The Six Questions Every Business Funding Proposal Must Answer

A business can be profitable, experienced and commercially attractive yet still struggle to progress a funding request. The problem is often not the business itself. It is that the proposal does not allow a third party to understand the transaction quickly, test the important assumptions and identify how capital will be returned.

A credible funding proposal should answer six connected questions. If one remains unclear, the rest of the proposal is usually harder to rely on.

1. Who is asking for the funding?

Start with the exact legal entity that will borrow, issue shares or receive funds. Explain where it sits in the group, who owns and controls it, who its directors are and whether another entity will provide security, guarantees or operational support.

• State the full legal name, company number, jurisdiction and trading address.
• Include an ownership chart and current capitalisation table where relevant.
• Identify the borrower, issuer, guarantor, security provider and operating company separately.

2. How much is required, and for what?

A single headline figure is not enough. A sources-and-uses schedule should show the gross funding requirement, fees, debt repayment, capital expenditure, working capital, contingency and the net amount available to the business. The use of funds should be specific and capable of being evidenced.

3. What creates the ability to repay or generate a return?

For debt, the proposal should demonstrate how interest and principal will be serviced from cash flow, asset realisation, refinancing or another defined source. For equity, it should explain the milestones, value creation and plausible routes by which investors may eventually realise value. Profit is not the same as cash.

4. What evidence supports the commercial plan?

Separate actual trading, executed contracts and paid invoices from letters of intent, qualified pipeline and early expressions of interest. All can be useful, but they do not carry the same evidential weight. Market size should also connect to the real route to market.

5. What security or structural protection is available?

Where security is proposed, identify the asset, legal owner, valuation basis, existing charges, proposed ranking, liquidity and any third-party consent required. A personal or corporate guarantee is a legal commitment, not a substitute for a viable repayment plan.

6. What is the exit, and what could prevent it?

A sale, refinance, planning event, customer contract or future fundraising may form part of an exit, but each depends on timing and assumptions. The strongest proposals do not hide uncertainty. They distinguish facts from management expectations, explain the key risks and show what happens if revenue is delayed, costs rise or the intended exit takes longer.

A useful final test

A reader who has not met the management team should be able to explain the parties, funding amount, use of funds, repayment or return, security and exit after reading the executive summary. If they cannot, the proposal is not yet ready for wider circulation.

Assess your funding readiness. Send Charter HCP a high-level summary of the business, proposed transaction, funding requirement and intended repayment or exit, and a member of the team will confirm whether the opportunity falls within Charter HCP's scope.