Top 3 Secrets to crafting a Business Proposal for Investor or Bank Funding
Are you intending on starting a new business venture, capitalizing on the next big opportunity or expanding and scaling an existing operation?
In all the above cases you will need to put together a business proposal to convince investors or banks that your Dream is worth their Risk.
The starting conversation with an investor or bank is normally done through a Credit Application process and a sound business proposal is Vital for the approval of a Credit application process but applying for a Credit line for the first time can be a daunting task for many CEO’s, Entrepreneurs and Business Owners.
Top 3 reasons why a Credit application gets rejected by an Investor or bank:
- Lack of Business Acumen and relevant knowledge and expertise in the specific industry or business environment by the management team.
- Poorly designed Cash Flow forecasts and Budgets which are unable to explain the commercial drivers of the Revenue, Costs and Profit from the business.
- Inadequate or lack of collateral such as property or machinery.
Top 3 ways to a achieve a Successful Credit application from an Investor or bank:
- A clearly defined Business Strategy.
A story or narrative indicating the road map the company will use to allocate Resources to achieve its goals and objectives of using the funding credit lines to create Customer Value.
A great way to design a business narrative or story is to start with the Business Model Canvas (shown below) showing the key elements that fit together to help the business make a Profit and create, deliver and capture Value in the enterprise.
2. A detailed and commercially driven Financial Model.
A good starting point will be the 5 year Financial Forecast which will reflect the financial journey that will translate the Business Strategy and provide deep commercial insights about the key performance indicators (KPI’s) in the business.
It will also describe the key assumptions around estimation and predictability of Revenue streams and Cost structures in the Business model, and in turn how this will create Profit for the enterprise.
3. A Five year Trend of the high level numbers from the Audited Financial Statements.
Provide evidence of the enterprises financial performance (Income Statement), financial position (Balance Sheet) and Statement of Cash flows as well as Financial ratio analysis and Audit reports.
Investors and banks use this financial information to evaluate the success of the entity, assess reasonableness of the financial forecast assumptions, determine the appropriate pay back period of the credit funding lines, benchmark the Balance sheet against other similar market enterprises and evaluate overall Credit risk.
Generating and compiling the information needed for a business proposal is unquestionably tedious but can become a useful tool for the management team, as it encourages them to consider their business plans and Strategy more carefully into the future.
Let me know if you need help structuring the Perfect Business Proposal to successfully fund your next opportunity.
Would you like to learn more? Drop me an SMS on +260967924720 and I’ll call you back.