Business Plans vs. Financing Proposals

January 3, 2021


Kevin Valley

Business plans and financing proposals are separate documents used for distinct purposes...

Business plans and financing proposals are separate documents used for distinct purposes.

A business plan should be used as a planning document which lays out the blueprint of a company and its strategic direction to guide management decision making. Whereas a financing proposal is a written document that is prepared solely for the purposes of soliciting interest from investors and/or lenders.

Business Plan

You should aim to include the following information in your business plan:

  1. Executive Summary

Outline the vision and strategic direction of the company

  1. Business Purpose

Include the company’s mission statement, the history of the business, and a summary of its products or services.

  1. Company’s Customers

Who are they? Where are they from? What is their spending power? What opportunities are there to deepen the relationship and add more value to them?

  1. Competitive Environment

Who is currently providing solutions to the problem(s) you are trying to solve? What are their strengths and weaknesses as it pertains to solving this problem for customers? How is your solution different?

  1. Company’s Suppliers

Who are they? What are their strengths and weaknesses? Most importantly, what is your company’s reliance on them?

  1. Marketing Plan

What are your sales channels? How do you intend to explore them?

  1. Key Staff

Who are they? What are their backgrounds? What specific skills and experience do they bring to the company? 

  1. Financial Forecasts

Include a financial cash flow model and a projected balance sheet that incorporate the proposed financing arrangements.

  1. Valuation of the Company

Include the valuation amount, valuation assumptions and rationale, comparable transactions, and comparable publicly traded companies.

  1. Sources and Uses of Financing

Outline the proposed sources and uses of financing that are consistent with achieving the business plan.

Financing Proposal

When soliciting financing from investors and/or lenders, you should aim to include the following information in your financing proposal, bearing in mind that it is a “selling” document:

A description of the business

  • The history of the business;
  • Corporate, financing (debt and equity), and ownership structures
  • Products and services manufactured and sold;
  • Markets served and marketing approaches used;
  • Major customers and suppliers;
  • Composition of directors, employees, contractors; and
  • Any technical (or other) expertise specific to the business

Analysis of the industry environment in which the business competes

Bios for the company’s management team

Description of the business' assets

  • Property, plant, and equipment that can be used as collateral for a loan/debt facility
  • Accounts receivable amounts
  • Inventory Values

An action-oriented business strategy

  • Build on the strengths and opportunities fo the business
  • Recognize, address, and deal with the weaknesses and deficiencies of the business.

Forward budgets based on stated financing plan, including cash flow forecasts and sensitivity analysis (base case, worst case, best case).

Copies of relevant financial, product and corporate documents to support the proposal.

  • Recent financial statements
  • Executed customer contracts / purchase orders

Characteristics of a Strong Financing Proposal

  1. States a clear financing amount that is being requested. A weak financing proposal would vaguely describe a range of financing or multiple amounts of acceptable financing.
  2. Financial forecasts including the effects of cash inflows and outflows resulting from funds being secured.
  3. Includes sensitivity analysis on key variables.
  4. Includes supporting financial statements in anticipation of readers’ questions and includes relevant financial, product, and corporate documents. A weak financing proposal excludes supporting financial statements and corporate documents and waits for potential investors and lenders to request them.
  5. Concisely written, includes detailed and relevant information that adds to the credibility of the proposal. A weak financing proposal is a lengthy document that elaborates on the irrelevant details of the company’s business plan.

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