Businesses usually need start-up capital. Another major need is when the business is growing, and requires further monies to expand, for example to move to bigger premises, or buy equipment or vehicles. This is where a well-crafted financial proposal is necessary to obtain finance from external sources. There are a number of different ways to raise the funds for a business. Each source has advantages and disadvantages.
The potential sources of finance are existing shareholders’ and directors’ funds, family and friends, business angels, share issues, bank loans, overdrafts or credit cards, suppliers or extended credit terms, customers – payments in advance, Government and EU – grants and loans, Venture Capitalists.
Unless you are using your own savings, or borrowing from family, you will need to write a Loan Proposal to obtain the funds. Loan Proposal document is critically important for you. A lender or a bank, for example, will judge whether to grant the loan on how well this document presents the case to them. Their concern is that they will be repaid.
A good proposal must contain the key elements such as Overview of the business, Amount and purpose of the loan, Business description (details of the businesses’ trading history, assets, number of employees, and legal structure), Management Profiles (brief biographies of key individuals), Market Rundown (define your companies’ products and the area of the market it operates in, and also Profile your customers Identify competitors), and also Financial information (provide balance sheets, and cashflow statements and list collateral that you can pledge as security for the loan).