Business Funding Help: How to use your business plan to get funding from business angels, investors, banks, family, investors, shareholders and more

There are two main categories of people that will examine your business plan to check the viability of the business proposed. This article is mainly geared at businesses that are already trading but new business owners can still read to gain the knowledge ahead of time. These are the lenders and potential investors. This is to check whether it is worth risking their money at all.

Business plans usually don’t have a standard format, but majority of business plans consist of the following:

• Executive summary ,

• Marketing research,

• Marketing plan,

• Financial information including financial history,

• How finances will be managed,

• Key personnel and organisational chart,

And any other relevant ones such as:

• A cash flow forecast eg quarterly

• Financial forecast for 3 – 5 year period

• Repayment schedules of loans or investors capital

Another way to use the business plan to get funding is to tailor it to target market/audience.

Lenders such as the bank will be interested in how the loan will actually help the business to grow from its current position, what the money is going to be used for in the business, how you are intending to repay any loans and overdraft issued to the business. The lenders will also want to know how much debt the business has already incurred and what other commitments the business has before any funding is given. This is to ensure that the business is not over-geared (i.e. business debt is too much compared to its income.)

Investors will be interested in what the return on investment is, if the business already has another source of funding , what the business is going to do with the funding if they get it , how and when the business is going to pay back the funding and if there is a good management in place to run the business so the funds are not mismanaged. Also a good cash flow forecast may be required to convince the investors or lender to part with their money!

Shareholders want to know if there is a secondary market for their shares i.e. how / where they can sell their share if they choose to exit the business, how much dividend they can expect on shares bought within the business, if share prices are expected to rise/fall sharply in the future , the management’s track record , the level of involvement they can have in the running of the business depending on the number of shares held in the company amongst other things.

Another way to get funding is to show your commitment to the business by showing if you have easy access to funds , or funds are difficult to obtain due to past credit history. Also the business owners need to demonstrate a personal financial commitment to the business. Most investors believe that if an owner is willing to risk their money, then they must believe in the service or product they are offering and are more likely to risk their own money as well. For example, you could demonstrate that you are reinvesting profits back into the business, show that there are existing investors!

The more investors or lenders there are backing a business, the more likely it is to secure new funding!

Further more:

• Business plans need to be well researched and up-to-date

• Backed up with relevant facts especially assumptions,

• Given a professional look and be consistent with fonts and colours,

• Be realistic and unambiguous

• Point out expected financial difficulties

• Cash flow will be effectively managed e.g. by actively monitoring accounts receivables

Main reasons why loan applications and business plans fail to attract funding include the following:

• Unrealistic forecasts,

• Poor unprofessional presentations of the business plan. This shows lack of seriousness,

• Poor management team or inexperience management to effectively manage the funding if given,

• Poor financial history ,

• Poor marketing plans.