Business Plans vs. Financing Proposals
January 3, 2021
By
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...
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.
You should aim to include the following information in your business plan:
Outline the vision and strategic direction of the company
Include the company’s mission statement, the history of the business, and a summary of its products or services.
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?
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?
Who are they? What are their strengths and weaknesses? Most importantly, what is your company’s reliance on them?
What are your sales channels? How do you intend to explore them?
Who are they? What are their backgrounds? What specific skills and experience do they bring to the company?
Include a financial cash flow model and a projected balance sheet that incorporate the proposed financing arrangements.
Include the valuation amount, valuation assumptions and rationale, comparable transactions, and comparable publicly traded companies.
Outline the proposed sources and uses of financing that are consistent with achieving the business plan.
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
Analysis of the industry environment in which the business competes
Bios for the company’s management team
Description of the business' assets
An action-oriented business strategy
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.