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How To Write the Funding Request for Your Business Plan

What goes into the funding request, parts of the funding request, important points to remember when writing your request, frequently asked questions (faqs).

MoMo Productions / Getty Images

A business plan contains many sections, and if you plan to seek funding for your business, you will need to include the funding request section. The good news is that this section of your business plan is only needed if you plan to ask for outside business funding. If you're not seeking financial help, you can leave it out of your business plan. There are a variety of  ways to fund your business  without debt or investors. Below, we'll cover how to write the funding request section of your business plan.

Key Takeaways

• The funding request section of your business plan is required if you plan to seek funding from a lender or investors.
• You'll want to include information on the business, your current financial situation, how the money will be used, and more.
• Tailor each funding request to the specific funding source, and make sure you ask for enough money to keep your business going.

The funding request section provides information on your future financial plans, such as when and how much money you might need. You will also include the possible sources you could consider for securing your funds, such as loans or crowdfunding. Later, you can update this section when you need outside funding again for business growth.

An Outline of the Business

Yes, you've done this already in past sections, but you want to give potential lenders and investors a recap of your business. In some cases, you might simply share the funding request section so you need to have your business details such as what you provide, information about your target market, your structure (i.e. LLC), owners' and members' information (for partnerships and corporations), and any successes you've had to date in your business.

Current Financial Situation

Again, you've provided some financial information in the financial data section , but it doesn't hurt to summarize. If you're submitting just the funding request, you'll need this information to help financial sources understand your money situation.

Provide financial details such as income and cash flow statements, and balance sheets in your funding request section.

Offer your projected financial information as well. If you're asking for a loan for which you'll be offering collateral, include information about the asset. If the business had debt, outline your plan for paying it off. Finally, share how you'll pay the loan or what sort of return on investment (ROI) investors can expect by investing in your business.

How Much Money Do You Need Now and in the Future?

Indicate what type of funding you're asking for such as a loan or investment. Outline what you need now and what you might need in the future as far as five years out. 

How Will the Funds Be Used?

Detail how you'll be using the money, whether it's for inventory, paying a debt, buying equipment, hiring help, and more. If you plan to use the money for several things, highlight each and how much money will go to each.

Most financial sources would rather invest in things that grow a thriving business than things that pay for debt or overhead expenses. 

Current and Future Financial Plans

Current and future financial plans include items such as loan repayment schedules or plans to sell the business. If you're getting a loan, outline your plans for repayment (although most lenders will have their own schedules). If you have plans to sell the business, let the lender know that and how it will affect them. Other issues to consider are relocation (if you move) or a buyout. Finally, let investors know how they can exit the deal, such as cashing out (and how long before they can do that).

You're asking for money, so you need to always be professional and know your business inside and out. Here are some other things to keep in mind:

• Tailor your funding request to each financial source : Lenders and investors need different information, such as loan repayment versus ROI, so create different reports for each. 
• Keep your funding sources in mind : Each resource will have different questions and concerns. Do a little research so you can address them in your report.
• Ask for enough to keep your business going : Don't be stingy, as you don't want your business to fail from a lack of money. At the same time, don't be greedy, asking for more than you need. 

How do you request funding for a nonprofit?

Most nonprofits seek funding in the form of grants. Write a grant proposal that includes information on the project or organization, preliminary budget needs, and more. Be sure to format it with a cover letter, proposal summary, the introduction of the organization, problem statement, objectives, methods, evaluation, future funding needs, and the budget.

What are three methods of funding?

Grants and scholarships, equity financing, and debt financing are the main three methods of funding for small businesses . Grants and scholarships do not need to be repaid and are often best for nonprofit organizations. Equity financing is when you receive money in exchange for ownership and profits. Debt financing is when you borrow money that needs to be repaid.

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Small Business Administration. " Fund Your Business ."

Congressional Research Service. " How To Develop and Write a Grant Proposal ."

Library of Congress Research Guides. " Types of Financing ."

How to Write Your Business Plan to Secure Funding

Unlock funding for your business! Master the art of writing a funding-worthy business plan with our ultimate guide.

Introduction to Writing a Funding-Worthy Business Plan

When it comes to securing funding for your business, a well-written business plan plays a pivotal role. It serves as a roadmap that outlines your goals, strategies, and financial projections, giving potential investors or lenders a comprehensive understanding of your business. In this section, we will explore the importance of a well-written business plan and delve into the purpose it serves.

Importance of a Well-Written Business Plan

A well-crafted business plan is essential for multiple reasons. Firstly, it showcases your professionalism and commitment to your business idea. It demonstrates that you have thoroughly thought through every aspect of your venture and have a solid plan in place.

Additionally, a well-written business plan acts as a communication tool between you and potential investors or lenders. It allows you to effectively convey your business concept, market analysis, and financial projections, helping them understand the viability and potential of your business.

Moreover, a comprehensive business plan can help you identify any potential pitfalls or gaps in your strategy. By thoroughly analyzing your business model, market conditions, and financial projections, you can proactively address any weaknesses and make necessary adjustments.

Understanding the Purpose of a Business Plan

The purpose of a business plan extends beyond just securing funding. It serves as a strategic document that guides your business operations and helps you stay focused on your goals. Some key purposes of a business plan include:

• Attracting Investors and Lenders: A well-written business plan provides potential investors or lenders with the information they need to make an informed decision about whether to invest in your business or provide financial support. It showcases the potential return on investment and outlines the steps you will take to achieve success.
• Setting Clear Goals and Strategies: A business plan helps you define your short-term and long-term goals, as well as the strategies you will implement to achieve them. It provides a roadmap that keeps you on track and allows you to measure your progress along the way.
• Identifying Strengths and Weaknesses: By conducting a thorough market analysis and assessing your business's strengths and weaknesses, a business plan helps you identify areas where you excel and areas that require improvement. This enables you to develop strategies to leverage your strengths and mitigate any weaknesses.
• Guiding Financial Decision-Making: A business plan includes financial projections and analysis that help you make informed financial decisions. It provides a clear understanding of your revenue streams, costs, and potential profitability, enabling you to allocate resources effectively.
• Facilitating Collaboration and Communication: A business plan serves as a tool for collaboration and communication within your organization. It ensures that all team members are aligned with the business goals and strategies, fostering a cohesive and unified approach.

Understanding the importance and purpose of a well-written business plan is the first step towards creating a document that effectively communicates your vision and secures the funding you need. In the following sections, we will explore the key components, step-by-step guide, and best practices for crafting a funding-worthy business plan.

Key Components of a Funding-Worthy Business Plan

To create a business plan that attracts funding, it's essential to include key components that provide a comprehensive overview of your business. These components will help potential investors understand your business's potential and make informed decisions. Here are the key components you should include in your funding-worthy business plan:

Executive Summary

The executive summary is a concise overview of your entire business plan. It should provide a clear and compelling summary of your business, highlighting its unique selling proposition, market opportunities, and financial projections. This section should be written in a way that captures the attention of potential investors and encourages them to read further.

Company Overview

The company overview section provides an introduction to your business. It should include details about your company's mission, vision, and values. Additionally, this section should highlight key information such as the legal structure of your business, its history, location, and any notable achievements or milestones.

Market Analysis

The market analysis section presents a thorough examination of your target market, industry trends, and competitors. It should showcase your understanding of the market dynamics, customer needs, and competitive landscape. Including market research, data, and relevant statistics can strengthen your analysis and demonstrate the market opportunity your business intends to tap into.

Product or Service Description

In this section, you should provide a detailed description of your product or service. Explain how it addresses a need or solves a problem in the market. Include information about its features, benefits, and any unique selling points. Use this section to showcase the value proposition of your offering and differentiate it from competitors.

Marketing and Sales Strategy

The marketing and sales strategy section outlines how you plan to promote and sell your product or service. It should include your target market segmentation, pricing strategy, distribution channels, and promotional activities. Demonstrating a well-thought-out marketing and sales strategy can instill confidence in investors regarding your ability to reach and attract customers.

Organizational Structure and Management

In this section, provide an overview of your organizational structure, including key personnel and their roles. Highlight the qualifications and experience of your management team, as well as any advisors or board members. Investors want to see that your team has the expertise and capabilities to execute your business plan successfully.

Financial Projections and Analysis

The financial projections and analysis section is crucial for illustrating the financial viability of your business. Include projected income statements, balance sheets, and cash flow statements for at least the next three years. Additionally, provide a detailed analysis of your financial assumptions and key performance indicators. It's important to present realistic and well-supported financial projections.

Funding Request and Use of Funds

In this section, clearly state the amount of funding you are seeking and how you intend to use it. Break down the allocation of funds, highlighting specific areas such as product development, marketing, operations, or expansion. Providing a detailed breakdown of the use of funds demonstrates your ability to effectively utilize the investment.

The appendix section serves as a supplemental section that includes any additional information that supports your business plan. This may include market research data, product samples, patents, licenses, permits, or any other relevant documents. The appendix provides investors with access to more detailed information without overwhelming the main body of the business plan.

By including these key components in your funding-worthy business plan, you can present a comprehensive overview of your business and increase your chances of securing the funding you need to bring your entrepreneurial vision to life.

Step-by-Step Guide to Writing a Funding-Worthy Business Plan

Writing a business plan that is compelling and attractive to potential investors is a crucial step in securing funding for your venture. To help you navigate this process, here is a step-by-step guide to writing a funding-worthy business plan.

Research and Gather Information

Before diving into the writing process, it's essential to conduct thorough research and gather all the necessary information. This includes understanding your industry, target market, competitors, and potential investors. Collecting data and market insights will provide a solid foundation for your business plan.

Define Your Business and Goals

Clearly define your business and outline your goals. Describe the nature of your business, the products or services you offer, and what sets you apart from your competitors. Additionally, establish both short-term and long-term goals for your business, focusing on specific, measurable, achievable, relevant, and time-bound (SMART) objectives.

Conduct a Comprehensive Market Analysis

Perform a comprehensive market analysis to gain insights into your target market, customer demographics, and industry trends. Identify your target audience's needs, preferences, and purchasing behavior. Analyze your competitors to understand their strengths, weaknesses, and market positioning. Presenting this information in tables can help organize and present the data effectively.

Market Analysis Factors                                       Data

‍ Target Market Size

Customer Demographics

Industry Trends

Competitor Analysis

Develop a Strong Marketing and Sales Strategy

Outline a robust marketing and sales strategy that highlights how you plan to reach and attract customers. Define your unique selling proposition (USP) and outline your pricing strategy, distribution channels, and promotional activities. This section should demonstrate your understanding of your target market and how you plan to position your business in the competitive landscape.

Outline Your Organizational Structure and Management

Describe your organizational structure and management team. Provide an overview of key personnel, their roles, and their qualifications. Highlight any relevant industry experience, expertise, or accomplishments that make your team well-equipped to execute the business plan successfully. A clear and concise organizational chart can help visualize the structure.

Create Financial Projections and Analysis

Develop financial projections that estimate your business's future revenue, expenses, and profitability. Include a projected income statement, balance sheet, and cash flow statement. Use realistic assumptions based on your market research and industry benchmarks. Additionally, conduct a comprehensive financial analysis that evaluates the financial health and viability of your business.

Craft a Compelling Executive Summary

The executive summary is a concise overview of your entire business plan and should entice readers to continue reading. Summarize the key elements of your plan, including your business concept, market opportunity, competitive advantage, and financial projections. Craft a compelling and engaging executive summary that captures the attention of potential investors.

Polish and Revise Your Business Plan

Once you have completed the initial draft of your business plan, take the time to polish and revise it. Review the content for clarity, coherence, and accuracy. Ensure that your plan flows logically and presents a compelling case for investment. Proofread for grammar and spelling errors. Consider seeking feedback from trusted advisors or professionals to refine your plan further.

By following this step-by-step guide, you can create a comprehensive and compelling business plan that increases your chances of securing funding for your venture. Remember to tailor your plan to the specific needs and preferences of your target audience, providing them with all the necessary information to make an informed investment decision.

Tips and Best Practices for Writing a Funding-Worthy Business Plan

Writing a business plan that is compelling and effective in securing funding requires careful attention to detail and adherence to best practices. Here are some tips to help you create a funding-worthy business plan:

Keep it Clear and Concise

When writing your business plan, it's essential to communicate your ideas clearly and concisely. Avoid using unnecessary jargon or technical terms that may confuse your readers. Use straightforward language and structure your content in a logical manner. Remember, clarity and simplicity are key to ensuring that your business plan is easily understood by potential investors.

Tailor Your Plan to the Target Audience

Each business plan should be tailored to the specific needs and expectations of the target audience. Consider the preferences and priorities of potential investors or lenders and customize your plan accordingly. For example, venture capitalists may be more interested in growth potential and return on investment, while traditional lenders may focus on cash flow and collateral. Understanding your audience will allow you to highlight the aspects of your business that are most relevant to them.

Support Claims with Data and Research

To instill confidence in your business plan, it's important to back up your claims with data and research. Provide market research, industry trends, and competitive analysis to support your assertions about the viability and potential of your business. Including relevant statistics, market projections, and customer surveys can help validate your assumptions and demonstrate that your business plan is grounded in reality.

Seek Professional Help if Needed

Writing a funding-worthy business plan can be a complex and time-consuming task. If you are unsure about certain aspects or need assistance in crafting a compelling plan, consider seeking professional help. Business consultants, accountants, or industry experts can provide valuable insights and guidance to ensure that your business plan is comprehensive, accurate, and persuasive.

Remember, a well-written business plan is not only a tool for securing funding but also a roadmap for the success of your business. By following these tips and best practices, you can increase your chances of creating a business plan that effectively communicates your vision and attracts the attention of potential investors or lenders.

Q: What is a funding-worthy business plan?

A: A funding-worthy business plan is a comprehensive document that outlines your business concept, market opportunity, competitive advantage, financial projections, and other key components to attract potential investors or lenders.

Q: What are the key components of a funding-worthy business plan?

A: The key components of a funding-worthy business plan include an executive summary, company overview, market analysis, product or service description, marketing and sales strategy, organizational structure and management, financial projections and analysis, funding request and use of funds, and appendix.

Q: How long should my business plan be?

A: While there is no strict rule on the length of a business plan, it's generally recommended to keep it concise and focused. A typical business plan can range from 15 to 30 pages. However, the most important thing is to provide all the necessary information in a clear and compelling manner.

Q: Do I need professional help to write my business plan?

A: While you can certainly write your own business plan with careful research and attention to detail, seeking professional help can provide valuable insights and guidance. Business consultants, accountants or industry experts can offer specialized knowledge that can enhance the quality of your business plan.

Q: How often should I update my business plan?

A: Your business plan should be viewed as a living document that evolves over time. It's recommended to review and update your plan regularly to reflect changes in your industry or market conditions. You may need to update it annually or even more frequently if significant changes occur in your business operations or financial performance.

By addressing these frequently asked questions about writing a funding-worthy business plan in your document or during presentations with investors or lenders can demonstrate that you have thoroughly thought through the planning process.

As an entrepreneur seeking funding for your business, a well-crafted and comprehensive business plan is essential. By following the step-by-step guide outlined in this article, you can create a funding-worthy business plan that effectively communicates your vision, market opportunity, competitive advantage, and financial projections to potential investors or lenders. Remember to tailor your plan to the specific needs and expectations of your target audience, keep it clear and concise, support claims with data and research, and seek professional help if needed. With a compelling business plan in hand, you'll be one step closer to turning your entrepreneurial dreams into reality.

https://blog.hubspot.com/sales/how-to-write-business-proposal

https://www.etu.org.za/toolbox/docs/finances/proposal.html

https://www.mybusiness.com.au/how-we-help/grow-your-business/increasing-sales/how-to-write-a-funding-proposal

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The Importance of Market Research

Creating a business plan, legal requirements, exploring funding options, crafting a marketing strategy, managing and growing your business, how do i start a small business for beginners, how do i create a business plan, what are six ways to grow and scale a business, the bottom line.

• Small Business
• How to Start a Business

Starting a Small Business: Your Complete How-to Guide

From market research to managing growth

The U.S. is home to 33.2 million small businesses, which drive over 43% of GDP.   If you are looking to start a business, there are key factors to consider—from market research and creating a business plan to scaling your business. These factors are critical to your journey and can make a big difference no matter what stage of the process you are in.

Entrepreneurs who take concrete action can differentiate themselves from competitors, innovate, and grow. For successful entrepreneurs, the execution of the business is often what means the most. 

Key Takeaways

• Starting a small business involves extensive market research of your target audience, competitors, and gaining a deep understanding of the industry.
• It is important to build a comprehensive business plan that includes the product or service description, your target customers, financial projections, and all other key details.
• Understanding the legal requirements of starting your business involves knowledge of business registration, permits, licensing, and other regulatory requirements.
• There are various types of funding channels for starting a business, including financing it yourself, securing external funding from your network, and applying for government and corporate grants and loans. 

Being clear about your business goals involves doing your research. Successful entrepreneurs often do extensive research on their field. This includes understanding their prospective customers, the technical aspects of the industry, and the challenges other businesses are facing. 

Understanding how other players operate in an industry is important. Attending conferences, joining associations, and building a network of people involved in the field can help you learn how decisions are made. Often, comprehensive market research takes six months to a year. 

Understanding Your Target Audience

Knowing your target market is critical for many reasons. These are the customers who are most likely to purchase your product, recommend it to friends, and become repeat buyers. Apart from driving your bottom line, having a strong understanding of your target audience will allow you to tailor your offering more effectively, reach your customers more efficiently, and manage customer expectations.

Compiling demographic data on age, family, wealth, and other factors can give you a clearer understanding of market demand for your product and your potential market size.

It’s important to ask, “Why would someone buy this and part with their discretionary income?” or “Will someone love this enough to tell someone about it?” At the heart of these questions is understanding whether your business solves a key problem, as well as whether it delivers the “more” that connects to your audiences’ human emotions.

Assessing Market Trends and Opportunities

To find an advantage in a given market, look at key market trends in customer behavior and the business landscape. Explore the state of business conditions and consumer spending, along with the economic environment and how interest rates may affect financing and business growth.

Several resources are available to dive into market trends across industries, such as Statistics of U.S. Businesses and the U.S. Census Business Builder . To analyze the competitive landscape, and in turn, identify key opportunities, Porter's 5 Forces is a classic model to help businesses build their competitive strategy.

A business plan is a road map for achieving your business goals. It outlines the capital that you need, the personnel to make it happen, and the description of your product and prospective customers.

There are a number of models for creating a business plan. The Small Business Administration (SBA) , for instance, provides a format that includes the following nine sections:

• Executive summary: This should be a description of your company and its potential for success. The executive summary can cover your mission statement, employees, location, and growth plan.
• Company description: This is where you detail what your business offers, its competitive advantages, and your strengths as a business.
• Market analysis: Lay out how your company is positioned to perform well in your industry. Describe market trends and themes and your knowledge of successful competitors.
• Organization and management: Who is running your company, and how is your business structured? Include an organizational chart of your management team. Discuss if your business will be incorporated as a business C or S corporation, a limited partnership, a limited liability company, or a sole proprietorship. 
• Service or product line: Here is where you describe how your business will solve a problem and why this will benefit customers. Describe how your product lifecycle would unfold.
• Marketing and sales: Detail your marketing strategy and how this will reach your customers and drive return on investment. 
• Funding request: If you're looking for financing, lay out the capital you’re requesting under a five-year horizon and where, in detail, it will be allocated, such as salaries, materials, or equipment. 
• Financial projections: This section shows the five-year financial outlook for your company and ties these to your request for capital.

Having a coherent business plan is important for businesses looking to raise cash and crystallize their business goals.

Setting Goals and Strategies

Another key aspect of a business plan is setting realistic goals and having a strategy to make these a reality. Having a clear direction will help you stay on track within specified deadlines. In many ways, it allows companies to create a strategic plan that defines measurable actions and is coupled with an honest assessment of the business, taking into account its resources and competitive environment. Strategy is a top-down look at your business to achieve these targets.

Financial Projections and Budgeting

Often, entrepreneurs underestimate the amount of funding needed to start a business. Outlining financial projections shows how money will be generated, where it will come from, and whether it can sustain growth. 

This provides the basis for budgeting the costs to run a business and get it off the ground. Budgeting covers the expenses and income generated from the business, which include salaries and marketing expenses and projected revenue from sales.

Another important aspect of starting a business are the legal requirements that enable you to operate under the law. The legal structure of a business will impact your taxes, your liability, and how you operate.

Businesses may consider the following structures in which to operate:

• Corporation
• Limited Liability Company (LLC)
• Partnership
• Sole Proprietorship

Each has different legal consequences, from regulatory burdens to tax advantages to liability being shifted to the business instead of the business owner.

Registering Your Business

Now that you have your business structure outlined, the next step is registering your business . Your location is the second key factor in how you’ll register your business. In many cases, small businesses can register their business name with local and state government authorities. 

If your business is being conducted under your legal name, registration is not required. However, such a business structure may not benefit from liability protection, along with certain legal and tax advantages. Often, registering your businesses costs $300 or less.

Before filing, a business structured as a corporation, LLC, or partnership requires a registered agent in its state. These agents handle the legal documents and official papers on your behalf.

Businesses that are looking to trademark their product, brand, or business, can file with the United States Patent and Trademark Office.

Understanding Permits and Licenses

If your business conducts certain activities that are regulated by a federal agency, you’re required to get a permit or license. A list of regulated activities can be found on the SBA website, and includes activities such as agriculture, alcoholic beverages, and transportation.

There are many different ways to fund a business. One of the key mistakes entrepreneurs make is not having enough capital to get their business running . The good news is that there are several channels to help make this happen, given the vital role entrepreneurs play in creating jobs and boosting productivity in the wider economy.

Self-Funding vs. External Funding

Bootstrapping, the term commonly used to describe self-funding your business, is where companies tap into their own cash or network of family and friends for investment. While the advantage of self-funding is having greater control, the downside is that it often involves more personal risk.

External funding involves funding from bank loans, crowdfunding, or venture capital , among other sources. These may provide additional buffers and enable you to capture growth opportunities. The drawback is less freedom and more stringent requirements for paying back these funds.

Grant and Loan Opportunities

Today, there are thousands of grants designed especially for small businesses from the government, corporations, and other organizations. The U.S. Chamber of Commerce provides a weekly update of grants and loans available to small businesses. 

For instance, Business Warrior offers loans between $5,000 and $50,000 to small business owners. As another example, Go. Be. Elevate Fund offers $4,000 to grant recipients who are women and/or people of color business owners to help them grow their businesses.

When it comes to marketing, there is a classic quote from Milan Kundera: “Business has only two functions—marketing and innovation." In order to reach customers, a business needs a marketing strategy that attracts and retains customers and expands its customer base.

To gain an edge, small businesses can utilize social media, email marketing, and other digital channels to connect and engage with customers.

Branding Your Business

Building a successful brand goes hand in hand with building a great experience for the customer. This involves meeting the expectations of your customer. What is your brand offering? Is it convenience, luxury, or rapid access to a product? Consider how your brand meets a customer's immediate need or the type of emotional response it elicits. Customer interaction, and in turn loyalty to your brand, is influenced, for example, by how your brand may align with their values, how it shifts their perception, or if it resolves customer frustration.

Digital Marketing and Social Media

We live in a digital-first world, and utilizing social media channels can help your business reach a wider audience and connect and engage in real time. Given that a strong brand is at the heart of successful companies, it often goes without saying that cultivating a digital presence is a necessity in order to reach your customers. 

According to HubSpot’s 2023 report, The State of Consumer Trends, 41% of the 600-plus consumers surveyed discovered new products on social media and 17% bought a product there in the past three months.

Managing a business has its challenges. Finding the right personnel to run operations, manage the day-to-day, and reach your business objectives takes time. Sometimes, businesses may look to hire experts in their field who can bring in specialized knowledge to help their business grow, such as data analysts, marketing specialists, or others with niche knowledge relevant to their field.

Hiring and Training Staff

Finding the right employees involves preparing job descriptions, posting on relevant job boards such as LinkedIn, and effectively screening applicants. Careful screening may involve a supplemental test, reviewing a candidate's portfolio, and asking situational and behavioral questions in the interview. These tools will help you evaluate applicants and improve the odds that you'll find the people you are looking for.

Once you have hired a new employee, training is the next essential step. On average, it takes about 62 hours to train new employees. Effectively training employees often leads to higher retention. While on-the-job training is useful, consider having an onboarding plan in place to make the transition clear while outlining expectations for the job.

Scaling Your Business

Growing your business also requires strategy. According to Gino Chirio, executive vice president at the consultancy group Maddock Douglas, there are six ways that companies can grow their business to drive real growth and expansion:

• New processes: Boost margins by cutting costs.
• New experiences: Connect with customers in powerful ways to help increase retention.
• New features: Provide advancements to your existing product or service.
• New customers: Expand into new markets, or find markets where your product addresses a different need.
• New offerings: Offer a new product.
• New models: Utilize new business models, such as subscription-based services, fee-for-service, or advertising-based models.

With these six ways to grow a business, it is important to consider the risk, investment, and time involved. Improving your margins through new processes is often the most straightforward way to grow. Offering new features is also effective since it is tailored to your existing market with products you have already delivered.

By contrast, offering new products may involve higher risk since these have not been tested in the market. However, they may offer higher reward, especially if you have a first-mover advantage and release your product in the market before the competition.

A good place to start building a business is to understand the following core steps that are involved in an entrepreneur's journey : market research, creating a business plan, knowing the legal requirements, researching funding options, developing a marketing strategy, and business management.

A business plan is made up of a number of primary components that help outline your business goals and company operations in a clear, coherent way. It includes an executive summary, company description, market analysis, organization and management description, service or product line description, marketing and sales plan, funding requests (optional), and financial projections.

Business growth can fall into the following six categories, with each having varying degrees of risk and investment: new processes, new experiences, new features, new customers, new offerings, and new models.

Knowing how to start a small business involves the key steps of market research, setting up a business plan, understanding the legal requirements, exploring funding options, crafting a marketing strategy, and managing your business. 

For aspiring small business owners, these steps can help you successfully deliver your product or service to the market, and ultimately grow. While it can take a considerable amount of work, the payoffs are manifold: independence of work, personal fulfillment, financial reward, and following your passion.

U.S. Chamber of Commerce. " The State of Small Business Now ."

U.S. Small Business Administration. " Market Research and Competitive Analysis ."

U.S. Small Business Administration." Write Your Business Plan ."

U.S. Small Business Administration. " Choose a Business Structure ."

U.S. Small Business Administration. " Register Your Business ."

U.S. Small Business Administration. " Apply for Licenses and Permits ."

U.S. Small Business Administration. " Fund Your Business ."

U.S. Chamber of Commerce. " 52 Grants, Loans and Programs to Benefit Your Small Business ."

Ogilvy. " Behind Every Brand Is a Great Experience, and Vice Versa—Why Today's Customer Expects Synergy ."

HubSpot. " The State of Consumer Trends in 2023 ."

Training Magazine. " 2022 Training Industry Report ."

Harvard Business Review. " The Six Ways to Grow a Company ."

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• How to Do Market Research, Types, and Example 2 of 25
• Marketing Strategy: What It Is, How It Works, and How to Create One 3 of 25
• Marketing in Business: Strategies and Types Explained 4 of 25
• What Is a Marketing Plan? Types and How to Write One 5 of 25
• Business Development: Definition, Strategies, Steps & Skills 6 of 25
• Business Plan: What It Is, What's Included, and How to Write One 7 of 25
• Small Business Development Center (SBDC): Meaning, Types, Impact 8 of 25
• How to Write a Business Plan for a Loan 9 of 25
• Business Startup Costs: It’s in the Details 10 of 25
• Startup Capital Definition, Types, and Risks 11 of 25
• Bootstrapping Definition, Strategies, and Pros/Cons 12 of 25
• Crowdfunding: What It Is, How It Works, and Popular Websites 13 of 25
• Starting a Business with No Money: How to Begin 14 of 25
• A Comprehensive Guide to Establishing Business Credit 15 of 25
• Equity Financing: What It Is, How It Works, Pros and Cons 16 of 25
• Best Startup Business Loans 17 of 25
• Sole Proprietorship: What It Is, Pros and Cons, and Differences From an LLC 18 of 25
• Partnership: Definition, How It Works, Taxation, and Types 19 of 25
• What Is an LLC? Limited Liability Company Structure and Benefits Defined 20 of 25
• Corporation: What It Is and How to Form One 21 of 25
• Starting a Small Business: Your Complete How-to Guide 22 of 25
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Startup Funding: What It Is, How It Works, & 5 Tips for Landing It

Published: January 24, 2023

Raising startup funding is one of the most exciting and challenging times for a company.

Searching for investors, loans, grants, and other forms of funding is a big step toward business growth. It can give your startup the capital you need to keep building products or offering customers new features.

Global venture funding fluctuates wildly depending on what is happening in the world. Startups worldwide raised a total of $415.1 billion from investors in 2022, down 35% from 2021's all-time high.

So, how do you get the funding you need? This post explains the essentials of startup funding. Keep reading or jump ahead to a section to learn:

What is startup funding?

Types of startup funding for business, how startup funding works, startup funding rounds, how to get startup funding.

Startup funding is the money a business uses to start or support a new business. There are many different types of funding. Startups use these funds to cover marketing, growth, and operating expenses to launch the business.

The number and types of funding options can be overwhelming for a new startup. Understanding the types of startup funding can help you understand what's out there and how it aligns with your company's goals, so let’s cover that next.

• Self-Funding
• Crowdfunding
• Private Equity Firms
• Incubators and Accelerators

Free Business Plan Template

The essential document for starting a business -- custom built for your needs.

• Outline your idea.
• Pitch to investors.
• Secure funding.
• Get to work!

You're all set!

Click this link to access this resource at any time.

1. Self-Funding

39% of business founders fund startups with personal funds. Self-funding means that you independently provide the funding you need for your startup. This might mean personal savings, starting your business with a long timeline, or running on a tight budget .

These are some other self-funding strategies:

Bootstrapping

Bootstrapping isn't just using personal funds to start a business. Bootstrapped businesses also use early startup revenue to continue running the business rather than seeking outside funding.

Bootstrapping is a hotly-debated topic. It helps founders keep control of their businesses — instead of giving equity to investors — and avoid interest payments from taking out loans. The downside? If the startup fails, the founder loses their savings or that of their family and friends.

Credit cards

Credit cards can help you get the resources you need to grow your startup and offer backup cash flow when things don't go as expected.

17% of businesses use credit cards as a source of startup funding. That said, keep a close eye on interest rates, penalties, and payments to make sure that your credit doesn't suffer as you grow your business.

Bartering can be a useful way to finance big purchases like furniture, phones, or advertising for your startup. Startups that use bartering offer a useful product or service in return. This can save operating funds and expand your network.

Customer Commitment

Some startups begin with a commitment from an early customer who believes in their value. In this situation, the customer's payments alone can fund the startup at the beginning.

2. Crowdfunding

Crowdfunding is a way to raise money online through online platforms. While some sites have a built-in audience, many need you to build your own following with your own promotional strategy. It's a low-commitment way for you to get support and build early interest in your startup.

Small businesses can use crowdfunding sites to quickly access cash. These gains may mean giving up equity in the business or offering rewards. It's also important to be transparent about your company's health throughout the process.

Friends and Family

Many startups begin with funds from close friends and family. If you're not sure about asking for a loan, crowdfunding can be a simple way to ask your community to support your new venture.

Interested? Get your next business or product off the ground with the help of these crowdfunding sites .

You can also fund your startup with loans. You can use the money to build, repair, enhance, or re-open a business. What you'll need to qualify for a loan will vary depending on the lender, amount, and type of loan you borrow.

These are some popular loan choices for startups:

SBA Microloan

The U.S. Small Business Administration offers programs, such as SBA microloans , to provide companies with up to $50,000 of working capital.

Microlenders

Another option is microlending . These organizations lend small amounts of money, usually between $5,000-$50,000 to entrepreneurs.

This choice is great for founders who may not qualify for standard business loans. This type of capital can help a founder build their credit score so they can access more funding in the future.

Microlenders may be more responsive to business plans that might seem risky to another lender. These loans can also have more flexible loan and repayment terms.

According to 2021 Guidant research , 10% of startups receive loans from family and friends.

If you plan to go this route, create a clear plan for how you'll present the idea to your people. This overview should talk about the risks involved, set the terms of the loan, and share potential mutual benefits.

Friends and family loans often help startups in the pre-seed or seed funding stages.

Personal Business Loans

If you have a strong credit score and personal finances, you can also take out a personal business loan. This type of loan may have a lower interest rate and a quicker approval time. At the same time, do your research before you borrow. Some lenders have restrictions about taking out a loan for startup funding.

Learn more about financing your startup in this post.

A grant is a financial award for a business from a government, corporate, or nonprofit entity. Grants are gifts, so they don't need to be repaid.

These mission-driven investments are often quite competitive. For many grants, to qualify for funding your startup goals and values need to align with those of the organization you're applying to.

Small Business Grants

The Small Business Administration offers some small business grants to states and community organizations. This is where many startups begin their search for funding.

But don't stop there. There are many other resources to begin your search for small business grants.

Featured resources:

• Small business grants for startups
• Grants for veterans
• Small business grants for minority entrepreneurs
• Grants for black women
• How to find and apply for grants for women
• Funding resources for black-owned businesses

5. Private Equity Firms

High-growth companies are enticing for venture capitalists. Unlike other forms of startup funding, there's significant risk involved.

If a company fails, the investors won't see a return on their contributed capital. But if a company succeeds, the payout can be in the millions.

Investors hope the companies they invest in do one of three things:

• Get acquired
• Pay back their investment with interest

Private equity firms often sit on the board of a startup or act as advisors. They have a stake in the business and will do what they can to help it succeed.

Venture Capital

These are usually large investments. This startup funding is for a startup that's prepared to use a large investment and grow quickly. That said, micro VCs can work for startups that don't need as much financing.

Venture capitalist funding is difficult to get and often takes time and preparation.

Success can also mean that you will lose some control over your startup. Changes like staffing or spending often mean conversations with investors. Instead of quick decisions, all parties must come to an agreement.

Angel Investors

Angel investors , private investors , and silent partners are other options for startup funds. These are individuals who fund startups, often with their own money. This investment may be in exchange for equity or partial ownership of the business.

6. Incubators and Accelerators

Startup funding once focused on a small, elite group of founders. But the industry has been shifting to support founders who haven't had access to private equity, loans, or grants.

Sustainable funding resources are essential for equitable entrepreneurship. These programs also support funding for people with marginalized identities, such as:

• People of color
• The LGBTQI+ community
• People with disabilities

Incubators and accelerators are essential programs for startup founders, especially those starting a business for the first time. They offer capital, mentorship, and networking. There's a slight difference between the two , which you need to know if you're considering this type of startup funding.

Incubators help entrepreneurs build their businesses. They focus on developing a business plan, name, website, and minimum viable product (MVP). If a company already has an MVP, an accelerator expedites growth. Here, founders receive mentorship, funding, and networking connections. Incubators also run on a flexible schedule.

Accelerators are competitive mentor-based programs. They offer guidance, support, and limited funding in exchange for equity. These programs often run on a shorter schedule than incubator programs.

Ultimately, every founder needs to figure out which type of funding is right for their startup. But how does startup funding work? Let's walk through a typical funding process.

Now that you understand the different types of funding, let's walk through the typical funding process.

Let's say you're a startup founder. Your business is growing and you want to hire more employees to manufacture your product prototype. But you need funding to make it happen. You decide to search for investors.

Investors want to support startups they believe in. They also want to make a return on their investments. That's why almost all deals with angel investors, venture capitalists, or private equity firms include equity.

That way, when the company begins to earn a profit, the investors will get their money back — plus an extra slice of equity for taking a chance.

Companies looking for outside funding usually begin with a seed round. Then, some will continue on to Series A, B, and C rounds.

But before any rounds begin, a company valuation must take place. This can impact investor interest in the company and how much new capital a startup can bring in.

A valuation considers:

• The startup's maturity
• Market size
• Track record

Once the valuation is complete, startups can begin a funding round. The timeline and process vary by company. Some founders search for investors for months, while others close a round in a matter of weeks.

And while certain startups move slowly through each funding round, others build capital much faster. It's not uncommon for an innovative startup to raise a few million in one to two rounds, while another company raises $25 million in the same number of rounds.

This video by The Rest of Us gives a detailed explanation of the funding process.

The startup funding that gets the most news involves raising money through outside investment. In those cases, investors exchange capital for equity — or partial ownership — of the company.

The investment process is broken up into funding rounds. Funding rounds can be confusing. Let's look at each phase in the process and what it means for founders, companies, and investors.

Pre-Seed Funding

Pre-seed funding takes place as founders are getting their companies off the ground.

It's the earliest stage of funding a company. Pre-seed funding usually involves an investment from:

• The founder's personal savings
• A network of other founders

This round can go on for years as a company develops. Or, if a company proves itself, it can happen rather quickly.

Seed Funding

Seed funding is the first official funding a company raises, and it's often tied to equity.

This capital helps a startup finance early steps, like:

• Conducting product research
• Launching a product
• Marketing to a target audience
• Building an audience

Think of this stage as the "seed" by which the rest of the company is able to grow and flourish. Without it, a founder wouldn't be able to hire a team or test their idea in the market.

Seed funding can come from family, friends, angel investors, incubators, or private equity firms. But the amount varies widely — some companies raise $10,000, while others raise $2 million.

Funding for this round varies . It usually depends on what resources the business needs to grow and what investors feel is worth their time and financial investment.

Series A Funding

Once a business uses its seed funding to develop a product and build a customer base, it's time for the next step. A Series A funding round can help to:

• Expand a company's product offerings
• Bring in more customers
• Develop a long-term plan for growth

Startups in this funding round often attract investors from traditional private equity firms.

The average U.S. Series A for funding in the first half of 2022 was $20.4 million . Valuations in the tech industry vary and this impacts the average funding amounts.

Series B Funding

Series B rounds are about business development and how to reach the next level of growth. The capital raised in this round often supports:

• Hiring new talent
• Boosting sales
• Tech development
• Customer service

Average Series B round funding was $50 million in 2022, up from $35 million in 2020.

This funding round can attract both traditional private equity and later-stage investment firms.

Series C Funding

Series C funding rounds are for successful startups that need extra funding to:

• Create new products
• Acquire other companies
• Expand into new markets
• Hire an exceptional leadership team
• Boost numbers before an initial public offering (IPO)

The capital should help scale the company's efforts so it can grow as quickly as possible. Series C funding averages range from $88 to $89.5 million in 2022.

Because these startups are already successful, this round of investment can be less risky. With that in mind, there are often more investors getting involved at this level.

Series C investors can include:

• Private equity firms
• Hedge funds
• Secondary market groups
• Investment banks

Series D and Beyond

Few companies extend beyond Series C into Series D or E rounds. Businesses seeking this funding are often looking for a final influx of capital to achieve their goals.

A company at this stage of funding should have an established customer base, revenue streams, a track record of growth, and a solid plan for how it will use new capital.

• Calculate your funding needs.
• Create a business plan.
• Check your financial health.
• Research funding options.
• Make a repayment plan.

Startup funding depends on your business idea, experience, and access to financing. There are many factors that can influence funding and following these steps can help improve your chances.

1. Calculate your funding needs.

Before contacting investors or applying for a loan, you need to know how much money you need to achieve your business goals.

Looking for a small, one-time sum? A business loan or grant might be the right fit.

Need a larger contribution? An angel investor may make more sense.

Understanding your funding needs lets you take the best approach. This calculator can help you figure out your startup costs.

More resources:

• Startup costs
• Startup marketing budget

2. Create a business plan.

A business plan can help you build confidence with investors, lenders, and family members who can help fund your startup.

Your business plan should outline your vision. It should highlight the opportunity, target market, and industry you want to impact. It should also include:

• Marketing plans
• Competitive analysis

This business plan template makes it easy to create a detailed business plan so you can start pitching your idea.

Featured resource: Business plan template

3. Check your financial health.

You can't figure out what type of funding you need if you don't know your current financial status. Gather the documents you need to make an assessment including:

• Business and personal tax returns
• Bank statements
• Projected expenses

Then, create a profit and loss statement and revenue projections. These can help you (and investors) understand how much funding you have on hand — and how much you still need.

4. Research funding options.

Reading this post may have opened your eyes to the types of available funding. Before you make any choices, do an extensive amount of research to see if it's right for your business. There are hundreds of resources available online about approaching investors , your debt-to-equity ratio , and distributing equity .

• Tips for pitching to investors
• Preparing for investors

5. Make a repayment plan.

Accepting capital is no small gesture, especially if it's millions of dollars. Most founders only need a few thousand dollars to get started, but it's still wise to create a plan for paying back the money you borrow.

You can use a business loan calculator to estimate payments and work them into your budget. If you can't make the payment, don't take the funding.

Find the Right Startup Funding for Your Business

Some businesses need a massive amount of capital to bring their ideas to life. Others need a small loan to push them toward higher revenue and financial freedom.

Whatever the case may be for your business, it's best to figure out your current finances and funding options before choosing a path. Look to similar businesses in your industry, look at loans, or find inspiration for a crowdfunding campaign.

Use this starting point to find the funding you need to bring your business to life. Then, go out and get that money.

Editor's note: This post was originally published in February 2022 and has been updated for comprehensiveness.

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Business Capital: Definition and Where to Get It

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Business capital, or small-business capital, commonly refers to lump sums of money that come from external sources and are used to fund business purchases, operations or growth. These sources can include small-business loans , as well as free funding like small-business grants .

The right type of business capital for you depends on how established your business is, as well as other factors like your funding purpose and how fast you need it.

How much do you need?

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We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

What is business capital?

Technically speaking, business capital is anything that generates value for your business. That can include financial capital like cash, human capital like employees and personnel or physical capital like real estate and intellectual property.

Business capital, or small-business capital, can also simply refer to external financing, or lump sums your business attains to fund operations or large purchases.

Types of business capital

There are several types of business capital that you can use to fund your business at various stages.

Debt funding

With debt funding — taking out a small-business loan — you borrow money from a third party and repay it, with interest, over a specific period of time. Debt funding can be a good option for a variety of small businesses, especially established companies looking to grow their operations.

Business term loans

With a business term loan , you receive a lump sum of capital upfront from a lender. You then repay the loan, with interest, over a set period of time — usually with fixed, equal payments.

Business term loans are well-suited for specific funding purposes, such as purchasing real estate or renovating your storefront. Some loans, like equipment financing , are designed to accommodate specific business purchases.

You can get business term loans from banks, credit unions and online lenders . Banks and credit unions will offer term loans with the most competitive rates and terms, but you’ll need to meet strict criteria to qualify. Online lenders are typically more flexible and may work with startups or businesses with bad credit. These companies will often charge higher interest rates.

» MORE: Compare the best banks for business loans

SBA loans are partially guaranteed by the U.S. Small Business Administration and issued by participating lenders, typically banks and credit unions. There are several types of SBA loans , but generally, these products are structured as term loans.

These loans usually have low interest rates and long repayment terms and can be used for a range of purposes, such as working capital, equipment purchases and business expansions.

This type of government funding can be a good option if you’re an established business with good credit but you can’t qualify for a bank loan.

>> MORE: Top SBA lenders

Business lines of credit

A business line of credit is one of the most flexible types of business capital — making it well-suited to meet the working capital needs of new and established companies alike.

With a business line of credit, you can draw from a set limit of funds and pay interest on only the money you borrow. After you repay, you can draw from the line as needed. Lines of credit are often used to manage cash flow, buy inventory, cover payroll or serve as an emergency fund.

Like term loans, business lines of credit are available from traditional and online lenders. Traditional lenders typically offer credit lines with the lowest rates but require an excellent credit history and several years in business to qualify.

Online lenders, on the other hand, may charge higher interest rates but generally work with a wider range of businesses. Some online lenders offer startup business lines of credit and/or options for borrowers with fair credit.

Business credit cards

Business credit cards work similarly to personal credit cards, although business cards typically offer rewards for spending on operational expenses, such as gas, internet, software purchases and more.

Business credit cards can be a good option for startups because they offer quick access to capital and most entrepreneurs with good personal credit can qualify. You may not want to completely fund your business with a credit card , however, because overspending can lead to expensive debt that’s difficult to repay.

In general, business credit cards can be useful for all types of entrepreneurs because they allow you to earn rewards (e.g., cash back, miles, points) for everyday spending on your business purchases. Responsible spending on a credit card can also help you establish business credit, which will allow you to qualify for more competitive loan products.

»MORE: Debt vs. equity financing

Equity funding

With equity funding , you receive money from an investor in exchange for partial ownership of your company. If you’re a startup that can’t qualify for a business loan or you want to avoid debt, equity funding may be a suitable option for your needs.

Angel investors and venture capital firms

Angel investors and venture capital firms are common forms of equity financing that involve receiving money in exchange for equity in your company.

With angel investors , you work with individuals who invest their money into your business. These individuals often invest in startups with high growth potential. In addition to the equity they receive, your angel investor may offer business expertise to help your company progress.

A venture capital firm, on the other hand, will be an individual or group that invests from a pool of money. VCs may require a higher amount of equity in your company as well as some operational control, such as a seat on the board of directors. Compared to angel investors, VCs tend to offer larger amounts of money and invest in businesses that are a little more established.

You can find angel investors and venture capitalists through organizations like the Angel Capital Association or the National Venture Capital Association . You can also search online for investors in your area as well as attend industry events and talk to other business owners.

Either of these startup funding options may be a good option for your business if you’re looking to avoid debt. Finding and receiving capital may take time, however, and some businesses may not be able to meet the requirements set out by an angel investor or venture capital firm.

Crowdfunding

With crowdfunding your business , you raise money online through public donations in exchange for equity or rewards, such as an exclusive product or early access to an event.

You can set up a campaign using a crowdfunding platform, which allows you to manage the process through the platform’s website.

With equity crowdfunding , you can use platforms like Fundable, StartEngine and Netcapital to receive capital in exchange for ownership of your business. For rewards-based crowdfunding , you can turn to well-known websites like Kickstarter or Indiegogo .

Crowdfunding can be well-suited for a range of businesses as long as they’re dedicated to managing and promoting a campaign. Rewards-based crowdfunding is usually a better option for small amounts of capital, especially for businesses with a unique product or service.

Equity crowdfunding, on the other hand, may give you access to larger funding amounts, but you may have to meet stricter eligibility requirements to use one of these crowdfunding platforms.

» MORE: How to fund your business idea

Free business capital

On top of these main sources of external financing, entrepreneurs can access free small-business capital through grants. Grants do not have to be repaid and are available from government agencies, corporations and nonprofits.

Small-business grants are available for new and existing businesses. You can get a business grant from a few sources:

Federal and state governments. Government agencies offer a range of small-business grants, including those designed for companies that focus on scientific research and technology innovation. Grants.gov provides a comprehensive list of business grants available from the federal government.

Private corporations. Many corporations offer annual small-business grant programs or competitions, such as the FedEx Small Business Grant Contest . In many cases, you have to meet specific criteria to qualify for one of these grants.

Nonprofits. Certain nonprofits offer grants designed for small-business owners. Among these organizations, some focus on providing business grants for women or business grants for minority groups .

Business grants are a good option for startups as well as companies that can’t qualify for other types of small-business capital. Because grants give you access to free capital, however, applications are competitive — and often time-consuming.

Bootstrapping

In addition to the previous external financing sources, many small-business owners also bootstrap, or self-fund, their business venture. Options for bootstrapping your business include using personal savings or tapping into their retirement account through a Rollover as Business Startup , or ROBS.

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How to get business capital

The right funding option is different for every small-business owner. And the best type of funding for you now might not be the best choice to meet your needs later.

Consider why you need business capital. Your funding purpose is a key component of which type of business capital is best for you, and how much money you need. Plus, any potential lender or funder will likely ask for this information. 

Decide which type of funding is best for your business. Before you start researching, think about which type of business capital is best for you. Consider if you would rather take on debt or give up business equity, how fast you need access to funding and your current resources and qualifications. 

Research lenders or funders. Once you’ve decided which type of capital your business needs, you can begin researching providers — either lenders, investors or funding platforms — to determine the best options. 

Gather documents. It may vary based on your capital provider, but generally you’ll need documents like your business plan, filing information and financial information like profit and loss statements, tax returns or bank statements. 

How you get small-business capital depends on why you need capital and how long you’ve been in business. Startups may consider self-funding, working with angel investors or applying for grants. Businesses with at least a year in operation and solid finances, likely have more options, such as SBA funding and other types of business loans.

Capital in business generally refers to anything the business uses to generate value, including finances, physical assets, human resources and more. It can also refer to external sources of financing, like loans or grants.

If you need money to get your business off the ground, you’ll likely have difficulty qualifying for traditional funding, like a term loan or line of credit. Instead, you might turn to alternative sources, such as friends and family, crowdfunding, small-business grants or angel investors for the startup capital you need.

On a similar note...

N.J. schools could get back money lost in budget cuts under new plan. See the list.

• Updated: Apr. 09, 2024, 8:41 a.m. |
• Published: Apr. 08, 2024, 1:25 p.m.
• Tina Kelley | NJ Advance Media for NJ.com

Additional state aid could be available to more than 100 New Jersey school districts facing budget cuts , under a plan moving through the state Legislature.

The legislation, A4161 , would provide an additional $71.4 million to soften some of the cuts in Gov. Phil Murphy ’s proposed state budget. The legislation to add additional school aid was approved by the state Assembly Education Committee Friday. (See the full list of N.J. districts facing state aid cuts below.)

Murphy introduced his $11.6 billion state budget proposal for 2024-25 in February. If approved by the state Legislature, it would be the first state budget to fully implement the controversial 2008 school aid formula that cut aid to many districts.

MORE: 10 biggest winners and losers in N.J.’s new school funding plan

Murphy’s plan includes a $901 million increase in education funding compared to last year. In the spending plan, 422 districts would receive an increase in funds, 15 would receive the same amount and 137 districts would receive less.

Districts that lost state aid could gain back two-thirds of the amount cut under the Assembly bill, said Assemblyman Roy Freiman, D-Somerset, a co-sponsor of the legislation. The school districts would have to apply to the state education commissioner for money from the Department of Education’s Property Tax Relief Fund.

The school districts would have to prove they raised as much money as they could through local taxes and not cut employees since last year, the legislation says.

The measure would also allow districts to raise property taxes above the state’s 2% annual limit for local tax increases — for this year only, Freiman said. Bills addressing school aid cuts in previous years lacked that provision.

“Ninety percent of the time I think it would be an incredibly small amount,” Freiman said of the possible tax increases in local school districts.

A Murphy administration spokesperson declined to comment on the proposal to restore some of the school district funding cuts.

State Sen. Andrew Zwicker, D-Middlesex, introduced a similar bill, S3801, in the state Senate on Monday that would allow districts that have experienced cuts since 2021 to apply for additional aid.

Also on Monday, Senate Minority Leader Anthony Bucco , R-Morris, and Sen. Declan O’Scanlon, R-Monmouth, introduced bill S3076 to fully restore the proposed school funding cuts for certain school districts.

“The unexpected cuts that districts around the state and in my district received, in an incredibly short time frame, would result in hundreds of teachers and support personnel losing their jobs, which is completely unacceptable,” Zwicker said.

The school funding formula is based on enrollment, the local tax base, poverty levels and multiple other factors. It was created to address long-standing inequities among districts with varying educational needs and tax bases.

The adjustments in the formula caused some districts to lose state aid. They included districts where student populations declined or where local tax bases were sufficient to cover more school costs.

The districts hit with the largest proposed cuts this year are Cape May Point, Bass River and Runnemede. Each would lose more than 55% of their state aid under Murphy’s budget proposal.

By dollar amount, the most affected districts are Long Branch, with a $10.4 million proposed cut, Cherry Hill, with a loss of $6.9 million, and Lenape Regional, with a loss of $4.7 million.

The districts gaining the most dollars in the governor’s proposed budget are Newark, with a $101 million increase, Paterson, with an additional $54 million, and Elizabeth, with an increase of $50 million.

At the Assembly Education Committee meeting last week, Assemblyman Brian Rumpf, R-Ocean, said the state’s school formula is broken.

To have school districts “throughout our state suffering by the fact they have significant aid cuts is not something New Jersey should tolerate,” he said.

Rumpf said in his district, Lacey Township schools face a $3.2 million cut and the loss of 103 positions.

“These are real people that we’re talking about, not only the teachers that are going to be losing their positions but the kids that are going to be forced to have an education with 30 plus students in the classroom. And I don’t think any one of us would suggest that that is the manner in which we would like our children to be educated,” he said.

Freiman — the assemblyman sponsoring the bill to restore school district cuts — said the state needs to address the causes of year-to-year volatility and avoid adjusting state aid amounts in April, when districts are trying to complete their budgets for the following year.

It has been a challenge to account for unexpected changes in property values and local school tax revenue in the wake of the COVID-19 pandemic, Freiman said. Changes in student population and the merging of school districts have also resulted in swings in the amount of state aid each district receives.

The Assembly education committee also passed a bill, A4059 , last week that would give school districts experiencing state aid cuts more time to submit their budgets.

Both the Assembly bill to restore school aid cuts and the bill giving school districts more time to submit their budgets must still go to the full Assembly for a vote. The measures would need to pass both the Assembly and the state Senate and be signed by Murphy before becoming law.

Stories by Tina Kelley

• This N.J. high school is in the running for $100K science prize
• Vandals trash Rutgers Islamic center, rip down Palestinian flag as Ramadan ends
• N.J. professor wins $1M Turing prize for helping teach computers ‘randomness’

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25 million student loan borrowers could see their balances shrink under Biden’s new forgiveness plan

President Joe Biden and his administration are moving forward with plans to provide student debt relief to as many people as possible.

The administration announced Monday the details of its new plan to reduce student debt balances for millions of borrowers. The proposed regulations — which were drafted as part of the months-long negotiated rulemaking process — feature several different ways for borrowers to see their debt balances reduced, if not eliminated entirely. 

The provisions of the plan include forgiving excessive interest that has accrued, discharging balances that have been in repayment for 20 years or more and relief for borrowers who attended now-closed or insolvent institutions.

"[The] plan is focused on the reasons that people are struggling with their student loan debt," James Kvaal, Under Secretary of Education, told CNBC Make It. 

"People who are upside down on their student loans because interest has racked up faster than they could pay it, people who have been making payments on their loans for decades and still owe those loans — it's a sign of how aggressive the President is [being] in tackling the student loan crisis," he said.

The relief provisions will soon be open for a public comment period where the administration will consider revisions to its proposal before it goes into effect. Some provisions are expected to roll out as early as this fall, the administration said.

As with Biden's previous student debt forgiveness proposals, it's possible this plan will come under legal scrutiny if challenged by opponents. But this plan differs from his previous action by using a different legal authority — the Higher Education Act — and narrowing the scope of borrowers eligible for relief.

In the event this plan is enacted and a future presidential administration wanted to repeal it, it would need to go through the same lengthy rulemaking process, Kvaal said.

Here's the relief borrowers may expect to see in the coming months.

Up to $20,000 of accrued interest forgiven

Interest accrues daily on student loans and some borrowers have interest rates as high as 8%. As a result, many borrowers wind up with balances higher than what they initially took out for school, despite making regular payments.

Biden's plan aims to address that "runaway interest" by canceling up to $20,000 of the amount a borrower's balance has grown due to unpaid interest after entering repayment. Single borrowers who earn $120,000 or less and married borrowers earning $240,000 or less who enroll in an income-driven repayment plan would be eligible to have their entire excess interest balances discharged, the administration said. 

Some 25 million borrowers stand to benefit from their interest balances being reduced if the plan goes into effect as proposed. An estimated 23 million of those borrowers will have their entire balance growth forgiven, according to the administration.

Automatic loan discharge for forgiveness-eligible borrowers

The Biden administration has canceled debt for over 1 million borrowers through existing forgiveness programs, including Public Service Loan Forgiveness , income-driven repayment and closed school loan discharges.

The administration estimates another 2 million borrowers are eligible to have their debt forgiven under these programs, but have not yet applied .

The new plan will allow the administration to use available data to identify and automatically clear balances for these borrowers as they are eligible, without borrower action.

Debt forgiveness for long-term borrowers

Another 2 million borrowers could benefit from a provision that will clear debt balances that are at least 20 years old for undergraduate borrowers and 25 years for graduate borrowers. It will apply to undergraduate borrowers with direct loans or direct consolidation loans who entered repayment on or before July 1, 2005, and graduate school borrowers who entered repayment on or before or July 1, 2000.

Currently, borrowers enrolled in the Saving on a Valuable Education plan or other income-driven repayment plans are eligible to have their remaining balances discharged after 20 or 25 years, but the new regulation would eliminate the IDR requirement.

Relief for attendees of 'low-financial-value' programs

The Biden administration has made a concerted effort to "hold colleges accountable when they leave students with mountains of debt and without good job prospects," it said in its statement. 

As such, the new plan would waive loans for borrowers who attended institutions or programs the administration identifies as "low-financial-value."

That includes schools that have lost eligibility to receive federal student aid or were denied recertification due to cheating or taking advantage of students, as well as programs that have since closed or have a history of leaving students with high debt loads and poor earnings outcomes.

Help for borrowers facing financial hardship

The administration says it is committed to pursuing a "specific action" for student loan borrowers experiencing a variety of financial hardships , although it's not yet clear who may receive relief and to what degree their balances will be reduced.

"This could include delivering automatic forgiveness to borrowers predicted to be likely to default on their loans, or through an individualized applications where borrowers could detail their financial hardship that is preventing them from being able to fully pay back their loan, such as a child care or medical expense," the administration said in its statement.

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Biden's latest student-loan forgiveness plan brings questions for borrowers: What to know

Some student loan borrowers may not take advantage of President Joe Biden's final plan to eliminate debt for millions because they don't know if they're eligible, don't understand the process or think it is a scam.

On Monday, Biden promised student loan relief by the fall with his final proposal. This plan comes less than a year after the Supreme Court blocked his initial attempt.

Under the proposed plan, more than 4 million borrowers who have been paying down their student loans for 20 years or more could have their debt completely canceled, according to the White House. The plan would also help more than 10 million borrowers by giving them $5,000 or more in relief, Biden's administration said.

Biden also aims to help 23 million borrowers by eliminating interest past the original loan amounts.

How to apply for student loan forgiveness?

If eligible for debt relief, borrowers should periodically check their emails for updates from their student loan servicers and Federal Student Aid .

Learn more: Best personal loans

While Biden works on his final proposal, eligible borrowers can apply on the Federal Student Aid website for other kinds of relief, including if they have a disability , work for a nonprofit , or are a teacher , government employee or medical professional .

Borrowers repaying their loans for 20 to 25 years can apply for income-driven repayment (IDR) loan forgiveness.

Several other loan forgiveness options are available on the Federal Student Aid website, but borrowers should check if they're eligible by looking closely at each selection. Victims of forgery, borrowers who declared bankruptcy and Perkins loan borrowers are examples of individuals eligible for forgiveness.

What document explains your rights and responsibilities as a federal student loan borrower?

A Master Promissory Note (MPN) is a binding legal document borrowers must sign before they receive a federal student loan promising they'll repay the loans and any accrued interest and fees to the U.S. Department of Education, according to Federal Student Aid.

Student loan debt: Averages and other statistics in 2024

There is one MPN for direct subsidized/unsubsidized loans and a different MPN for direct PLUS loans. All MPNs can be signed electronically.

"You may receive more than one loan under an MPN over a period of up to 10 years to pay for your or your child’s educational costs, as long as the school is authorized to use the MPN in this way and chooses to do so," the Federal Student Aid website says.

Am I eligible for student loan relief?

By checking their emails, borrowers typically receive messages explaining whether they're eligible for relief and what type they can apply for.

If not signed up for emails, borrowers can visit the Federal Student Aid website and check their eligibility by hovering over the "loan forgiveness" tab and clicking "types of loan forgiveness."

Once the borrower clicks "types of loan forgiveness," they will be taken to a page showing the available relief options. Borrowers then can check their eligibility.

Be aware of student loan scams

Federal Student Aid warns borrowers to be aware of scams because they "might be contacted by a company saying they will help you get loan discharge, forgiveness, cancellation, or debt relief for a fee."

"You never have to pay for help with your federal student aid," the office's website says. "Make sure you work only with the U.S. Department of Education, the office of Federal Student Aid, and our loan servicers, and never reveal your personal information or account password to anyone."

The emails to borrowers come from [email protected], [email protected] and [email protected].

Borrowers can report scam attempts to the Federal Trade Commission by calling 1-877-382-4357 or by visiting reportfraud.ftc.gov.

Student loan scam involving 'Mission Hills Federal'

The Federal Trade Commission announced March 13 that it is sending more than $4.1 million in refunds to 27,584 borrowers who "lost money to student loan debt relief scammers who lured consumers with fake loan forgiveness claims and pocketed their money," according to a news release.

The scheme, which "tricked students into paying hundreds to thousands of dollars" since 2014, went by many names including Mission Hills Federal, Federal Direct Group, National Secure Processing and The Student Loan Group.

The group made the borrowers pay "illegal upfront fees and pretended to lower consumers’ monthly student loan payments," according to the FTC. The operators also deceived borrowers into sending their monthly student loan payments directly to them by "falsely claiming to take over the servicing of the consumers’ loans," the agency said.

"In reality, few payments were actually applied to consumers’ student loans and in many cases, none at all," the FTC said. "Instead, the defendants kept consumers’ money for themselves."

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Plan to Stash Pollution Beneath the Sea Could Save Money and Jobs

The Italian energy giant Eni sees future profits from collecting carbon dioxide and pumping it into natural gas fields that have been exhausted.

This gas processing plant at Casalborsetti is the focus of the first phase of an ambitious plan to capture carbon dioxide and bury it under the sea. Credit... Maurizio Fiorino for The New York Times

Supported by

By Stanley Reed

Stanley Reed, who writes on energy and the environment, visited Milan and Ravenna to report this story.

• April 4, 2024

Renowned for ancient churches and the tomb of Dante, the 14th-century poet, the city of Ravenna and its environs along Italy’s Adriatic coast are also home to old-line industries like steel and fertilizer. The manufacturing plants are of little interest to the many tourists who help sustain the area’s economy, but these sites employ tens of thousands of people.

The question is: For how long? The factories, like others in Europe, face increasing pressure from regulators to reduce the climate-altering gases that their operations produce. The worry is that rising costs from regulation will force them to close.

“We are very scared about the future of our industries,” said Michele De Pascale, the mayor of Ravenna. “We have to reach this goal to reduce CO2 emissions, but we want to do it without destroying our industries,” he said.

Italy’s energy giant, Eni, which has a large presence in Ravenna, is pushing a plan that the mayor says could help preserve the region’s heavy industries: create an industrial pollution collector.

The company is proposing to construct a network of pipelines to sweep up the carbon dioxide from the sites and store it away in old natural gas reservoirs. It sees this process, known as carbon capture and storage , as a promising new business line that would aid its shift to cleaner activities.

Eni is working on similar plans elsewhere in Europe, notably in Britain, where many mature oil and gas fields offer large volumes of storage potential. There are other carbon capture projects around the world, including in the United States, often aimed at reducing emissions from oil and natural gas production.

The company wants to diversify away from the oil and gas sales that have long been its mainstay, but it faces an uncertain future because of climate change concerns. Eni executives calculate they will have an edge because they can make use of the company’s existing infrastructure like wells and pipelines and redeploy employees.

“It is very easy to reskill or shift people,” said Claudio Descalzi, Eni’s chief executive.

Mr. Descalzi plans to turn carbon capture into a “satellite” company that could attract other investors seeking profits that he forecasts could be about 10 percent a year.

The transition to cleaner energy will succeed only if it spawns sustainable businesses, Mr. Descalzi said. “Otherwise, it will fail,” he added. “Because resources are limited and you can’t burn money.”

Eni has about 50 operating petroleum platforms in the Adriatic Sea off Ravenna, beyond lagoons dotted with flamingos. With production falling, Eni plans to pump carbon dioxide into the depleted gas reservoirs, which will act as giant sponges for the waste gas.

The company is spending about 100 million euros on modifications designed to remove about half the carbon dioxide emanating from a gas processing plant in nearby Casalborsetti. Work is largely complete, and Eni plans to begin sending the carbon dioxide through a new well into a gas field about 12 miles offshore and 10,000 feet below the seabed soon.

If this first phase goes smoothly, Eni will move to a much larger plan, initially costing as much as €1.5 billion, that will hook up factories and other large polluters in Italy and perhaps even France, to eventually draw as much as 16 million tons of carbon dioxide a year for burial.

Just as oil experts use powerful computers to crunch data into three-dimensional images to figure out how to efficiently extract gas from the ground, they are now using similar techniques to model how to safely inject carbon dioxide into porous rock.

Launching carbon capture projects, though, is proving a grind — an indication of how challenging the energy transition may be as countries shift from some of the easier areas to clean up, like electric power, to more difficult sectors like cement and steel.

Carbon capture needs to account for 8 percent of cumulative emissions reductions if the world is to achieve net zero by 2050, according to the International Energy Agency, an intergovernmental organization. Yet to be on track, the volume of stored carbon dioxide needs to jump twentyfold by 2030, to one billion tons a year — “a very ambitious undertaking” said Carl Greenfield, an analyst at the agency.

Polluters are struggling to evaluate whether it is worthwhile spending tens or even hundreds of millions to retrofit their plants. “They don’t have even the expertise to understand which is the best technology,” said Guido Brusco, Eni’s chief operating officer of natural resources.

But pressure from customers and taxes on carbon are pushing businesses to look seriously at carbon capture projects. Some analysts forecast that the European Union’s carbon tax will soar well above €100 a metric ton in future years, making proposals like Eni’s, which Mr. Brusco says will cost less than €80 a metric ton on average, an easier sell.

Andrea Ramonda, chief executive of Herambiente, which burns municipal waste to produce energy, is weighing the pros and cons. He figures that building what he calls a “washing machine of gases” at the plant could mean roughly doubling the €110 per metric ton that it now costs customers to to burn their garbage.

“We have to be very prudent” when managing the money of citizens, he said.

High costs and other obstacles mean that these proposals tend to require government backing, at least in the early stages.

“At the end of the day, you have to have some sort of government support,” said Bassam Fattouh, director of the Oxford Institute for Energy Studies, a research organization. “Otherwise, many of these projects will not be realized.”

The British government has for years backed work by Eni, including a plan to clean up emissions around Liverpool and Manchester in northwest England. As part of the project, known as HyNet North West, Eni would build and manage a 40-mile pipeline for collecting carbon dioxide from factories and other polluters in the area and pump the gas into wells beneath Liverpool Bay. Eni says it has reached a preliminary agreement with the British government to receive a guaranteed profit.

“We’re backing this industry with £20 billion,” Martin Callanan, Britain’s minister for energy efficiency and green finance, said in an emailed statement.

Negotiations with the Italian government are less advanced, although Eni executives hope Italy will copy Britain’s approach. Vannia Gava, Italy’s deputy energy minister, recently visited the Ravenna project and said afterward, “This is an enormous opportunity for Italy.”

Eni and other operators of carbon capture systems are targeting large emitters like cement and fertilizer plants that analysts say lack options to clean up their operations.

Heidelberg Materials, for instance, operates a large cement plant at Padeswood in Wales that it wants to tie into the Hynet pipeline. Simon Willis, chief executive of the company’s British business, said about 60 percent of the plant’s substantial emissions came from a chemical reaction in the cement-making process.

“There is nothing we can do about that other than collect it and store it,” he said.

Even some environmental groups are inclined to give carbon capture at least a lukewarm pass as long as it is not a means of prolonging the use of fossil fuels.

“If CO2 release to the atmosphere is otherwise inevitable from an industrial installation, then it is better to capture it,” said Doug Parr, chief scientist of Greenpeace UK.

Stanley Reed reports on energy, the environment and the Middle East from London. He has been a journalist for more than four decades. More about Stanley Reed

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Here's where funding comes from for guaranteed basic-income programs giving money with no strings attached to low-income Americans

• Guaranteed basic-income pilots across the US give no-strings cash assistance to low-income families.
• Funding often comes from foundations and federal relief funding, not just taxpayer dollars.
• GBI faces opposition from Republican lawmakers who fear it  incentivizes reliance on government aid.

Across the US, guaranteed basic-income pilots are giving hundreds of dollars a month unconditionally to help thousands of low-income families secure housing and pay off debts.

The money for those programs might not come from where you expect. Each pilot has different funding streams, but the money often comes from foundations and federal relief funding — not just local taxpayer dollars, according to the Economic Security Project , an organization that advocates for guaranteed income and cash tax credit programs.

Income inequality is high, many areas are experiencing an affordable housing crisis , and Census data shows that about 40 million Americans live below the poverty line.

Cities like San Antonio , Austin , Denver , Boston , and Minneapolis have turned to basic-income pilot programs to explore ways to reduce those poverty levels. GBI offers participants no-strings cash payments for one to three years.

The programs differ from traditional social services because participants can choose to spend the money where they need it most instead of on a specific spending category like SNAP or Medicaid . Many have used the funds — often between $500 and $1,000 a month — to pay rent, afford groceries, pay off debt, and support their children.

"You're deciding what's best for your family, you're the expert on your family," Monique Gonzalez, a mother of six and participant in the San Antonio pilot, told BI . "Being able to utilize these funds in a manner that puts you back into control boosts your confidence."

Still, basic income has been met with opposition by some local leaders and lawmakers, often citing concerns about the cost of the programs. Republicans in Texas , Arizona , Iowa , and South Dakota are making efforts to ban GBI programs at the municipal and state level. Some worry that cash payments will make people too reliant on the government.

"Are we going to rob from taxes that fund our streets, bridges, law enforcement, and government function?" Arizona Rep. John Gillette told BI. "Are we going to raise taxes for people that are not working or don't want to work? I think this disincentivizes people from getting a job."

States and cities sometimes fund basic-income programs

Many basic-income programs receive funding directly from state and local governments.

On the state level, California budgeted $35 million in 2021 for cities to put into effect guaranteed-income programs over five years. This has allowed thousands of participants in Los Angeles, San Francisco, and Sacramento to receive monthly payments.

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In Michigan, Flint announced a plan to give new and expecting moms a $1,500 lump sum and then $500 monthly for their baby's first year. The program comes from government money and is supplemented by grants.

Biden's economic relief plans also fund the programs

GBI pilots in Massachusetts and Texas have also pulled from federal pandemic relief funds to support participants.

President Joe Biden signed the American Rescue Plan Act , also known as ARPA, in 2021. The funds — which amount to $1.9 trillion — were intended to alleviate the negative economic impacts of COVID-19. ARPA partially funded pandemic stimulus checks , and local governments have also received money to spend on local education, childcare, and housing assistance.

In some cases, these local governments chose to spend the money on basic income.

The City of Chicago's Department of Family and Support Services committed $31.5 million in ARPA funding to assist 5,000 residents via the Chicago Resilient Communities Pilot, the nation's largest pilot.

Somerville, Massachusetts is also allocating $1.8 million in ARPA funds toward GBI, with other ARPA funding going to affordable childcare programs and public transit. The local pilot is giving 200 low-income families currently experiencing housing insecurity $750 a month for a full year.

Harris County , which includes Houston, is budgeting $20.5 million in ARPA funds to give low-income households $500 a month for 18 months.

Nonprofits and philanthropy play a key role in basic-income funding

Other basic-income programs are organized through a nonprofit, or receive funding from foundations and private donors.

For instance, former Twitter CEO Jack Dorsey donated $15 million in 2020 to help fund pilot programs assisted by Mayors for a Guaranteed Income, which encourages local leaders to implement GBI programs. Organizations like GiveDirectly have helped deliver $250 million in unconditional cash payments to over 220,000 low-income Americans since 2017.

In San Antonio , the nonprofit UpTogether first piloted GBI in 2020 by giving low-income families $5,108 total over 25 months. UpTogether is also giving a smaller group of families $500 a month for 18 months, set to end in December 2024. The nonprofit organized money through the city of San Antonio, philanthropic foundations, and donors.

Similarly, the poverty solutions nonprofit Georgia Resilience and Opportunity Fund is giving cash payments to low-income Black women in Atlanta . The $13 million initiative is funded by GRO Fund and individual donations.

A basic-income pilot in Denver was so successful that its funding was extended . The city, the private foundation Colorado Trust, an anonymous foundation provided over $7 million to continue the program for another six months.

Along with funding cash payments, the Economic Security Project said that philanthropic donations can help a GBI programs pay for income policy research. Most GBI pilots interview participants throughout their program about how cash payments are impacting their financial situation.

Have you benefited from a guaranteed basic-income program? Share your story with these reporters at [email protected] and [email protected] .

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