or choose not to, funders will get the idea that you are not "on the hook" in the same way they are, and may be less driven to keep the business afloat and protect their investment. They would like to know that you are in the same boat as them and have made personal financial sacrifices as well as the usual sacrifices of time and energy.
Categories of Uses
The uses of funding will fall into different categories depending on the type of business you are launching. These may include legal and permitting expenses, leasehold improvements on a rented facility, equipment purchases, starting inventory purchases (if you cannot buy inventory on credit at this stage), marketing expenses, cash to cover the shortfall between your early operating revenues and operating expenses, and additional cash reserves. Use a cash flow statement to determine these final two categories, as only by looking at how the inflows and outflows will work over your first months or year will you be able to see what cash requirements the business will have to keep a healthy reserve in the bank to prepare for any contingencies.
Eric Powers is associated with Growthink, a business plan consulting firm. Since 1999, Growthink's business plan consultants have developed more than 2,000 professional business plans for entrepreneurs and business owners who have raised more than $1 billion in growth capital. Call 800-506-5728 today for a free business plan consultation with a Growthink business plan writer.
Business Plan Funding
Getting funding for your business is provided by investors, and is typically based on a company's business plans' ability to show how much money is needed, how much money is going to be made, and how the investor will benefit.
A well-crafted business plan offers a glimpse into the past, present, and future of the company. Generally the funding is awarded based on financial projections that usually include a 2-3 year cash flow forecast, 3-5 year financial information forecast, and a detailed and specific plan on the how the loan will be repaid.
There are two basic types of business plan funding: debt and equity.
Debt funding is where a company borrows money (as with loans) and must pay it back with interest in a timely manner. There are many sources for debt financing: traditional bank loans, savings and loans, commercial finance companies, and the U.S. Small Business Administration (SBA) are the most common. Usually, these sources are best for companies that have a high ratio of equity-to-debt.
Equity funding means taking on private or commercial investors, and making your business accountable to your investor. Many small business owners raise funding from relatives, friends, colleagues, or customers who hope to see the businesses succeed for a return on their investment. However, the most common source of professional equity funding comes from angel investors or venture capitalists.
Venture Capitalists are institutional risk-takers and may be groups of wealthy individuals that are willing to offer promising new businesses the capital needed. These investors include individuals with substantial net worth, corporations, and corporate financial institutions. If a company has a high proportion of debt to equity, most experts advise increasing the ownership capital (equity investment) for acquiring money to finance your business plan or obtain a commercial line of credit.
As always, it is best to consult with experts and trusted advisors before making a decision that will affect your business.
Albert Malwicky is a freelance writer who writes about a variety of different topics for small businesses everywhere. A specialist currently building a resource dedicated to business financing, Albert enjoys the challenges of writing for different companies everywhere.
A well-crafted business plan offers a glimpse into the past, present, and future of the company. Generally the funding is awarded based on financial projections that usually include a 2-3 year cash flow forecast, 3-5 year financial information forecast, and a detailed and specific plan on the how the loan will be repaid.
There are two basic types of business plan funding: debt and equity.
Debt funding is where a company borrows money (as with loans) and must pay it back with interest in a timely manner. There are many sources for debt financing: traditional bank loans, savings and loans, commercial finance companies, and the U.S. Small Business Administration (SBA) are the most common. Usually, these sources are best for companies that have a high ratio of equity-to-debt.
Equity funding means taking on private or commercial investors, and making your business accountable to your investor. Many small business owners raise funding from relatives, friends, colleagues, or customers who hope to see the businesses succeed for a return on their investment. However, the most common source of professional equity funding comes from angel investors or venture capitalists.
Venture Capitalists are institutional risk-takers and may be groups of wealthy individuals that are willing to offer promising new businesses the capital needed. These investors include individuals with substantial net worth, corporations, and corporate financial institutions. If a company has a high proportion of debt to equity, most experts advise increasing the ownership capital (equity investment) for acquiring money to finance your business plan or obtain a commercial line of credit.
As always, it is best to consult with experts and trusted advisors before making a decision that will affect your business.
Albert Malwicky is a freelance writer who writes about a variety of different topics for small businesses everywhere. A specialist currently building a resource dedicated to business financing, Albert enjoys the challenges of writing for different companies everywhere.
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