Funding Request and Return
Adapted from content excerpted from the American Express® OPEN Small Business Network
State the amount of funding and the type (debt or equity) of investment you seek. It is important here to provide a breakdown of how the money will be applied. Discuss what effect the capital will have on the business' potential to grow and profit, when the money is needed, and what investment has already been made in the company.
Investors will also want to know what they will receive in return for their capital. Be as clear as you can in this section both about the potential upside and the potential downside of investing in your business. A common mistake in a business plan is to be unclear in this section, which turns potential investors away. If the company founders have invested in the company, include this in your plan. Some investors are encouraged by founders putting their own money on the line.
Finally, create an exit plan that describes how investors will get their money out of your company. One common investor worry is that even if a business is profitable, it may be difficult for them to get a good price for their shares. A cash-out option in five years or assurance that the company will become a strong candidate for a purchase or an IPO (Initial Public Offering) are what many venture capitalists and lenders will insist upon. See the sample exit plan in the toolbox.
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