What Is Your Business
Financing Rationale?
The rationale for the business financing request should also be clearly outlined early on. You are making this request for a reason, so it’s important to state and support the business reason as clearly as possible.
Building off of our equipment acquisition example, the rationale would clearly explain why the business wants to acquire the equipment described in the previous section.
Is the equipment to replace existing equipment? Is this an upgrade? Is this additional equipment to provide capacity for expansion?
Is the equipment standard issue that is commonplace in the industry, or is it new technology that is just starting to be adopted?
What are the operational and financial benefits of acquiring the equipment? How did the business come to making this decision?
A potential list of questions can be quite extensive.
The larger the capital investment, the more a business financing provider is going to want to know about the business the rationale for acquiring incremental capital.
Therefore, its very important that the rationale for a capital request is fully described in any business financing application.