Tailor your business plan to secure funding

Use your business plan to demonstrate your commitment to the business

Guide

If you want to attract outside funding, you need to show that you are committed to the business. You will also need to either show that you have a good credit history or, if not, explain why not.

Demonstrating your personal financial commitment

To attract funding, you need to invest your own money in your business. If you are not prepared to risk your own capital, a lender or investor is unlikely to want to risk theirs.

Therefore, your business plan needs to show the extent to which you are committing your own resources.

For example, you should mention that you are:

  • investing your own cash in the business
  • reinvesting profits from the business rather than taking dividends yourself
  • using your own assets and guarantees to raise funds
  • finding funds from family, friends and existing investors

It is always helpful to detail the backing you already have from banks and other investors - especially independent investors.

Demonstrating your personal credit history

Because your commitment and track record in meeting your obligations are so important, lenders and investors will want to know your personal credit history. Credit references will be taken up for sole traders and each partner in a partnership.

Experian provides a summary of the information that credit reference agencies hold on businesses and individuals.

A credit reference agency will discover if you, or any partner or co-director of the business, have a poor credit history or county court judgments.

If you have a poor credit rating, use the notes supporting the business plan to state the facts and give your own version of how the poor credit history arose. This is much better than having the new investor find out without any explanation.

You should also state what you are doing to repair your credit history, such as paying your bills on time and managing debt responsibly.