Writing a business prospectus is an important step in allocating funds from investors. Whether you are starting a new business or expanding an existing one, having a thorough, yet concise business prospectus will state your potential financial and legal risks to those from whom you seek funding. The business prospectus is like an executive summary of the business plan, but explains clearly why you may be a risk and how you aim to overcome past and future obstacles to achieve your goals.
A business prospectus will be shorter than a business plan, but will cover much of the same material. To start, give an overview of your business and the purpose of the prospectus, what you need from investors, your business goals, and how you intend to repay your investors. The beginning of your prospectus serves as a mission statement and an outline for the body of information that will follow.
Include all pertinent information of business partners, properties, locations, and names of legal or financial advisers. When listing business partners, make sure to include their roles and history within the business, their ownership rights, and financial compensation. How will they help achieve the overall goals of the business? The list of directors should include their perks, as well as their pay.
The main element of the business prospectus will be the risk involved. Be up-front and honest about any discrepancies and legal or financial problems there may be in the past. What has gone wrong in the past or what concerns currently plague the business? Disclose any past lack in management, cessations in business operation, past or current legal troubles, and any adverse economic conditions that might affect the business. With all this on the table, there is nothing to hide, and solutions can be presented to overcome negative factors. Include how you plan to overcome any past issues or current risks.
When describing risks, make sure to include information about the competition. Who are your competitors, and how do you plan to have the advantage in the field? Describe the market and the socio-economic factors that will affect business. How will these work towards or against your goals? By providing a market strategy, you are informing the lenders of your plan to make the best use of their investment. Taking all factors into consideration will show your realistic approach to the situation, and they will be more likely to invest.
Your prospectus will include your financial history, as audited by a certified public accountant. As well as disclosing your annual budget and earnings, give a projection of your costs and earnings for the next three years. State the amount you wish to borrow to achieve your goals, and explain exactly how you will repay the lender. These details can best be worked out with your accountant or financial advisor.
In all, the business prospectus should inform the potential lender of all pertinent information, including business history, financial standings, all risks, and goals that will insure the repayment of any loans. With honesty, thoroughness, and foresight, you are much more likely to receive the funds you need.