July 25, 2024

Earn Money

Business Life

5 Tips For Writing A Funding Request Lenders And Investors Will Love

Startups, long-established businesses, and any business in between may need an influx of cash at some point. Getting funding from lenders or investors is one way businesses can get the funds they need. But, how you write a business funding request can make the difference between a yes or a no response. There are five key tips for writing a business funding request—and I’m here to break them down for you. 

5 Key Tips To A Funding Request

One of the many things I’ve learned through my years as a serial entrepreneur is that getting funding can be necessary. Even when you put your all into your business, getting some cash flow from a lender or investor helps you go a little further. With that in mind, let’s get into my five tips for how to write a funding request that lenders and investors will love (so your business can benefit!). 

1. Be Professional

Being professional should go without saying, but it is of the utmost importance when communicating with lenders or investors. And, being professional is not just in appearance or word choice. It can also include small details, like tone or grammar.

For email, online data submissions, paper communication, or other documents, check the following before sending:

  • Punctuation
  • Grammar
  • Formatting
  • Headers
  • Signatures
  • Clarity of the document
  • Active voice
  • Tone
  • Conciseness

If you plan to mail your funding request, make sure you complete everything digitally instead of by hand. Typed forms are more professional and generally more legible for others to review. Do you have any letterhead for your business? If so, use it for any cover letters you submit with the request. 

Do you plan to submit everything online? Review for any errors before submitting. Consider using word or grammar correction software to help catch any potential mistakes. 

2. Do Your Research

From loans through the Small Business Administration (SBA) to funds from angel investors, there are many options to consider when seeking funding. Rather than create one template for all investors, research what each option has available and tailor your requests. The last thing you want to do is write up a one-size-fits-all funding request. 

Instead, sit down and look through what each option has to offer. It may take some time, but research lets you narrow down your best opportunities. For example, if your business sells novelty T-shirts, you don’t want to submit a request for funding to an investor who works with technology and software. 

Researching potential lenders also allows you to determine if there is a funding limit. If you need $200,000, but a lender only provides up to $100,000, your research lets you know you need to limit your request. Or, you can look for another lender or investor for the remaining funds you need. 

Keep in mind that some lenders (e.g., SBA) have business size requirements. Looking into a potential lender or investor lets you determine if your business funding request is a good fit before you sit down to write. 

3. Bring Documents

Let’s face it: Before anyone lends or invests large sums into your business, they need to get nosy with your financials. Prepare all of your financial documentation before contacting lenders or investors to put your best foot forward. 

Prepare the following business financial statements:

Investors and lenders may also want to see other important information, including:

  • Personal financial statements
  • Business licenses and permits
  • Ownership and/or affiliate documentation
  • Business loan or mortgage information
  • Loan application history

Some investors may require different information. And, some lenders may require more or less documentation from you. Be prepared to provide any and all up-to-date financial records you may have. 

4. Give Details

A funding request is not an elevator pitch. So, it’s important to provide as much detail as possible without adding unnecessary filler. 

Add the following information to the funding request:

  • Business information (e.g., location, date opened, products or services, etc.)
  • Current financial situation
  • Amount of funding requested
  • How you plan to use the requested funds
  • Explanation of current and future financial plans (e.g., how you plan to pay off loans)

Explain why you need the amount you’re requesting and how you will use the funds. Give lenders or investors details on how you will use the funds to grow your business and repay the loan or make good on the investment. 

5. Be Realistic

In an ideal world, your million-dollar idea would guarantee a $1 million investment or loan. Unfortunately, that’s not exactly how the real world works. So, it’s crucial that you set realistic expectations for your business’s needs. 

Grab a calculator, pen, and notebook. Sit down with your financial statements and determine a realistic funding request. 

If you’re looking at business loans, factor in the length of a potential loan repayment period. Can you afford to repay a loan of $100,000? What about $50,000? What interest rate is too high for you to consider? Consider how loan repayments will impact your monthly business bills. 

Looking at investors? Before you take the plunge, ask yourself the maximum percentage of ownership or control you’re willing to give to an investor. If an investor agrees to the maximum funding request but wants a 50% control, are you willing to accept that offer? 

If you’re not sure about the answers to these questions, consult your accountant or a business lawyer for guidance. 

Writing A Funding Request Wins And Losses

Not every funding request is a win, and that’s OK. Sometimes, you decide the loan or the investment isn’t the right fit for your business. Other times, it’s just not the right request at the right time with the right lender or investor. Don’t give up after one loss or even a dozen. Keep trying and remember these five tips before starting your next funding request.

Source Article