How do I put together a financing file?

What is a funding application? 

The financing package is the cornerstone for obtaining business financing, whether it is a bank loan, an equity investment or a grant. 

Since in most cases, the organization that is going to finance the project expects a reimbursement or a return on investment, a well-prepared file allows you to convince your interlocutor and to put all the chances on your side.

The financing file presents in a few pages your project (creation of a company, development of an activity, etc.) and allows you to demonstrate its credibility and your seriousness. 

Such a file allows the third party to better appreciate the chances of success of your project thanks to a detailed business model (what will be the strategy adopted? What are the characteristics of the proposed products or services? What is the customer base? What is the state of the competition on your market?) Finally, the financial forecasts for the first years of activity allow you to judge the feasibility of the project and to estimate its profitability in the short and medium term. 

Presenting a complete, explicit and well-argued file significantly increases your chances of obtaining professional financing, bank credit or equity investment. Of course, the quality of your project is essential. Presenting a profitable, solid project with measured risks is an important factor of success.

What makes a good financing package? 

Any application for financing must include a presentation of the project. The objective of this presentation is to give credibility to the entrepreneur, to demonstrate the viability of the project and to reassure the real estate credit establishments or the lending organization as to the capacity to reimburse the loan, or the return on investment .

The presentation of the project must be clear, precise and easy to read. It should summarize the business model of your activity and be based on a serious market study, a clear strategy and a complete forecast .

The rest of the documents to be provided depend on the nature of the project to be financed.

Financing file for a business creation or takeover project 

A project to create or take over a company generally requires the development of a business plan. Potential investors will be particularly interested in this plan, both for its financial and economic aspects.  

The business plan is an essential document that presents all aspects of a project and details the business model in depth. Beyond allowing the potential lender to study the project in its entirety (the concept, the market, the strategy, the team and of course its financial part and its projected profitability) the business plan allows to evaluate the quality of the founding team.

Generally speaking, a business plan should include the following parts:

• An executive summary
• The project's business model
• The presentation of the project leader as well as his possible partners (identity, background, training, skills and roles)
• The market study and the feasibility study
• The legal framework (legal status chosen, shareholder composition, management team...)
• The commercial and communication strategy
• The financial set-up and the financial forecast (needs related to the project, financing plan, cash flow budget, forecasted balance sheet...) 

Financing file for an investment or development project

When the request for financing concerns investment in professional equipment (machine, car, etc.), for example, the realization of a business plan is unnecessary. 

In this case, the main documents you will have to attach to your application are a copy of your annual accounts, a Kbis extract of your company and, if possible, an estimate of the property you are planning to acquire.

What are the mandatory documents for a financing file?  

A well prepared financing file must include a certain number of important documents in addition to the business plan and the market study. The legal and identification elements of the company must be added. These include, for example, its up-to-date articles of association, its legal form, its location and operating address, a Kbis extract, proof of domicile, etc.

Other supporting documents related to the project to be funded are also required, including:

• Proof of personal contribution (a statement of account or a deed of contribution for example)
• Pro forma invoices and estimates
• Documents related to the financial elements (business forecast, last three balance sheets and income statements in case of a takeover, etc.)

In addition, documents related to the project owner such as a copy of a valid ID, proof of address, an updated curriculum vitae, a copy of the tax notice and tax status slip and other various documents (proof of real or personal guarantee, marriage contract, etc.).

Our tips for increasing your chances of obtaining financing 

To put all the chances on your side, the financing file must be impeccable. 

1. Particular care must be taken with both form and content.
2. The next step is to make sure that you meet certain mandatory criteria (especially for bank financing) such as a minimum percentage of contribution or an acceptable debt ratio.
3. Finally, it is advisable to add to the file any element that could bring credibility to your project, such as obtaining grants, having won competitions, etc.
4. It may also be important to adapt its content to the person you are talking to. The information to be included is not the same depending on the recipient (bank, investor, partner, etc.). 

For example, to grant a business loan, a bank generally analyzes several financial indicators such as the self-financing capacity (CAF) generated by your project, your personal contribution (capital contribution and/or current account), the overall amount of the planned investment and therefore of the requested financing.

Where to turn for funding? 

Bank debt

Although banks are often the first institutions that project leaders turn to in search of financing, the loans granted are not very accessible and have a low amount. Moreover, banks have limiting criteria for companies that do not already have three positive balance sheets and have not previously raised funds.

Business Angels

A Business Angel is an individual who invests his or her personal funds in a company. They are usually former entrepreneurs who invest in young companies with high potential.

Subsidies

In France, the State allocates a budget to support business creation. Subsidies can take different forms: material or financial aid, social and tax relief. Several public or private organizations provide subsidies for business creation. 

Revenue Based Financing

Karmen is the solution for Revenue Based FinancingKarmen is an innovative, non-dilutive financing solution (there is no transfer of capital in exchange) and is recommended for digital companies, SaaS and e-tailers.

With Karmen, digital start-ups and SMEs benefit from a 100% non-dilutive, digitalized and fast financing solution.

Getting financing with Karmen is easy! Our software connects in read-only mode, thanks to open banking, to your tools to have a quick and efficient view of your company's financial health. 

Several products are available from Karmen to best meet your needs. The Karmen offer gives you rapid cash flow and enables you to finance your growth efficiently.

If you're feeling the cash crunch when it comes to your working capital requirements, we recommend you take a look at the Karmen

To learn more, please contact our consultants! 

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Thus, fine-tuning your financing file is the best way to convince banks, capital investors or granting organizations to invest in your project. If you are launching a SaaS start-up, there is also an alternative way to finance yourself in a non-dilutive and fast way: Revenue Based Financing!