Business Funding: How to Write a Strong Executive Summary

If you are seeking business funding, project financing, private lending, or investment capital, your executive summary may be one of the most important documents in your funding package.

Why?

Because it is often one of the first documents a lender or investor reviews.

Before a capital provider spends significant time analyzing financial statements, projections, valuations, feasibility studies, appraisals, or a complete business plan, they need to understand the fundamentals of the opportunity.

A strong executive summary should quickly answer three fundamental questions:

What is the opportunity? How much capital is required? Why does this transaction make financial sense?

If your executive summary cannot answer those questions clearly, you may lose a lender's or investor's attention before they ever reach the strongest parts of your proposal.

Your Executive Summary Is More Than an Introduction

A common mistake among business owners and project sponsors is treating the executive summary as simply an introduction to the business plan.

For funding purposes, it needs to accomplish considerably more.

Think of your executive summary as a concise investment or lending case.

A capital provider should be able to read it and understand the business, the people behind it, the amount of capital requested, the proposed use of funds, the financial opportunity, the risks, and how the capital provider ultimately gets paid.

Here are the key components to include.

1. Who Are You?

Start with the fundamentals.

Identify the legal name of the company, its location, industry, operating history, ownership structure, and principal management team.

Explain what the company does in plain business language.

Avoid making a lender search through several pages of promotional material before discovering the actual business model.

For a project financing request, identify the project, location, sponsor, development stage, and purpose.

2. How Much Funding Do You Need?

State the amount clearly.

If you are seeking $10 million, say so.

Avoid vague statements such as:

"We are seeking between $5 million and $15 million depending upon investor interest."

Unless there is a legitimate reason for a funding range, uncertainty about the amount required can suggest that the project's financial requirements have not been adequately developed.

The requested capital should correspond with your financial projections, project budget, and use-of-funds schedule.

3. What Type of Capital Are You Seeking?

Identify the anticipated funding structure.

Depending upon the transaction, you may be seeking:

• Senior debt
• Secured business financing
• Project financing
• Mezzanine capital
• Preferred equity
• Common equity
• Joint-venture capital
• A combination of debt and equity

If you are willing to consider different structures, explain that flexibility.

The objective is to help the capital provider determine whether the opportunity fits its investment mandate.

4. What Will the Money Be Used For?

Your use of funds is one of the most important components of a funding request.

Do not simply state that the capital will be used for "business expansion."

Explain where the money is going.

For example, a funding request could include:

Real estate acquisition: $3,500,000
Construction and improvements: $2,500,000
Equipment: $1,500,000
Working capital: $1,750,000
Professional and closing costs: $750,000

Total Funding Requirement: $10,000,000

The numbers in the executive summary should reconcile with the detailed financial information contained elsewhere in your funding package.

5. What Has the Sponsor Already Invested?

Capital providers will often want to understand the sponsor's financial commitment to the transaction.

Explain how much has already been invested and by whom.

Sponsor investment might include cash, land, buildings, equipment, intellectual property, engineering, architectural work, feasibility studies, permitting costs, professional fees, or other legitimate project expenditures.

Clearly distinguish between cash already invested, contributed assets, previous development expenditures, and future commitments.

This provides the capital provider with a much clearer understanding of the existing capital structure.

6. Where Does the Business or Project Stand Today?

A concept and a funding-ready transaction are not the same thing.

Explain the current status.

For an operating company, provide information about customers, revenue, facilities, employees, contracts, production capabilities, and significant milestones.

For a development project, identify which major steps have already been completed.

Depending upon the project, these might include:

Site acquisition or control, zoning, permits, engineering, architectural plans, environmental studies, feasibility studies, appraisals, construction estimates, contractor agreements, purchase agreements, customer contracts, or regulatory approvals.

The more advanced the project, the more clearly that progress should be documented.

7. What Are the Historical Financial Results?

If you are seeking funding for an existing business, provide a concise financial snapshot.

Relevant information could include:

Revenue
Gross profit
EBITDA
Net income
Operating cash flow
Existing debt

Whenever possible, include several years of historical results so the lender or investor can identify trends.

Do not hide a difficult year.

If the company experienced a decline, loss, unusual expense, or temporary disruption, explain what happened and what management did about it.

Credibility is extremely important when raising capital.

8. What Are the Financial Projections?

Historical performance tells a capital provider where the company has been.

Financial projections explain where management believes it is going.

Typically, provide three to five years of projected results.

The projections should include relevant metrics such as revenue, expenses, EBITDA, cash flow, capital expenditures, debt service, and profitability.

But projections alone are not enough.

Explain the assumptions behind them.

If revenue is projected to increase from $5 million to $15 million, what specifically produces that growth?

New locations?

Additional production capacity?

Signed contracts?

New customers?

Acquisitions?

Expansion into new markets?

Capital providers generally place greater value on projections supported by credible assumptions than spectacular forecasts unsupported by evidence.

9. What Is the Market Opportunity?

Explain the commercial opportunity.

Who are your customers?

What problem are you solving?

How large is your addressable market?

Who are your competitors?

Why should customers choose your company?

A common mistake is emphasizing that an industry is worth billions of dollars without explaining how the company intends to capture its share of that market.

A large market does not automatically create a successful business.

Your executive summary should connect the market opportunity directly to the company's competitive strategy.

10. What Assets or Collateral Support the Transaction?

If you are seeking debt financing, identify assets available to support the transaction.

Depending upon the business, these could include:

Real estate, equipment, inventory, accounts receivable, intellectual property, contracts, or other tangible and intangible assets.

If professional appraisals or valuations have been completed, identify them.

Also disclose existing liens or secured obligations where relevant.

A lender needs to understand both the value of the assets and the existing claims against them.

11. How Will the Lender Be Repaid?

This is one of the most important questions in any financing proposal.

Where does repayment come from?

For an operating company, repayment may come from operating cash flow.

For a development project, repayment might come from project revenue, refinancing, sale of completed assets, or another identifiable source.

The executive summary should demonstrate that management has considered debt service and repayment—not merely obtaining the money.

12. How Does an Equity Investor Make Money?

If you are seeking equity rather than debt, the question changes slightly.

The investor wants to understand the potential return.

Explain the proposed ownership structure, valuation methodology, anticipated distributions, growth strategy, and potential liquidity event.

Potential investor returns might arise through:

Dividend or profit distributions, appreciation in enterprise value, strategic acquisition, management buyout, recapitalization, or eventual sale of the company.

Avoid promising guaranteed investment returns.

Instead, present reasonable financial assumptions and clearly identify the risks.

13. What Are the Key Risks?

Every business opportunity involves risk.

Experienced lenders and investors know this.

Trying to convince them that your transaction has virtually no risk can actually damage credibility.

Identify the most significant risks and explain how management intends to mitigate them.

These could include market risk, construction risk, regulatory risk, customer concentration, supply-chain risk, commodity pricing, technology risk, competition, management execution, or interest-rate exposure.

The objective isn't to frighten the capital provider.

It is to demonstrate that management understands the risks and has developed strategies to address them.

What Should You Leave Out?

An executive summary should not become a marketing brochure filled with exaggerated claims.

Be cautious about statements such as:

"This opportunity cannot fail."

"There is no competition."

"Our company will dominate the industry."

"This is guaranteed to become a billion-dollar company."

Sophisticated lenders and investors are looking for evidence, not superlatives.

Use facts, financial information, market research, documented milestones, and realistic assumptions to demonstrate the strength of the opportunity.

How Long Should an Executive Summary Be?

There is no universal rule, but approximately two to five pages is appropriate for many business funding applications.

Complex real estate developments, infrastructure projects, energy transactions, manufacturing facilities, or international projects may justify additional detail.

However, longer does not necessarily mean better.

The executive summary should provide enough information for the capital provider to make one important decision:

Is this opportunity worth investigating further?

If the answer is yes, the executive summary has accomplished its purpose.

Before You Approach a Lender or Investor

Before submitting your funding package, read the executive summary from the perspective of someone who knows absolutely nothing about your business.

Can that person answer the following questions after reading it?

Who is requesting the funding?

What does the business or project do?

How much capital is required?

What will the money be used for?

What has the sponsor already invested?

What are the historical financial results?

What are the projected financial results?

What is the market opportunity?

What assets support the transaction?

How will the lender be repaid?

How will an equity investor potentially earn a return?

What are the major risks and how will they be managed?

If several of those questions remain unanswered, your executive summary probably needs additional work.

A Great Idea Is Not Necessarily a Fundable Transaction

This distinction is important.

Entrepreneurs understandably become enthusiastic about their businesses and projects. But lenders and investors must evaluate opportunities from a different perspective.

They need to determine whether the economics make sense, whether management can execute the plan, whether sufficient documentation exists, whether the capital structure is reasonable, and whether the anticipated return justifies the risk.

That is why preparation matters.

A professional executive summary doesn't guarantee funding.

But a poorly prepared one can make obtaining funding considerably more difficult.

Prepare Before You Raise Capital

If you are considering business funding, project financing, private debt, or equity capital, invest the time necessary to prepare your transaction properly before approaching the capital markets.

A strong executive summary creates understanding. Understanding builds confidence. And confidence gives a qualified funding opportunity a better chance of receiving serious consideration.

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About Creative Global Funding Services Inc.

Creative Global Funding Services Inc. works with qualified businesses and project sponsors seeking private debt and equity capital.

Our objective is to help connect viable funding opportunities with appropriate sources of private capital and facilitate the funding process from initial presentation through transaction review.

Creative Global Funding Services Inc.
Business & Project Funding | Private Debt & Equity Capital
www.cgfs.biz

Funding availability, structure, pricing and terms are transaction-specific and subject to review, due diligence, underwriting, documentation, and the requirements of individual lenders or investors.