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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).

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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.

Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!

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 ."

Home > Business > Business Startup

How To Write a Business Plan

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Starting a business is a wild ride, and a solid business plan can be the key to keeping you on track. A business plan is essentially a roadmap for your business — outlining your goals, strategies, market analysis and financial projections. Not only will it guide your decision-making, a business plan can help you secure funding with a loan or from investors .

Writing a business plan can seem like a huge task, but taking it one step at a time can break the plan down into manageable milestones. Here is our step-by-step guide on how to write a business plan.

Write your executive summary
Do your market research homework
Set your business goals and objectives
Plan your business strategy
Describe your product or service
Crunch the numbers
Finalize your business plan

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Step 1: Write your executive summary

Though this will be the first page of your business plan , we recommend you actually write the executive summary last. That’s because an executive summary highlights what’s to come in the business plan but in a more condensed fashion.

An executive summary gives stakeholders who are reading your business plan the key points quickly without having to comb through pages and pages. Be sure to cover each successive point in a concise manner, and include as much data as necessary to support your claims.

You’ll cover other things too, but answer these basic questions in your executive summary:

Idea: What’s your business concept? What problem does your business solve? What are your business goals?
Product: What’s your product/service and how is it different?
Market: Who’s your audience? How will you reach customers?
Finance: How much will your idea cost? And if you’re seeking funding, how much money do you need? How much do you expect to earn? If you’ve already started, where is your revenue at now?

Step 2: Do your market research homework

The next step in writing a business plan is to conduct market research . This involves gathering information about your target market (or customer persona), your competition, and the industry as a whole. You can use a variety of research methods such as surveys, focus groups, and online research to gather this information. Your method may be formal or more casual, just make sure that you’re getting good data back.

This research will help you to understand the needs of your target market and the potential demand for your product or service—essential aspects of starting and growing a successful business.

Step 3: Set your business goals and objectives

Once you’ve completed your market research, you can begin to define your business goals and objectives. What is the problem you want to solve? What’s your vision for the future? Where do you want to be in a year from now?

Use this step to decide what you want to achieve with your business, both in the short and long term. Try to set SMART goals—specific, measurable, achievable, relevant, and time-bound benchmarks—that will help you to stay focused and motivated as you build your business.

Step 4: Plan your business strategy

Your business strategy is how you plan to reach your goals and objectives. This includes details on positioning your product or service, marketing and sales strategies, operational plans, and the organizational structure of your small business.

Make sure to include key roles and responsibilities for each team member if you’re in a business entity with multiple people.

Step 5: Describe your product or service

In this section, get into the nitty-gritty of your product or service. Go into depth regarding the features, benefits, target market, and any patents or proprietary tech you have. Make sure to paint a clear picture of what sets your product apart from the competition—and don’t forget to highlight any customer benefits.

Step 6: Crunch the numbers

Financial analysis is an essential part of your business plan. If you’re already in business that includes your profit and loss statement , cash flow statement and balance sheet .

These financial projections will give investors and lenders an understanding of the financial health of your business and the potential return on investment.

You may want to work with a financial professional to ensure your financial projections are realistic and accurate.

Step 7: Finalize your business plan

Once you’ve completed everything, it's time to finalize your business plan. This involves reviewing and editing your plan to ensure that it is clear, concise, and easy to understand.

You should also have someone else review your plan to get a fresh perspective and identify any areas that may need improvement. You could even work with a free SCORE mentor on your business plan or use a SCORE business plan template for more detailed guidance.

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The takeaway

Writing a business plan is an essential process for any forward-thinking entrepreneur or business owner. A business plan requires a lot of up-front research, planning, and attention to detail, but it’s worthwhile. Creating a comprehensive business plan can help you achieve your business goals and secure the funding you need.

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 ."

How to Start a Business: A Comprehensive Guide and Essential Steps 1 of 25
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
Starting an Online Business: A Step-by-Step Guide 23 of 25
How to Start Your Own Bookkeeping Business: Essential Tips 24 of 25
How to Start a Successful Dropshipping Business: A Comprehensive Guide 25 of 25

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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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How to Write a Business Plan (Plus Examples & Templates)

3 years ago

Have you ever wondered how to write a business plan step by step? Mike Andes, told us:

This guide will help you write a business plan to impress investors.

Throughout this process, we’ll get information from Mike Andes, who started Augusta Lawn Care Services when he was 12 and turned it into a franchise with over 90 locations. He has gone on to help others learn how to write business plans and start businesses. He knows a thing or two about writing business plans!

We’ll start by discussing the definition of a business plan. Then we’ll discuss how to come up with the idea, how to do the market research, and then the important elements in the business plan format. Keep reading to start your journey!

What Is a Business Plan?

A business plan is simply a road map of what you are trying to achieve with your business and how you will go about achieving it. It should cover all elements of your business including:

Finding customers
Plans for developing a team
Competition
Legal structures
Key milestones you are pursuing

If you aren’t quite ready to create a business plan, consider starting by reading our business startup guide .

Get a Business Idea

Before you can write a business plan, you have to have a business idea. You may see a problem that needs to be solved and have an idea how to solve it, or you might start by evaluating your interests and skills.

Mike told us, “The three things I suggest asking yourself when thinking about starting a business are:

What am I good at?
What would I enjoy doing?
What can I get paid for?”

Three adjoining circles about business opportunity

If all three of these questions don’t lead to at least one common answer, it will probably be a much harder road to success. Either there is not much market for it, you won’t be good at it, or you won’t enjoy doing it.

As Mike told us, “There’s enough stress starting and running a business that if you don’t like it or aren’t good at it, it’s hard to succeed.”

If you’d like to hear more about Mike’s approach to starting a business, check out our YouTube video

Conduct Market Analysis

Market analysis is focused on establishing if there is a target market for your products and services, how large the target market is, and identifying the demographics of people or businesses that would be interested in the product or service. The goal here is to establish how much money your business concept can make.

Product and Service Demand

An image showing product service and demand

A search engine is your best friend when trying to figure out if there is demand for your products and services. Personally, I love using presearch.org because it lets you directly search on a ton of different platforms including Google, Youtube, Twitter, and more. Check out the screenshot for the full list of search options.

With quick web searches, you can find out how many competitors you have, look through their reviews, and see if there are common complaints about the competitors. Bad reviews are a great place to find opportunities to offer better products or services.

If there are no similar products or services, you may have stumbled upon something new, or there may just be no demand for it. To find out, go talk to your most honest friend about the idea and see what they think. If they tell you it’s dumb or stare at you vacantly, there’s probably no market for it.

You can also conduct a survey through social media to get public opinion on your idea. Using Facebook Business Manager , you could get a feel for who would be interested in your product or service.

I ran a quick test of how many people between 18-65 you could reach in the U.S. during a week. It returned an estimated 700-2,000 for the total number of leads, which is enough to do a fairly accurate statistical analysis.

Identify Demographics of Target Market

Depending on what type of business you want to run, your target market will be different. The narrower the demographic, the fewer potential customers you’ll have. If you did a survey, you’ll be able to use that data to help define your target audience. Some considerations you’ll want to consider are:

Other Interests
Marital Status
Do they have kids?

Once you have this information, it can help you narrow down your options for location and help define your marketing further. One resource that Mike recommended using is the Census Bureau’s Quick Facts Map . He told us,

“It helps you quickly evaluate what the best areas are for your business to be located.”

How to Write a Business Plan

Now that you’ve developed your idea a little and established there is a market for it, you can begin writing a business plan. Getting started is easier with the business plan template we created for you to download. I strongly recommend using it as it is updated to make it easier to create an action plan.

Each of the following should be a section of your business plan:

Business Plan Cover Page
Table of Contents
Executive Summary
Company Description
Description of Products and Services

SWOT Analysis

Competitor Data
Competitive Analysis
Marketing Expenses Strategy

Pricing Strategy

Distribution Channel Assessment
Operational Plan
Management and Organizational Strategy
Financial Statements and/or Financial Projections

We’ll look into each of these. Don’t forget to download our free business plan template (mentioned just above) so you can follow along as we go.

How to Write a Business Plan Step 1. Create a Cover Page

The first thing investors will see is the cover page for your business plan. Make sure it looks professional. A great cover page shows that you think about first impressions.

A good business plan should have the following elements on a cover page:

Professionally designed logo
Company name
Mission or Vision Statement
Contact Info

Basically, think of a cover page for your business plan like a giant business card. It is meant to capture people’s attention but be quickly processed.

How to Write a Business Plan Step 2. Create a Table of Contents

Most people are busy enough that they don’t have a lot of time. Providing a table of contents makes it easy for them to find the pages of your plan that are meaningful to them.

A table of contents will be immediately after the cover page, but you can include it after the executive summary. Including the table of contents immediately after the executive summary will help investors know what section of your business plan they want to review more thoroughly.

Check out Canva’s article about creating a table of contents . It has a ton of great information about creating easy access to each section of your business plan. Just remember that you’ll want to use different strategies for digital and hard copy business plans.

How to Write a Business Plan Step 3. Write an Executive Summary

A notepad with a written executive summary for business plan writing

An executive summary is where your business plan should catch the readers interest. It doesn’t need to be long, but should be quick and easy to read.

Mike told us,

How long should an executive summary bein an informal business plan?

For casual use, an executive summary should be similar to an elevator pitch, no more than 150-160 words, just enough to get them interested and wanting more. Indeed has a great article on elevator pitches . This can also be used for the content of emails to get readers’ attention.

It consists of three basic parts:

An introduction to you and your business.
What your business is about.
A call to action

Example of an informal executive summary

One of the best elevator pitches I’ve used is:

So far that pitch has achieved a 100% success rate in getting partnerships for the business.

What should I include in an executive summary for investors?

Investors are going to need a more detailed executive summary if you want to secure financing or sell equity. The executive summary should be a brief overview of your entire business plan and include:

Introduction of yourself and company.
An origin story (Recognition of a problem and how you came to solution)
An introduction to your products or services.
Your unique value proposition. Make sure to include intellectual property.
Where you are in the business life cycle
Request and why you need it.

Successful business plan examples

The owner of Urbanity told us he spent 2 months writing a 75-page business plan and received a $250,000 loan from the bank when he was 23. Make your business plan as detailed as possible when looking for financing. We’ve provided a template to help you prepare the portions of a business plan that banks expect.

Here’s the interview with the owner of Urbanity:

When to write an executive summary?

Even though the summary is near the beginning of a business plan, you should write it after you complete the rest of a business plan. You can’t talk about revenue, profits, and expected expenditures if you haven’t done the market research and created a financial plan.

What mistakes do people make when writing an executive summary?

Business owners commonly go into too much detail about the following items in an executive summary:

Marketing and sales processes
Financial statements
Organizational structure
Market analysis

These are things that people will want to know later, but they don’t hook the reader. They won’t spark interest in your small business, but they’ll close the deal.

How to Write a Business Plan Step 4. Company Description

Every business plan should include a company description. A great business plan will include the following elements while describing the company:

Mission statement
Philosophy and vision
Company goals

Target market

Legal structure

Let’s take a look at what each section includes in a good business plan.

Mission Statement

A mission statement is a brief explanation of why you started the company and what the company’s main focus is. It should be no more than one or two sentences. Check out HubSpot’s article 27 Inspiring Mission Statement for a great read on informative and inspiring mission and vision statements.

Company Philosophy and Vision

The company philosophy is what drives your company. You’ll normally hear them called core values. These are the building blocks that make your company different. You want to communicate your values to customers, business owners, and investors as often as possible to build a company culture, but make sure to back them up.

What makes your company different?

Each company is different. Your new business should rise above the standard company lines of honesty, integrity, fun, innovation, and community when communicating your business values. The standard answers are corporate jargon and lack authenticity.

Examples of core values

One of my clients decided to add a core values page to their website. As a tech company they emphasized the values:

Prioritize communication.
Never stop learning.
Be transparent.
Start small and grow incrementally.

These values communicate how the owner and the rest of the company operate. They also show a value proposition and competitive advantage because they specifically focus on delivering business value from the start. These values also genuinely show what the company is about and customers recognize the sincerity. Indeed has a great blog about how to identify your core values .

What is a vision statement?

A vision statement communicate the long lasting change a business pursues. The vision helps investors and customers understand what your company is trying to accomplish. The vision statement goes beyond a mission statement to provide something meaningful to the community, customer’s lives, or even the world.

Example vision statements

The Alzheimer’s Association is a great example of a vision statement:

A world without Alzheimer’s Disease and other dementia.

It clearly tells how they want to change the world. A world without Alzheimers might be unachievable, but that means they always have room for improvement.

Business Goals

You have to measure success against goals for a business plan to be meaningful. A business plan helps guide a company similar to how your GPS provides a road map to your favorite travel destination. A goal to make as much money as possible is not inspirational and sounds greedy.

Sure, business owners want to increase their profits and improve customer service, but they need to present an overview of what they consider success. The goals should help everyone prioritize their work.

How far in advance should a business plan?

Business planning should be done at least one year in advance, but many banks and investors prefer three to five year business plans. Longer plans show investors that the management team understands the market and knows the business is operating in a constantly shifting market. In addition, a plan helps businesses to adjust to changes because they have already considered how to handle them.

Example of great business goals

My all time-favorite long-term company goals are included in Tesla’s Master Plan, Part Deux . These goals were written in 2016 and drive the company’s decisions through 2026. They are the reason that investors are so forgiving when Elon Musk continually fails to meet his quarterly and annual goals.

If the progress aligns with the business plan investors are likely to continue to believe in the company. Just make sure the goals are reasonable or you’ll be discredited (unless you’re Elon Musk).

A man holding an iPad with a cup of coffee on his desk

You did target market research before creating a business plan. Now it’s time to add it to the plan so others understand what your ideal customer looks like. As a new business owner, you may not be considered an expert in your field yet, so document everything. Make sure the references you use are from respectable sources.

Use information from the specific lender when you are applying for lending. Most lenders provide industry research reports and using their data can strengthen the position of your business plan.

A small business plan should include a section on the external environment. Understanding the industry is crucial because we don’t plan a business in a vacuum. Make sure to research the industry trends, competitors, and forecasts. I personally prefer IBIS World for my business research. Make sure to answer questions like:

What is the industry outlook long-term and short-term?
How will your business take advantage of projected industry changes and trends?
What might happen to your competitors and how will your business successfully compete?

Industry resources

Some helpful resources to help you establish more about your industry are:

Trade Associations
Federal Reserve
Bureau of Labor Statistics

Legal Structure

There are five basic types of legal structures that most people will utilize:

Sole proprietorships
Limited Liability Companies (LLC)

Partnerships

Corporations.

Franchises.

Each business structure has their pros and cons. An LLC is the most common legal structure due to its protection of personal assets and ease of setting up. Make sure to specify how ownership is divided and what roles each owner plays when you have more than one business owner.

You’ll have to decide which structure is best for you, but we’ve gathered information on each to make it easier.

Sole Proprietorship

A sole proprietorship is the easiest legal structure to set up but doesn’t protect the owner’s personal assets from legal issues. That means if something goes wrong, you could lose both your company and your home.

To start a sole proprietorship, fill out a special tax form called a Schedule C . Sole proprietors can also join the American Independent Business Alliance .

Limited Liability Company (LLC)

An LLC is the most common business structure used in the United States because an LLC protects the owner’s personal assets. It’s similar to partnerships and corporations, but can be a single-member LLC in most states. An LLC requires a document called an operating agreement.

Each state has different requirements. Here’s a link to find your state’s requirements . Delaware and Nevada are common states to file an LLC because they are really business-friendly. Here’s a blog on the top 10 states to get an LLC.

Partnerships are typically for legal firms. If you choose to use a partnership choose a Limited Liability Partnership. Alternatively, you can just use an LLC.

Corporations are typically for massive organizations. Corporations have taxes on both corporate and income tax so unless you plan on selling stock, you are better off considering an LLC with S-Corp status . Investopedia has good information corporations here .

There are several opportunities to purchase successful franchises. TopFranchise.com has a list of companies in a variety of industries that offer franchise opportunities. This makes it where an entrepreneur can benefit from the reputation of an established business that has already worked out many of the kinks of starting from scratch.

How to Write a Business Plan Step 5. Products and Services

This section of the business plan should focus on what you sell, how you source it, and how you sell it. You should include:

Unique features that differentiate your business products from competitors
Intellectual property
Your supply chain
Cost and pricing structure

Questions to answer about your products and services

Mike gave us a list of the most important questions to answer about your product and services:

How will you be selling the product? (in person, ecommerce, wholesale, direct to consumer)?
How do you let them know they need a product?
How do you communicate the message?
How will you do transactions?
How much will you be selling it for?
How many do you think you’ll sell and why?

Make sure to use the worksheet on our business plan template .

How to Write a Business Plan Step 6. Sales and Marketing Plan

The marketing and sales plan is focused on the strategy to bring awareness to your company and guides how you will get the product to the consumer. It should contain the following sections:

SWOT Analysis stands for strengths, weaknesses, opportunities, and threats. Not only do you want to identify them, but you also want to document how the business plans to deal with them.

Business owners need to do a thorough job documenting how their service or product stacks up against the competition.

If proper research isn’t done, investors will be able to tell that the owner hasn’t researched the competition and is less likely to believe that the team can protect its service from threats by the more well-established competition. This is one of the most common parts of a presentation that trips up business owners presenting on Shark Tank .

SWOT Examples

Examples of strengths and weaknesses could be things like the lack of cash flow, intellectual property ownership, high costs of suppliers, and customers’ expectations on shipping times.

Opportunities could be ways to capitalize on your strengths or improve your weaknesses, but may also be gaps in the industry. This includes:

Adding offerings that fit with your current small business
Increase sales to current customers
Reducing costs through bulk ordering
Finding ways to reduce inventory
And other areas you can improve

Threats will normally come from outside of the company but could also be things like losing a key member of the team. Threats normally come from competition, regulations, taxes, and unforeseen events.

The management team should use the SWOT analysis to guide other areas of business planning, but it absolutely has to be done before a business owner starts marketing.

Include Competitor Data in Your Business Plan

When you plan a business, taking into consideration the strengths and weaknesses of the competition is key to navigating the field. Providing an overview of your competition and where they are headed shows that you are invested in understanding the industry.

For smaller businesses, you’ll want to search both the company and the owners names to see what they are working on. For publicly held corporations, you can find their quarterly and annual reports on the SEC website .

What another business plans to do can impact your business. Make sure to include things that might make it attractive for bigger companies to outsource to a small business.

Marketing Strategy

The marketing and sales part of business plans should be focused on how you are going to make potential customers aware of your business and then sell to them.

If you haven’t already included it, Mike recommends:

“They’ll want to know about Demographics, ages, and wealth of your target market.”

Make sure to include the Total addressable market . The term refers to the value if you captured 100% of the market.

Advertising Strategy

You’ll explain what formats of advertising you’ll be using. Some possibilities are:

Online: Facebook and Google are the big names to work with here.
Print : Print can be used to reach broad groups or targeted markets. Check out this for tips .
Radio : iHeartMedia is one of the best ways to advertise on the radio
Cable television : High priced, hard to measure ROI, but here’s an explanation of the process
Billboards: Attracting customers with billboards can be beneficial in high traffic areas.

You’ll want to define how you’ll be using each including frequency, duration, and cost. If you have the materials already created, including pictures or links to the marketing to show creative assets.

Mike told us “Most businesses are marketing digitally now due to Covid, but that’s not always the right answer.”

Make sure the marketing strategy will help team members or external marketing agencies stay within the brand guidelines .

An iPad with graph about pricing strategy

This section of a business plan should be focused on pricing. There are a ton of pricing strategies that may work for different business plans. Which one will work for you depends on what kind of a business you run.

Some common pricing strategies are:

Value-based pricing – Commonly used with home buying and selling or other products that are status symbols.
Skimming pricing – Commonly seen in video game consoles, price starts off high to recoup expenses quickly, then reduces over time.
Competition-based pricing – Pricing based on competitors’ pricing is commonly seen at gas stations.
Freemium services – Commonly used for software, where there is a free plan, then purchase options for more functionality.

HubSpot has a great calculator and blog on pricing strategies.

Beyond explaining what strategy your business plans to use, you should include references for how you came to this pricing strategy and how it will impact your cash flow.

Distribution Plan

This part of a business plan is focused on how the product or service is going to go through the supply chain. These may include multiple divisions or multiple companies. Make sure to include any parts of the workflow that are automated so investors can see where cost savings are expected and when.

Supply Chain Examples

For instance, lawn care companies would need to cover aspects such as:

Suppliers for lawn care equipment and tools
Any chemicals or treatments needed
Repair parts for sprinkler systems
Vehicles to transport equipment and employees
Insurance to protect the company vehicles and people.

Examples of Supply Chains

These are fairly flat supply chains compared to something like a clothing designer where the clothes would go through multiple vendors. A clothing company might have the following supply chain:

Raw materials
Shipping of raw materials
Converting of raw materials to thread
Shipping thread to produce garments
Garment producer
Shipping to company
Company storage
Shipping to retail stores

There have been advances such as print on demand that eliminate many of these steps. If you are designing completely custom clothing, all of this would need to be planned to keep from having business disruptions.

The main thing to include in the business plan is the list of suppliers, the path the supply chain follows, the time from order to the customer’s home, and the costs associated with each step of the process.

According to BizPlanReview , a business plan without this information is likely to get rejected because they have failed to research the key elements necessary to make sales to the customer.

How to Write a Business Plan Step 7. Company Organization and Operational Plan

This part of the business plan is focused on how the business model will function while serving customers. The business plan should provide an overview of how the team will manage the following aspects:

Quality Control

Legal environment

Let’s look at each for some insight.

Production has already been discussed in previous sections so I won’t go into it much. When writing a business plan for investors, try to avoid repetition as it creates a more simple business plan.

If the organizational plan will be used by the team as an overview of how to perform the best services for the customer, then redundancy makes more sense as it communicates what is important to the business.

A wooden stamp with the words "quality control"

Quality control policies help to keep the team focused on how to verify that the company adheres to the business plan and meets or exceeds customer expectations.

Quality control can be anything from a standard that says “all labels on shirts can be no more than 1/16″ off center” to a defined checklist of steps that should be performed and filled out for every customer.

There are a variety of organizations that help define quality control including:

International Organization for Standardization – Quality standards for energy, technology, food, production environments, and cybersecurity
AICPA – Standard defined for accounting.
The Joint Commission – Healthcare
ASHRAE – HVAC best practices

You can find lists of the organizations that contribute most to the government regulation of industries on Open Secrets . Research what the leaders in your field are doing. Follow their example and implement it in your quality control plan.

For location, you should use information from the market research to establish where the location will be. Make sure to include the following in the location documentation.

The size of your location
The type of building (retail, industrial, commercial, etc.)
Zoning restrictions – Urban Wire has a good map on how zoning works in each state
Accessibility – Does it meet ADA requirements?
Costs including rent, maintenance, utilities, insurance and any buildout or remodeling costs
Utilities – b.e.f. has a good energy calculator .

Legal Environment

The legal requirement section is focused on defining how to meet the legal requirements for your industry. A good business plan should include all of the following:

Any licenses and/or permits that are needed and whether you’ve obtained them
Any trademarks, copyrights, or patents that you have or are in the process of applying for
The insurance coverage your business requires and how much it costs
Any environmental, health, or workplace regulations affecting your business
Any special regulations affecting your industry
Bonding requirements, if applicable

Your local SBA office can help you establish requirements in your area. I strongly recommend using them. They are a great resource.

Your business plan should include a plan for company organization and hiring. While you may be the only person with the company right now, down the road you’ll need more people. Make sure to consider and document the answers to the following questions:

What is the current leadership structure and what will it look like in the future?
What types of employees will you have? Are there any licensing or educational requirements?
How many employees will you need?
Will you ever hire freelancers or independent contractors?
What is each position’s job description?
What is the pay structure (hourly, salaried, base plus commission, etc.)?
How do you plan to find qualified employees and contractors?

One of the most crucial parts of a business plan is the organizational chart. This simply shows the positions the company will need, who is in charge of them and the relationship of each of them. It will look similar to this:

Our small business plan template has a much more in-depth organizational chart you can edit to include when you include the organizational chart in your business plan.

How to Write a Business Plan Step 8. Financial Statements

No business plan is complete without financial statements or financial projections. The business plan format will be different based on whether you are writing a business plan to expand a business or a startup business plan. Let’s dig deeper into each.

Provide All Financial Income from an Existing Business

An existing business should use their past financial documents including the income statement, balance sheet, and cash flow statement to find trends to estimate the next 3-5 years.

You can create easy trendlines in excel to predict future revenue, profit and loss, cash flow, and other changes in year-over-year performance. This will show your expected performance assuming business continues as normal.

If you are seeking an investment, then the business is probably not going to continue as normal. Depending on the financial plan and the purpose of getting financing, adjustments may be needed to the following:

Higher Revenue if expanding business
Lower Cost of Goods Sold if purchasing inventory with bulk discounts
Adding interest if utilizing financing (not equity deal)
Changes in expenses
Addition of financing information to the cash flow statement
Changes in Earnings per Share on the balance sheet

Financial modeling is a challenging subject, but there are plenty of low-cost courses on the subject. If you need help planning your business financial documentation take some time to watch some of them.

Make it a point to document how you calculated all the changes to the income statement, balance sheet, and cash flow statement in your business plan so that key team members or investors can verify your research.

Financial Projections For A Startup Business Plan

Unlike an existing business, a startup doesn’t have previous success to model its future performance. In this scenario, you need to focus on how to make a business plan realistic through the use of industry research and averages.

Mike gave the following advice in his interview:

Financial Forecasting Mistakes

One of the things a lot of inexperienced people use is the argument, “If I get one percent of the market, it is worth $100 million.” If you use this, investors are likely to file the document under bad business plan examples.

Let’s use custom t-shirts as an example.

Credence Research estimated in 2018 there were 11,334,800,000 custom t-shirts sold for a total of $206.12 Billion, with a 6% compound annual growth rate.

With that data, you can calculate that the industry will grow to $270 Billion in 2023 and that the average shirt sold creates $18.18 in revenue.

Combine that with an IBIS World estimate of 11,094 custom screen printers and that means even if you become an average seller, you’ll get .009% of the market.

Here’s a table for easier viewing of that information.

A table showing yearly revenue of a business

The point here is to make sure your business proposal examples make sense.

You’ll need to know industry averages such as cost of customer acquisition, revenue per customer, the average cost of goods sold, and admin costs to be able to create accurate estimates.

Our simple business plan templates walk you through most of these processes. If you follow them you’ll have a good idea of how to write a business proposal.

How to Write a Business Plan Step 9. Business Plan Example of Funding Requests

What is a business plan without a plan on how to obtain funding?

The Small Business Administration has an example for a pizza restaurant that theoretically needed nearly $20k to make it through their first month.

In our video, How to Start a $500K/Year T-Shirt Business (Pt. 1 ), Sanford Booth told us he needed about $200,000 to start his franchise and broke even after 4 months.

Freshbooks estimates it takes on average 2-3 years for a business to be profitable, which means the fictitious pizza company from the SBA could need up to $330k to make it through that time and still pay their bills for their home and pizza shop.

Not every business needs that much to start, but realistically it’s a good idea to assume that you need a fairly large cushion.

Ways to get funding for a small business

There are a variety of ways to cover this. the most common are:

Bootstrapping – Using your savings without external funding.
Taking out debt – loans, credit cards
Equity, Seed Funding – Ownership of a percentage of the company in exchange for current funds
Crowdsourcing – Promising a good for funding to create the product

Keep reading for more tips on how to write a business plan.

How funding will be used

When asking for business financing make sure to include:

How much to get started?
What is the minimum viable product and how soon can you make money?
How will the money be spent?

Mike emphasized two aspects that should be included in every plan,

How to Write a Business Plan Resources

Here are some links to a business plan sample and business plan outline.

Sample plan

It’s also helpful to follow some of the leading influencers in the business plan writing community. Here’s a list:

Wise Plans – Shares a lot of information on starting businesses and is a business plan writing company.
Optimus Business Plans – Another business plan writing company.
Venture Capital – A venture capital thread that can help give you ideas.

How to Write a Business Plan: What’s Next?

We hope this guide about how to write a simple business plan step by step has been helpful. We’ve covered:

The definition of a business plan
Coming up with a business idea
Performing market research
The critical components of a business plan
An example business plan

In addition, we provided you with a simple business plan template to assist you in the process of writing your startup business plan. The startup business plan template also includes a business model template that will be the key to your success.

Don’t forget to check out the rest of our business hub .

Have you written a business plan before? How did it impact your ability to achieve your goals?

Brandon Boushy

Brandon Boushy lives to improve people’s lives by helping them become successful entrepreneurs. His journey started nearly 30 years ago. He consistently excelled at everything he did, but preferred to make the rules rather than follow him. His exploration of self and knowledge has helped him to get an engineering degree, MBA, and countless certifications. When freelancing and rideshare came onto the scene, he recognized the opportunity to play by his own rules. Since 2017, he has helped businesses across all industries achieve more with his research, writing, and marketing strategies. Since 2021, he has been the Lead Writer for UpFlip where he has published over 170 articles on small business success.

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Write the Funding Request Section of Your Business Plan

Free Startup Fundraising Checklist

Aayushi Mistry

December 12, 2023

Write the Funding Request Section of Your Business Plan

While writing a business plan to seek funding, you must be clear about what needs to be written under the section where you would request funding. This is an important and essential section of your business plan.

What Is the Funding Request?

A funding request section of your business plan allows you to ask for the required fund. While writing the request, you always have to mention the timeline in which you will utilize the funds. Usually, this timeline is up to the next 5 years from the request.

The funding request may differ on the age of your company. If your company is only a start-up, it will have to provide more details than any older company. Generally, any business up to its 7th year is called a startup company. Although this criterion may differ with respect to location and industry.

Step-by-Step Guide to Writing the Funding Request of Your Business Plan

Before you start writing your requests, be clear about your requirements. And, in the same line, be very clear explaining it. Your readers want you to get to the point. So, they can make accurate decisions just in time. Moreover, it will also save you a lot of time and effort.

Once the facts and figures are drawn (accurately), you need to draft them properly into your business plan. And you have to be very careful and precise while doing it.

So ideally, you need to figure out your requirements. And then put it into the context of the business plan.

So, How to derive your funding requirements?

Deriving funding requirements get a little overwhelming. But if you take it one step at a time, it starts getting easier.

First, determine what you need money for

It could be for hiring new staff, getting new equipment, or starting your business at a new location . Just be very clear with the goals. Then list down the requirements and the required fund for it. In the end, sum it up. If you want funds for recovering your debts, explain all your debts in detail.

Now, It Is Time to Know How Much Amount Can You Get on Your Own.

Calculate the financial resources: Look out for your saved capital in cash as well as in personal assets. Other than that, see if you can gather the funds from friends and family.
Grants and subsidies: Check if your company is eligible for any government grants and subsidies. If yes, apply for it and add the amount. Calculate and find the difference between the required amount and the amount you can already put together. And that will be the amount you will be needing from the third party, investors, or from the bank. Once you have the right fund requirement at hand, list out the investors, moneylenders, and loans who can provide you with the sum.

Now, Let’s Start Writing Your Funding Request

1. Provide Business Information

Yes, you still have to give this brief even though you have already explained it in detail. No, it does not get redundant-It does not have to be. In fact, you can take it up as an opportunity to give a little recap to your potential prospects and moneylenders.

Moreover, sometimes, you might have to only send the funding request section and not the entire business plan. In such cases, such information comes handy.

So, here’s what you will have to explain in the funding request section of your business plan-

Target Market
Your business structure like LTD, LLC, or more
Brief about your product/service
Partners involved
Business heir, if there exists.

2. Mention the Current Financial Situation

You might have provided some financial information in the financial section. But, you have to add some figures here anyway. Not only will make it contextual, but even easier to have a clear picture in one place.

Here are some financial details that you will have to include in this section:

Quarterly as well as yearly cash inflow and outflow
Balance sheets
P&L statement
Expected financial condition in the upcoming quarter and year
Include the list of assets and their ownership details if you are asking loan from the bank
If your business is in debt, explain the situation in the detail and a brief plan for paying it.
Mention how much return on investment can they expect.
In the end, mention how will you pay off the loan or transfer the ownership of the business.

3. Announce How Much Funds Do You Need?

When you explain the situation in brief and have all the facts and figures put aside, narrow it down to your requirements. Mention how much money you need.

4. Discuss Briefly How Will You Use the Money?

Here, you have to narrow down what you need the money for and how you are going to use it. Just list down the details and put the figure for it- so much like how you do your billing. If they are taking the money for multiple things, highlight every detail.

5. Dive Deep into Current and Future Financial Planning

You must have explained a little about the inflow and outflow in the financial section. But over here, you have to get into the details like-

If you are getting a loan, outline your timelines for payments.
If you are looking forward to selling, mention how it will affect the investors.
And then, finally, mention the exit strategy . Your exit strategy includes how you will transfer the business ownership at the end.
You only have to add the funding request if only you want the funding from outside. If you don’t want to raise your funds from a third party, then you don’t have to include them in your business plan.
Your investors would like to invest in your business if only it is thriving or promising. They are less likely to lend money if you are in debt.
You see, you are asking for money. So don’t take this section casually. Know your business inside out and only involve people who know everything about your business.
Be as specific about your requirements and the funding that you require.
If you are planning to send it to different investors, tailor your funding request according to the reader.
All your sources have different mindsets and different funding criteria. Be very specific about it. Do detailed research before starting to write your funding request.
Don’t hesitate while asking for the funds. Be open and ask just as much as your business really requires. But at the same time, don’t be greedy.

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How to Fund Your Business Idea

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Few things are more exciting than coming up with a business idea you believe in. But bringing that idea to life typically requires an investment — and funding a business can be tricky for entrepreneurs without a financial history or fully developed product.

A traditional small-business loan often won’t be possible until your business has been up and running for a few months, at least. Still, you can turn to other sources to invest in your idea while you get your business off the ground, including friends, family, professional investors, startup grants and your own bank account.

Here’s how to decide which funding options make sense for you.

How much do you need?

with Fundera by NerdWallet

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.

Types of business funding

In general, there are two types of business funding:

Zero-debt financing: You use savings or give someone something nonmonetary in exchange for an investment, like equity in your company or a custom piece of merchandise.

Debt financing: You borrow money and promise to pay it back with interest, regardless of how successful your business becomes.

At the idea stage, zero-debt options are typically the better choice, especially if you have limited business experience, and you want to avoid taking on debt that you may not be able to handle.

Debt financing may make sense once you have a detailed business plan that includes market research, a competitor analysis, financial projections and an explanation of how you’ll earn enough revenue to pay back the amount borrowed.

» MORE: Debt vs. equity financing: Which is right for you?

Ways to fund your business without taking on debt

When starting a business, your idea may be your most important asset. If you can convince others of the value of your business idea, they might be willing to invest in it without requiring you to pay them back.

Startup grants can be a source of free money for getting your business off the ground, but securing the award is not easy. Applying for funding often requires time and effort, but it can be worth it with grant amounts ranging from $1,000 to $25,000 or more.

You’ll want to check the eligibility requirement before applying, start preparing your grant application early and follow the instructions provided. You may be asked about your plan for your business, details about your market and competitors and how you would use the funds.

There are federal, state and private grants for small businesses as well as those designed for underserved groups and communities such as business grants for women , grants for minority entrepreneurs and grants for veterans .

Equity financing, including angel investment and venture capital

Equity financing gives individuals or firms a share of ownership in your business in exchange for the capital they provide to you.

Angel investing and venture capital are probably the two best-known methods of equity financing for startups. Angel investing is generally easier for aspiring entrepreneurs to secure — angel investors tend to be wealthy individuals, not investment firms, who focus on smaller investments. Venture capital firms, on the other hand, seek to invest in fast-growing startups that have the potential to be lucrative businesses.

With any type of investor, make sure to spell out the terms of the investment agreement in writing so all parties know what to expect and when.

Every investor will look for slightly different qualifications from the businesses they invest in. But like any other form of financing, you’ll probably need to demonstrate that your business plan is viable, your product or service fulfills a need in the market and your team can deliver on the idea.

You may be able to connect with angel investors and venture capitalists through your local business incubator or startup accelerator. An online search for your city or region and "business incubator" should lead you to any such organizations in your region.

Self-funding

Entrepreneurs often have to dip into their own pockets to get started. Doing so can help you avoid giving up control of your business to investors or paying interest on debts. On the other hand, if your business fails , you’ll lose your investment.

There are a variety of ways to self-fund your business, including tapping your retirement savings with a Rollover as Business Start-up or ROBS . Or, if you’re working a traditional full- or part-time job and starting a side hustle, consider remaining in your job as long as you can to maintain your personal financial security. Also, writing a business plan can help you come up with a strategy for growing your business to the point that it can support you.

Friends and family

Asking friends and family for a loan to start your business is a tried-and-true strategy for securing business funding. But mixing money and family matters can be complicated.

To preserve your relationships, treat your loved ones like any other investor. Share your business plan, answer their questions and be transparent about the risks. If they choose to invest in your idea, put your agreement in writing so everyone is on the same page. And if they choose not to, don’t take it personally — they need to look out for their own finances, too.

» MORE: Should you invest in a friend’s business?

Crowdfunding

If your business idea is developed enough to have garnered a dedicated audience — for instance, if you’re a home baker seeking to expand into a storefront or an artist who wants to make a certain piece of work — crowdfunding might be an option for you.

In general, there are three types of crowdfunding:

Rewards-based crowdfunding : Supporters donate to your business and receive a non-financial reward — like a piece of merchandise or exclusive access to an event — in return. Kickstarter and Indiegogo are platforms that support rewards-based crowdfunding.

Equity crowdfunding : Supporters receive equity in your company in anticipation of future returns. Wefunder is a platform that supports these kinds of campaigns, though investors may look for more established businesses.

Debt-based crowdfunding: Supporters essentially give you a loan, which you pay back on a prescribed schedule with interest or another kind of fee. Mainvest is one platform that offers these kinds of deals; although again, investors might lean toward more established businesses.

Debt-based financing options for your business idea

If you have a clear vision for your product or service, your business model and your market, taking on some debt can help accelerate your growth. You can generally spend debt-based financing as you see fit. However, make sure you’re prepared to pay it back on your lender’s schedule — because you may face late fees, liens or a lower credit score if you don’t.

Business credit cards

Depending on how much startup funding you need, a business credit card may provide enough financing to get your business up and running. Your credit limit will depend on the card issuer’s assessment of your creditworthiness. A card with a limit of several thousand dollars might be enough to create a product prototype or cover your business expenses while you secure your first few clients.

You can typically qualify for a business credit card if you have good or excellent credit (a FICO score of at least 690) and know your business structure; choosing a sole proprietorship works if you don’t have a formal structure yet.

Some business credit cards offer an introductory period with 0% APR, which allows you to carry a balance on the card for several months without accruing interest. Once the introductory period is over, the APR can be very high — above 20% in some cases. Make sure you have a plan to generate enough revenue to make those payments when the bill comes due.

» MORE: Business credit cards vs. business loans

The U.S. Small Business Administration offers SBA microloans of up to $50,000 to all kinds of businesses, including startups. The program is designed for businesses traditionally underserved by lenders, which can make microloans easier to qualify for than other types of business loans.

Lots of nonprofit microlenders also make small loans to startup businesses. Like SBA microlenders, these mission-driven organizations often have less stringent application requirements than banks or online lenders.

Personal loans

You can use a personal loan for pretty much anything you need capital for, including your business. Since you are personally responsible for the debt, lenders only consider your personal financials and credit history on your application.

That personal responsibility can be a double-edged sword, though. If you default on a personal loan, your own assets could be seized. It can also be risky to commingle your personal and business finances.

In general, personal loans for businesses are similar in size to microloans: You may be able to borrow up to $50,000. However, APRs can vary widely — from as low as 5% to as much as 35%.

Funding your business’s growth

After a year or two in business, you’ll have access to some larger financing options that can help your business expand.

Business loans

Small-business term loans aren’t usually a good fit for startups, but they can help your business expand once it’s established. In general, you’ll need at least two years in business to qualify for the lowest interest rates and most favorable terms from banks, along with good personal credit and collateral.

Some online business loans have less stringent requirements, but typically still require at least a year in business.

Business lines of credit

Business lines of credit are similar to business credit cards. A line of credit gives you access to a set amount of funding, and you can spend as needed up to the limit. Once you repay what you withdraw, you can borrow funds up to your credit limit again.

If you work with an online lender, you may be able to qualify for a business line of credit with as little as six months in business.

On a similar note...

Find small-business financing

Compare multiple lenders that fit your business

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15+ Business Plan Examples to Win Your Next Round of Funding

By Jennifer Gaskin , Jun 09, 2021

“If you fail to plan, you are planning to fail,” according to words of wisdom dubiously attributed to Benjamin Franklin. While there’s no solid evidence that Franklin actually coined this phrase, the sentiment rings true for any business.

Not having a solid plan makes it unlikely you’ll achieve the goals you seek, whether the goals are getting your to-do list done or launching a successful organization.

In the early stages of a company, that means developing things like pitch decks, business plans, one-sheeters and more. With Venngage’s Business Plan Builder , you can easily organize your business plan into a visually appealing format that can help you win over investors, lenders or partners.

Learn more about how to create a business plan so you can hit the ground running after reading through this list for inspirational examples of business plans.

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Click to jump ahead:

Simple business plan example, startup business plan example, small business plan example, nonprofit business plan example, strategic business plan example, market analysis business plan example, sales business plan example, organization and management business plan example, marketing and sales strategy business plan example, apple business plan example, airbnb business plan example, sequoia capital business plan example.

While your business plan should be supported by thorough and exhaustive research into your market and competitors, the resulting document does not have to be overwhelming for the reader. In fact, if you can boil your business plan down to a few key pages, all the better.

CREATE THIS PLAN TEMPLATE

The simple, bold visual aesthetic of this business plan template pairs well with the straightforward approach to the content and various elements of the business plan itself.

Use Venngage’s My Brand Kit to automatically add your brand colors and fonts to your business plan with just a few clicks.

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An essential startup business plan should include a clear and compelling value proposition, market analysis, competitive analysis, target audience identification, financial projections, and a well-defined marketing and operational strategy.

For a typical startup, the need to appear disruptive in the industry is important. After all, if you’re not offering anything truly new, why would an investor turn their attention toward your organization. That means establishing a problem and the ways in which you solve it right away.

CREATE THIS PRESENTATION TEMPLATE

Whether it’s a full-scale business plan or, in this case, a pitch deck, the ideal way for a startup to make a splash with its plans is to be bold. This successful business plan example is memorable and aspirational.

In the Venngage editor, you can upload images of your business. Add these images to your plans and reports to make them uniquely your own.

All businesses start out small at first, but that doesn’t mean their communications have to be small. One of the best ways to get investors, lenders and talent on board is to show that you’ve done your due diligence.

In this small business plan example, the content is spread over many pages, which is useful in making lengthy, in-depth research feel less like a chore than packing everyone on as few pages as possible.

Organizations that set out to solve problems rather than earning profits also benefit from creating compelling business plans that stir an emotional response in potential donors, benefactors, potential staff members or even media.

CREATE THIS REPORT TEMPLATE

Simplicity is the goal for nonprofits when it comes to business plans, particularly in their early days. Explain the crisis at hand and exactly how your organization will make a difference, which will help donors visualize how their money will be used to help.

Business plans are also helpful for companies that have been around for a while. Whether they’re considering new products to launch or looking for new opportunities, companies can approach business plans from the strategy side of the equation as well.

Strategic business plans or strategy infographics should be highly focused on a single area or problem to be solved rather than taking a holistic approach to the entire business. Expanding scope too much can make a strategy seem too difficult to implement.

Easily share your business plan with Venngage’s multiple download options, including PNG, PNG HD, and as an interactive PDF.

One-page business plan example

For organizations with a simple business model, often a one-page business plan is all that’s needed. This is possible in any industry, but the most common are traditional ones like retail, where few complex concepts need to be explained.

This one-page strategic business plan example could be easily replicated for an organization that offers goods or services across multiple channels or one with three core business areas. It’s a good business plan example for companies whose plans can be easily boiled down to a few bullet points per area.

Especially when entering a saturated market, understanding the landscape and players is crucial to understanding how your organization can fit it—and stand out. That’s why centering your business plan around a market analysis is often a good idea.

In this example, the majority of the content and about half the pages are focused on the market analysis, including competitors, trends, pricing, demographics and more. This successful business plan example ensures the artwork and style used perfectly matches the company’s aesthetic, which further reinforces its position in the market.

You can find more memorable business plan templates to customize in the Venngage editor. Browse Venngage’s business plan templates to find plans that work for you and start editing.

Company description business plan example

Depending on the market, focusing on your company story and what makes you different can drive your narrative home with potential investors. By focusing your business plan on a company description, you center yourself and your organization in the minds of your audience.

This abbreviated plan is a good business plan example. It uses most of the content to tell the organization’s story. In addition to background about the company, potential investors or clients can see how this design firm’s process is different from their rivals.

With Venngage Business , you can collaborate with team members in real-time to create a business plan that will be effective when presenting to investors.

Five-year business plan example

For most startups or young companies, showing potential investors or partners exactly how and when the company will become profitable is a key aspect of presenting a business plan. Whether it’s woven into a larger presentation or stands alone, you should be sure to include your five-year business plan so investors know you’re looking far beyond the present.

CREATE THIS PROPOSAL TEMPLATE

With Venngage’s Business Plan Builder , you can customize a schedule like this to quickly illustrate for investors or partners what your revenue targets are for the first three to five years your company is in operation.

The lifeblood of any company is the sales team. These are the energetic folks who bring in new business, develop leads and turn prospects into customers. Focusing your energy on creating a sales business plan would prove to investors that you understand what will make your company money.

In this example sales business plan, several facets of ideal buyers are detailed. These include a perfect customer profile that helps to convey to your audience that customer relationships will be at the heart of your operation.

You can include business infographics in your plan to visualize your goals. And with Venngage’s gallery of images and icons, you can customize the template to better reflect your business ethos.

Company mergers and shakeups are also major reasons for organizations to require strong business planning. Creating new departments, deciding which staff to retain and charting a course forward can be even more complex than starting a business from scratch.

This organization and management business plan focuses on how the company can optimize operations through a few key organizational projects.

Executive summary for business plan example

Executive summaries give your business plan a strong human touch, and they set the tone for what’s to follow. That could mean having your executive leadership team write a personal note or singling out some huge achievements of which you’re particularly proud in a business plan infographic .

In this executive summary for a business plan, a brief note is accompanied by a few notable achievements that signal the organization and leadership team’s authority in the industry.

Marketing and sales are two sides of the same coin, and clever companies know how they play off each other. That’s why centering your business plan around your marketing and sales strategy can pay dividends when it comes time to find investors and potential partners.

This marketing and sales business plan example is the picture of a sleek, modern aesthetic, which is appropriate across many industries and will speak volumes to numbers-obsesses sales and marketing leaders.

Do business plans really help? Well, here’s some math for you; in 1981, Apple had just gone public and was in the midst of marketing an absolute flop , the Apple III computer. The company’s market cap, or total estimated market value, could hit $3 trillion this year.

Did this Apple business plan make the difference? No, it’s not possible to attribute the success of Apple entirely to this business plan from July 1981, but this ancient artifact goes to show that even the most groundbreaking companies need to take an honest stock of their situation.

Apple’s 1981 business plan example pdf covers everything from the market landscape for computing to the products that founder Steve Jobs expects to roll out over the next few years, and the advanced analysis contained in the document shows how strategic Jobs and other Apple executives were in those early days.

Inviting strangers to stay in your house for the weekend seemed like a crazy concept before Airbnb became one of the world’s biggest companies. Like all disruptive startups, Airbnb had to create a robust, active system from nothing.

As this Airbnb business plan pitch deck example shows, for companies that are introducing entirely new concepts, it’s helpful not to get too into the weeds. Explain the problem simply and boil down the essence of your solution into a few words; in this case, “A web platform where users can rent out their space” perfectly sums up this popular company.

Sequoia Capital is one of the most successful venture capital firms in the world, backing startups that now have a combined stock market value of more than $1 trillion, according to a Forbes analysis .

For young companies and startups that want to play in the big leagues, tailoring your pitch to something that would appeal to a company like Sequoia Capital is a good idea. That’s why the company has a standard business plan format it recommends .

Using Sequoia Capital’s business plan example means being simple and clear with your content, like the above deck. Note how no slide contains much copy, and even when all slides appear on the screen at once, the text is legible.

In summary: Use Venngage to design business plans that will impress investors

Not every business plan, pitch deck or one-sheeter will net you billions in investment dollars, but every entrepreneur should be adept at crafting impressive, authoritative and informative business plans.

Whether you use one of the inspirational templates shared here or you want to go old school and mimic Apple’s 1981 business plan, using Venngage’s Business Plan Builder helps you bring your company’s vision to life.

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How to Write an SBA Business Plan + Template

Noah Parsons

10 min. read

Updated November 21, 2023

Applying for a Small Business Administration loan typically requires a business plan.

Unfortunately, there’s no SBA loan business plan format that guarantees approval. The SBA even states you should “pick a business plan format that works for you.”

While I agree with this sentiment, I’ve found that entrepreneurs who explain how funds will be used and how they will repay the loan tend to be more successful.

Luckily, these details can be covered using our SBA-lender-approved business plan format . I’ll go over that structure in this article, and focus on the sections that the SBA prioritizes, so you can maximize your chances of getting funded .

You can even download a free SBA-lender-approved business plan template to fill out as you read.

Let’s get started.

Why you need a business plan for SBA loans

SBA loans require good documentation of your business and personal finances. You’ll need to pull together your past tax returns, bank statements, and various application forms depending on the type of SBA loan you apply for.

The bank issuing the loan will also want to know about the future of your business.

They’ll want to see how the loan will be used and if future cash flow projections are realistic and indicate you can afford loan payments.

That’s where writing an SBA business plan comes in.

Not only will your business plan describe your business to the lender, but it will include the financial projections the bank will use to determine if you qualify for the loan .

What your business plan should include, according to the SBA

Business plans for SBA loans follow a fairly standard structure, but that doesn’t mean you need to follow it exactly.

The SBA even recommends adjusting the plan outline to serve your needs. If a section does not apply to your business, it’s fine just to remove it.

Here’s the successful business plan structure I recommend for SBA loans:

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1. Executive summary

A great executive summary is a short, simple overview of your business. It should be easy for a loan officer to read and clearly understand what your business does.

When applying for an SBA loan, highlight your:

Business opportunity
Financial forecast
How much money you want to borrow and how it will be used

Remember, an executive summary should be short and to the point. The rest of your business plan will provide additional details.

[Dig deeper: How to write an executive summary ]

2. Company description

Some people call this section “Products and Services.” Either option is fine. The important thing is that you use this section to explain what your business opportunity is.

You need to cover:

The problem you solve
Who you’re solving it for
What your solution is and why it’s better

Be specific and tell the story of your business and your customers. Focus on your strengths and what sets you apart from competitors.

If your company is developing a product, include information on:

What the product life cycle looks like
Intellectual property filings
Current research and development

If these topics don’t apply to your product, that’s fine. Just be sure that the description of what you sell is clear.

3. Market analysis

The market analysis chapter explains who your customers are. It provides an overview of your target market, competition, and industry.

Your target market is essentially a description of your ideal customers. Be sure to include specific demographic information (like age, gender, location, income) and psychographic information (hobbies, purchasing behaviors).

This data should reinforce that your target market needs your solution .

It’s helpful to also include information on the size of your target market . Lenders will want to see evidence of enough potential customers to drive growth.

While your target market information describes your customers, an industry overview discusses the type of business you’re in and its potential for growth.

For example: If you’re starting a fast-casual restaurant, your industry overview might discuss the increased interest in fast-casual dining and how more people are eating in these types of restaurants every year.

Finally, you’ll need to include a competitive analysis . This is a list of current competitors and alternatives, with explanations of why your business is a better option.

Your goal is to show how your business is unique, what opportunities and threats there are, and how you plan to address the competition.

4. Organization and management

Also known as your company overview, this section is where you describe your legal structure, history, and team .

For your SBA loan application, you should focus on describing who is managing the business as clearly as possible.

You may want to include an organizational chart. You should provide detailed resumes for everyone in leadership positions. Each team member’s experience, skills and professional qualifications can mitigate risk in the eyes of a lender .

To show you’re thinking ahead, it’s also helpful to include key positions you plan to fill as you grow.

5. Sales and marketing plan

Your goal in this section is to summarize how you will attract, retain, and sell to your customers.

The marketing strategies and sales methods you describe should always have the customer top of mind, and demonstrate that you know how to connect with them.

To help a loan officer visualize this, you can provide examples of marketing messaging, visuals, and promotions. If you have any research or results to show that your strategy has merit, include those as well.

6. Financial projections

SBA lenders typically require 5 years of financial projections — including profit and loss statements , balance sheets , and cash flow statements .

Be sure to include the SBA loan in your projections in the following areas:

A liability on your balance sheet.
Payments on your cash flow.
Interest expenses on your profit and loss statement.

I’ll dive into specific details of what you should focus on in the “how to improve your chances” section.

Your first year of financial projections should include monthly details. After that, annual summaries are usually sufficient for most SBA lenders. Occasionally, a lender might require 24 months of monthly projections, so check with your bank before submitting your business plan.

If your business is up and running, you must also provide historical financial reports for the past 12-24 months of operations—including income statements and a current balance sheet.

Typically, you will also need to provide reports on your personal finances , including any assets you have, such as a home or car.

Finally, include a section explaining your use of funds—what exactly you plan to use the loan for.

7. Appendix

The appendix is your chance to provide additional documents that support sections of your business plan.

When applying for a loan, these may include:

Employee resumes
Licenses and permits
Patents and other legal documents
Historical financial statements
Credit histories

Don’t worry about stuffing your appendix full of additional documentation. Only include information if you believe it will strengthen your approval chances, or if your lender specifically asks for it.

How to improve your chances of being approved for an SBA loan

Your SBA business plan needs to focus on the loan you are applying for and how that will impact your business financially.

Make sure to include the following information in your financial plan to increase your chances of success with your lender:

Funding request

In your executive summary, document how much money you are asking for. It’s best to put your number where it can be clearly read, instead of trying to bury it deep within your business plan.

Remember, there are limitations to how much you can borrow through SBA-backed loans. Most have a maximum loan amount of $5 million, while SBA Express loans have a maximum loan amount of $350,000.

Use of funds

You should also describe how you plan to use the loan and which aspects of the business you want to invest in.

Some SBA loans are designed specifically for expanding export businesses or funding real estate transactions. So, make sure your use of funds description is appropriate for the loan you are applying for.

Cash flow forecast

Be sure to include the loan in your cash flow statements and projections . You want to demonstrate that you’ve planned how you will use and repay the loan.

You need to show:

When you anticipate receiving the loan.
How the loan will impact your finances.
Loan payments for the life of the loan.

Having this prepared won’t just increase the chances of your application being approved—It will make it much easier to manage the loan after you receive funding .

Balance sheet

You’ll also want to put the loan on your projected balance sheet , and show how the loan will get paid down over time.

The money you owe will show up on your balance sheet as a liability, while the cash you receive from the loan will be an asset. Over time, your forecasted balance sheet will show that the loan is getting paid back.

Your lender will want to see that you have forecasted this repayment properly.

Profit & Loss forecast

Your P&L should include the interest expenses for the loan, and show how the interest will impact your profitability in the coming months and years.

How long does an SBA business plan need to be?

The SBA doesn’t have an official recommended or required business plan length . As a general rule of thumb, you should make your business plan as short and concise as possible.

Your business plan is going to be reviewed by a bank loan officer, and they will be less than excited about the prospect of reading a 50-page business plan.

If possible, keep the written portion of your business plan between 10-15 pages. Your financial forecasts will take up several additional pages.

If you’re struggling to keep it short, try a one-page plan

A great way to start your business plan is with a simple, one-page business plan that provides a brief and compelling overview of your business.

A good one-page plan is easy to read and visually appealing. Once you have your one-page plan, you can expand on the ideas to develop your complete written business plan, and use the one-page plan as your executive summary.

Loan officers will appreciate a concise overview of your business that provides the summary they need before they start looking at your complete business plan and financial plan .

Resources and tools for writing an SBA business plan

Remember, you can download a free SBA-lender-approved business plan template . It includes detailed instructions to help you write each section, expert guidance and tips, and is formatted as lenders and investors expect.

If you’re looking for a more powerful plan writing tool, one that can also help you create financial forecasts for the use of your loan, I recommend you check out LivePlan .

With LivePlan, you get:

AI-powered recommendations: Generate and rewrite sections of your plan to be more professional and persuasive.
Step-by-step instructions: In-app examples, tutorials, and tips to help you write an impressive business plan.
Automatic financials: Skip the spreadsheets and complex formulas, and quickly create accurate financial forecasts with everything a lender needs.
A built-in pitch presentation: Print or share your full business plan, one-page pitch, and financial reports—all with a professional and polished look.

Whether you use the template, LivePlan, or try writing a business plan yourself, following the structure and tips from this article will improve your chances of getting an SBA-backed loan.

And for additional SBA-focused resources, check out our guide on how to get an SBA loan .

Create a business plan that maximizes your chances of securing funding

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

Grow 30% faster with the right business plan. Create your plan with LivePlan.

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What to Do When You Need a Disaster Loan

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10 Reasons You Don’t Qualify for an SBA Disaster Loan

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NATO's plan to Trump-proof Ukraine aid shows just how worried US allies are about the future of American leadership

NATO's secretary general is proposing a plan for the alliance to control future aid packages.
The plan would have the US step aside from leading the group that coordinates weapons deliveries to Ukraine.
A potential second Trump term raises concerns about the security of assistance to Ukraine.

NATO's secretary general has a plan to give the alliance control of the group supplying Ukraine with weapons — a job currently held by the US.

The move comes amid growing concerns that former President Donald Trumps's reelection could spell trouble for Ukraine's future fighting , as well as continued inaction in Congress thanks to a stark political divide on giving Ukraine more money.

NATO Secretary General Jens Stoltenberg raise the idea at a NATO meeting this week, suggesting that the alliance consider taking on leadership of the Ukraine Defense Contact Group, also called the Ramstein group, that organizes the delivery of weapons to Ukraine.

"We must ensure reliable and predictable security assistance to Ukraine for the long haul, so that we rely less on voluntary contributions and more on NATO commitments. Less on short-term offers and more on multi-year pledges," Stoltenberg said.

That move would shift control of the group away from the US, which created and has led it since Russia's full-scale invasion began in February 2022. The plan was pitched by Stoltenberg in order to "shield the mechanism" of getting Ukraine aid "against the winds of political change," officials told The Financial Times , an apparent reference to the deepening political divide in Washington, DC.

The plan also includes coordinating $100 billion from NATO allies over the next five years to ensure Ukraine gets the aid it needs to keep fighting. News of the proposal was first reported by POLITICO earlier this week.

At a press briefing on Wednesday, Stoltenberg refused to go into further details about how discussions on the proposal had gone but said NATO was "now in the process of developing a more robust and enduring, institutionalized framework for support to Ukraine." He added that Ukraine had been informed about this process.

It remains unclear right now whether this plan will ultimately gain traction, especially before the NATO summit in Washington this July, but the emergence of this plan seems to highlight growing concern about US leadership.

The Ukraine Defense Contract Group has been the critical element getting military aid to Ukraine. The once-a-month meeting of over 50 nations, including all NATO members, focuses specifically on the procurement of ammunition, weapons systems, and other technologies and gear for Ukraine.

It was started by Secretary of Defense Lloyd Austin in April 2022 and has since been helmed by US leadership.

The group's meetings have consisted of some of the most high-profile debates of the war, from whether Germany and the US would send main battle tanks to Ukraine to where NATO allies landed on providing fighter jets, like the F-16 .

Watch: Russian strike leaves 17 dead during Blinken's visit to Ukraine

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Business plan and budget 2024 to 2025

The milestones we plan to complete within the business plan 2024 to 2025.

Published: 15 April 2024

Last updated: 15 April 2024

This version was printed or saved on: 15 April 2024

Online version: https://www.gamblingcommission.gov.uk/about-us/guide/business-plan-and-budget-2024-to-2025

Overview: ## Introduction

Foreword from Andrew Rhodes, Chief Executive

This year, 2024 to 2025, represents the first year of our new 3-year Corporate Strategy: Gambling Regulation in a Digital Age. I am proud to introduce our ambitions for the year ahead, as we strike a balance, putting more investment into those areas that we know will be important in the coming years, as identified through our strategic priorities.

One of our key principles is putting people first. This means every one of the 22.5 million people who gamble in Great Britain every year. We care about all of them, and the work we have set out to achieve is in everybody’s interest.

We will make further progress to deliver the important reforms set out in the Government’s White Paper High Stakes - Gambling reform for the digital age (opens in new tab) , working closely with colleagues at the Department for Culture, Media and Sport (DCMS) on cross-cutting matters. We will continue our work regulating a new operator of the National Lottery to ensure the public continue to benefit from a successful National Lottery in its milestone 30th year of operation.

We will also continue to support and assess the industry’s own approaches to improve consumer experience, such as the development of the single customer view (SCV) challenge solution - GamProtect.

Better evidence, driven by more effective use of data will lead to better regulation, which means better outcomes for consumers, the public and licensees. We will complete the launch of the Gambling Survey for Great Britain and make further improvements to our capacity to report on and analyse data, close evidence gaps in priority areas, pilot industry data sharing and revise our approach to regulatory return data.

A lot of our scope to deliver better outcomes sits within our licensing, compliance, and enforcement work. We want to make regulation work for all, and that is why, this year, we will be making improvements including developing the introduction of an account management style framework, responding to our consultation on our approach to financial penalties, increasing investment in preventing illegal gambling and increasing the level of transparency around industry compliance.

I want to see a reduction in the reliance on formal enforcement processes to raise standards. Enforcement action invariably means consumers have already been poorly treated. I want to see a greater focus on getting things right, and compliance at the earliest opportunity where issues arise. To support this, we will continue efforts to create the right conditions for those licensees committed to and accepting of their responsibilities towards consumers. Those who do not meet their responsibilities will continue to face escalating action.

And those who are operating outside of the law – illegal gambling operators – can expect to experience the full extent of our powers.

Due to the scale of the actions we have set out in our corporate strategy, some of the deliverables within this business plan describe the progress that will be made against those multi-year commitments in 2024 to 2025.

It is about building solid foundations for continued progress, to maintain our effectiveness regulating the largest online gambling market in the world and enhance our commitment to doing the right thing, even if it is sometimes difficult.

In addition to the specific deliverables outlined in this plan, we will continue to deliver our core regulatory functions. We are also working to identify and improve key enablers which help the Commission operate effectively. Of key note are areas related to our people plans, effective governance, the continued implementation of our digital roadmap and our work on a more sustainable future funding model.

It is our people that make the Commission a great place to work, and we want to support all of our people to make sure we have the skills, capabilities and diversity of thought and opportunity to push forward with this work.

This business plan represents the first part of realising the ambition set out in our new corporate strategy. I am excited about the work ahead and delivering for consumers in increasingly open, innovative and progressive ways to make gambling safer, fairer and free from crime.

Strategic focus 1: Using data and analytics to make gambling regulation more effective

Regulation must keep pace with industry and societal developments. Identifying and investing in technology and improvements in data analytics, will ensure regulation remains fit for purpose.

How gambling is offered is increasing in complexity and sophistication. We need to understand developments in data usage among industry to regulate the market effectively.

Here are the specific deliverables which will support the delivery of this strategic focus:

Close evidence gaps in priority areas

publish an evidence gaps and priorities progress update and host a spring conference event
procure a Consumer Voice supplier, following the end of the current contract.

Why: In line with the commitments in our strategy we are continuing work to improve our evidence base on the six themes outlined in our Evidence Gaps and Priorities report. This includes the collection of new evidence via our Consumer Voice research programme, Gambling Survey for Great Britain, and our data innovation programme.

As a result: We will make progress in improving our evidence base through the filling of known evidence gaps. Our spring conference will once again bring together a wide range of experts and interested parties to reflect on and discuss current evidence challenges. Procuring a high-quality provider to deliver our Consumer Voice programme will ensure our regulation continues to be responsive to and informed by consumer experiences and perspectives.

Revise our approach to regulatory return data

publish a response to our consultation on proposed changes to the submission of regulatory returns by licensees
continue to work with licensees to assist development of the system used to submit regulatory returns.

Why: This forms part of our strategic commitment to make more effective use of data.

As a result: Regulatory return data requests will be streamlined, enabling more timely, accurate data to be collected. Future requests will clearly define the data we ask for and the purposes for which it will be used. We will also ensure that operators comply with the requirement to submit accurate and timely data. The resulting framework will be iterative in process to build confidence in the data. An improved understanding of market developments and trends will help us identify issues impacting consumers and evaluate the impact of interventions.

Complete the full launch of the Gambling Survey for Great Britain

hold a launch event to release the first full dataset, including Problem Gambling Severity Index (PGSI) and harms data from the survey
publish quarterly data on participation.

Why: This forms part of our strategic commitment to make more effective use of data, to build a better understanding of the market and a leading understanding of gambling related harm to continue enhancing our work around consumer protection.

As a result: We will ensure the regular collection and publication of official statistics. The data will be published to the UK Data Archive for increased transparency and to encourage wider analysis.

Pilot industry data project

work with a group of licensees to establish and run a pilot data sharing project. During the pilot project we will obtain a daily feed of aggregated consumer data
create outputs from the data pilot to evaluate the value that can be obtained by progressing this work.

Why: This forms part of our strategic commitment to significantly increase the depth of our understanding of the gambling market and consumer behaviour. Previous Patterns of Play research demonstrated the value that can be obtained from a granular dataset. We and others have made extensive use of the outputs of that research. We are now exploring how we can develop an approach to obtaining similar data on a recurring basis.

As a result: We will take a significant step in exploring how data and related systems can make gambling regulation more effective. Successful delivery of this pilot will provide a practical insight into how operator data can be collected and the governance, legal and data protections processes required to do this effectively. This work has the potential to create improved analytical outputs which will provide insights into changes in the market and how consumers gamble.

Build on the Commission's capacity to use, report on and analyse data

We will procure a supplier to deliver a wide range of data science support.

Why: This forms part of our strategic commitment to invest in tools, technology and skills to enhance our knowledge, improve the integrity of our data and make it more relevant to current issues.

As a result: It will enable us to take more advantage of the opportunities presented by the other initiatives in this section. Improving the evidence base which informs our work will mean we are more responsive to issues impacting consumers, the wider public and licensees.

Read more details about this strategic focus in our corporate strategy.

Strategic focus 2: Enhancing our core operational functions 

The gambling industry continues to evolve and develop at pace. As the regulator of this industry, we must ensure that our regulation continues to adapt and evolve so we continue to regulate effectively in the public interest.

Establish an approach that better supports industry engagement and communication

develop an account management style framework designed to build and enhance two-way levels of trust, engagement and communication - this includes undertaking a pilot scheme to improve communication and introducing an account style management framework
facilitate regular opportunities for cross-industry dialogue and information sharing.

Why: This forms part of our strategic commitment to invest in a programme of activities exploring how licensees can be supported to meet their responsibilities to consumers and the wider public.

As a result: We will have a framework of activity and channels of communication that will fulfil the mutual appetite for increased transparency and engagement. Improved communication will enable licensees to address issues earlier and reduce the risk of adverse consumer outcomes.

Enhance our core operational capabilities

commence the implementation of a new case management system, that on completion will support all operational functions
develop enhanced data and reporting to support internal insights and performance
capitalise on efficiencies within operational functions allowing us to focus on more value-add regulatory activities.

Why : This forms part of our strategic commitment to evolve our licensing, compliance and enforcement work including improving our core processes, technology and related approaches.

As a result: We will have enhanced operational capabilities ensuring that we can continue to deliver an effective and trusted service, capable of keeping pace with the digital age. This in turn will increase the effectiveness of our work to deliver positive outcomes for consumers, the wider public and licensees.

Respond to the consultation on financial penalties

We will publish a response to our consultation and implement any changes arising.

Why: This forms part of our strategic commitment to evolve our licensing, compliance and enforcement work including improving our core processes, technology and related approaches.

As a result: The industry will have a clear understanding of our future approach to financial penalties.

Improve the transparency of industry compliance

We will publish information on our compliance findings whether regulatory action is taken or not in the form of compliance snapshots.

Why: This forms part of our strategic commitment to develop our approach to assurance including increasing transparency of industry compliance levels by theme and licensee.

As a result: The public and licensees will be more aware of relative levels of compliance. We will be better able to identify trends and themes across the industry to target our resource to the greatest effect. We will measure progress by reporting on increasing levels of industry compliance, building an initial benchmark and then demonstrating positive trends towards greater compliance.

Strategic focus 3: Setting clear, evidence-based requirements for licensees 

The Government published its White Paper High Stakes - Gambling reform for the digital age (opens in new tab) in April 2023. The White Paper sets the immediate policy agenda for the gambling market in Great Britain, and assigns us, as the gambling regulator, a number of commitments.

As we deliver our commitments from the White Paper, we aim to ensure that our regulation is as clear and as focused as possible, making it easier for licensees to operate compliantly at the earliest possible opportunity. This is consistent with the National Audit Office’s principles of effective regulation, the Regulators’ Code and our own Statement of Principles. 

Here is the specific deliverable which will support the delivery of this strategic focus:

Implementation of Gambling White Paper reforms

undertake a pilot and data collection period to inform our approach to implementing Financial Risk Assessments and publish final decisions
publish details of a joint evaluation model with the Department for Culture, Media and Sport (DCMS)
support DCMS on Government and industry-led White Paper measures
requirements for light-touch Financial Vulnerability Checks
new requirements on operators for fairer and safer remote game design for casino games as part of our Remote Technical Standards
new requirements to improve consumer choice on direct marketing
amended requirements to support the prevention of underage gambling in the land based sector.
working to ensure that incentives such as free bets and bonuses are constructed in a socially responsible manner
the role of customer-led gambling management tools and tackling artificial barriers to consumer choice
removal of the requirement to contribute to Research, Prevention and Treatment from our Licence Conditions and Codes of Practice, in preparation for a statutory levy
improved transparency on customer funds in the event of insolvency.
commence consultations in relation to further policy areas including Gaming Machine Technical Standards.

Why: This forms part of our strategic commitment to deliver those measures we are responsible for in the Government’s White Paper including improving transparency to consumers, consumer choice as well as player protections and product safety.

As a result: We will deliver on the Government’s ambition to ensure that gambling regulation in Great Britain remains appropriate, proportionate and effective in this digital age. Online gambling will be safer by design, with licensees marketing their products responsibly and being more proactive in preventing unchecked and unaffordable gambling.

Strategic focus 4: Being proactive and addressing issues at the earliest opportunity 

It is in the best interests of consumers and the public to secure the compliance of a licensee at the earliest opportunity. We want to achieve that objective through more proactive activities and interventions with licensees and reduce reliance on reactive compliance and enforcement activity.

We are clear this shift is only appropriate where licensees are making best endeavours to operate compliantly and with due regard for consumers and the public. Where they are not, we will continue to take decisive and escalating enforcement action.

Develop and embed an Industry Forum

We will create a work plan for the forum to deliver against.

Why: This forms part of our strategic commitment to build on our existing approach to ensure we are engaging with a wide range of stakeholders. 

As a result: We will have broader relationships with industry and better insight into the environment in which licensees operate.

Strategically assess the Fair and Open licensing objective

We will conduct a strategic assessment focused on the fair and open licensing objective which will be informed by our consumer research programme, data from Alternative Dispute Resolution providers and others, and by our findings from compliance work and horizon scanning.

Why: This forms part of our strategic commitment to increase the resource available to improve our understanding of issues which pose a risk to the fair and open licensing objective. This will enhance our work on ensuring gambling operators conduct business in a fair and open way and will enhance consumer perceptions of how gambling is offered within our market.

As a result: We will have a greater understanding of what the main issues are for consumers in respect of the fair and open licensing objective, and therefore where to target our resources. This is to help plan work to best deliver positive change such as:

levels of consumer trust in gambling and confidence in gambling regulation improving
operators having much greater clarity about regulatory expectations concerning the fair and open licensing objective
operators behaving more consistently and for the benefit of consumers.

We will continue to measure and report on consumer survey responses obtained through the Gambling Survey for Great Britain. We will also monitor trends in complaints to our Contact Centre and compliance assessment outcomes.

Strategic focus 5: Regulating a successful National Lottery

For the first time in the history of the National Lottery there has been a change in licensee.

Our priority, in accordance with our statutory function and core regulatory outcomes, is to uphold the National Lottery duties, ensuring that the Lottery is run with all due propriety, in a way that protects players’ interests, and then ensures the maximisation of returns to good causes.

Fully embed Fourth National Lottery controls

ensure the Licensee delivers its application in full in 2024 to 2025
embed our revised regulatory approach, team structure and high-level frameworks and processes
finalise activity relating to the Third National Lottery Licence
close down the Fourth National Lottery (4NL) Programme.

Why: This forms part of our strategic commitment to complete our oversight and assurance of the transition to, and implementation of, the 4NL Licence and to embed our regulatory approach to the Fourth Licence.

As a result: In delivering this we will oversee and assure the delivery of Allwyn’s application in full in line with legal commitments. We will successfully close down the 4NL programme and ensure successful knowledge transfer of relevant items to the 4NL regulation team. We will measure success by assessing whether the programme is successfully closed down by 28 May 2025. We will also measure success by determining whether Allwyn successfully achieves Fully Implemented Commencement of its application in line with its obligations.

Corporate enablers

Our most important asset is our people. This year we will start to develop and implement elements of a new people strategy which will help ensure we can attract, recruit and retain a diverse and talented team of people who can help deliver our work to make gambling safer, fairer and crime free.

Develop a new people strategy and implement priority actions

To build and recruit the right combination of skills and capabilities
To enhance the employee offer, to attract and retain talent
To build the capability of leaders and managers
To embed inclusion into our everyday work
develop an employee value proposition to enable us to attract and retain talent
embed our work on equality, diversity and inclusion.

Why: Our most important asset is our people. To deliver our strategy we will need to continuously improve, and we will do this by further increasing the engagement of every colleague and improving our organisational effectiveness. We aim to be a first-class regulator that attracts, recruits and retains diverse and talented people who are able to realise our ambition of making gambling safe, fair and crime free.

As a result: We will maximise the potential of our existing people enabling us to retain key skills and expertise whilst also attracting new and diverse talent into the organisation. We will retain the necessary knowledge and skills to support those we regulate, including having an understanding of the gambling market and regulation to enhance all aspects of our delivery, enabling us to implement proportionate and effective approaches to help make gambling fair, safe and crime free. This in turn will increase the effectiveness of our work to deliver positive outcomes for consumers, the wider public and licensees.

Effective stakeholder engagement

In addition to specific engagement efforts as part of our work to improve our operations, data and proactivity, we will build on our existing programme of stakeholder engagement to continue to engage with a wide range of stakeholders as part of our day to day work.

Enhance cooperation with international regulators

expand the sharing of best practice between European and North American regulators
codify processes to streamline intelligence sharing requests
hold the Presidency of International Association of Gambling Regulators and prioritise supporting the formation of an illegal gambling working group
reengage with the international lotteries' community.

Why: This forms part of our strategic commitment to build on our existing approach to ensure we are engaging with a wide range of stakeholders.

As a result: We will continue to maximise the benefit for consumers, the wider public and our licensees of our standing as an influential gambling regulator. We will use our positions in relevant transnational organisations, resulting in increased levels of cross-jurisdictional cooperation on shared objectives such as illegal gambling and the prevention of financial crime.

Funding framework for regulation

We will work with Department for Culture, Media and Sport (DCMS) to review our fees model.

Why: To prepare options to deliver the Government’s White Paper commitment to change the system for setting our fees.

As a result: Government will have workable options to deliver their White Paper commitment. A revised funding system will enable us to adjust our fees more flexibly to ensure that we can meet the challenges of regulation, the cost of regulation is recovered, and costs are fairly allocated between licensees as is the case with other regulators.

Our financial forecast

Our budget for 2024 to 2025 will support the successful delivery of year 1 of our 3 year strategy.

Our financial management arrangements reflect the principles set out within Managing Public Money and to ensure that we comply with accounting standards as set out in HM Treasury’s Financial Reporting Manual (FReM) and our Management Agreement with the Department of Culture Media and Sport (DCMS).

For Gambling regulation, we are budgeting to receive a total income of £27.5m of which £26.8m is fees charged to gambling operators. The total expenditure is budgeted at £31.6m. This is in excess of our income, and as such we will be utilising £4.1m from our Reserves.

For the National Lottery, we are budgeting to receive a £35m Grant in Aid and the budgeted expenditure is £35m.

Annual fee income by sector percentage

Annual fee income by remote and non-remote split percentage.

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Prudential Regulation Authority Business Plan 2024/25

Be at the forefront of identifying new and emerging risks, and developing international policy

Support competitive and dynamic markets, alongside facilitating international competitiveness and growth, in the sectors that we regulate, run an inclusive, efficient, and modern regulator within the central bank, the pra’s strategy.

Our strategy for 2024/25 will be delivered through our strategic goals, extracts of which are below. For the full detail of our workplan against each strategic priorities, see pages 10 to 41 of this Business Plan .

Foreword by Chief Executive Sam Woods

Sam Woods Deputy Governor, Prudential Regulation Chief Executive of the PRA

First, this will be our first full year operating under the Financial Services and Markets Act (FSMA 2023), which established a new, post-Brexit regulatory framework for the UK. FSMA 2023 expanded our rulemaking responsibilities and gave us a new secondary objective to support the competitiveness and growth of the United Kingdom.

Competitiveness and growth have always been important considerations for the PRA. Nonetheless, this new objective represents a significant change, and embedding it into our approach has been a major priority for the organisation as a whole, and for me personally as CEO. That effort will continue this year.

Our business plan includes a range of initiatives aimed squarely at promoting the UK’s competitiveness and growth. Some of the most significant are:

Our ‘Strong and Simple’ project, which aims to simplify regulatory requirements for smaller banks, thus reducing compliance burdens without compromising on strong standards.
The ‘Solvency UK’ reforms of insurance capital standards, which will reduce bureaucracy in the regulatory regime, while also allowing insurers to invest in a wider range of productive assets.
The Banking Data Review, which aims to reduce burdens on firms by focusing our data collection on the most useful and relevant information.
Improvements to our authorisation processes – we have made significant progress in improving the speed and efficiency of authorisations without sacrificing the robustness of our controls; maintaining this progress will be a key focus for next year.
Reforms to ring-fencing, following the independent review led by Sir Keith Skeoch.

The second point I want to highlight is our ongoing programme of work to maintain the resilience of the UK’s banking and insurance sectors, which is at the heart of our role. The events of 2023 (including the high-profile failures of Silicon Valley Bank (SVB) and Credit Suisse (CS)) demonstrate the importance of a focus on resilience – and while I am encouraged by how the UK banking and insurance sectors have remained stable through a stressful period, we cannot take this for granted.

A major priority this year will be the implementation of the Basel 3.1 standards, which will complete the long process of post-financial crisis regulatory reform. While I expect the capital impact of these reforms to be limited for UK banks, they will nonetheless play a vital role in maintaining sufficient consistency in risk measurement across firms and jurisdictions – which is the cornerstone of the bank capital regime.

Another major priority this year will be ensuring firms have adequate standards of operational and cyber resilience. Following FSMA 2023, we have new powers to oversee the services provided to regulated firms by so-called ‘critical third parties’, and we will be implementing that regime over the coming year. And in March 2025 we will reach an important milestone with the full implementation of our wider operational resilience policy.

The day-to-day work of supervision will continue alongside these reforms. As always, our supervisory teams continue to work with PRA-regulated firms to ensure high standards of financial and operational resilience, governance, risk management, and controls. Stress testing remains a key element of our approach to resilience, and alongside colleagues from the wider Bank of England we will deliver a desk-based stress test of banks, and a system-wide exploratory scenario, in 2024. We will also work towards the next round of insurance stress tests in 2025.

I have really only scratched the surface of the work we are doing this year, as you can see from a glance at this document’s contents page. In order to deliver this work, we will need to run an efficient and effective regulator, and I am particularly excited by the potential of our data and analytics agenda to create new opportunities to improve how we work. And if past years are anything to go by, we will continue to engage with innovation in many forms across the industry, whether in the form of new entrants or new approaches to doing business in areas like digital money.

I am very much looking forward to the challenges that the next year will bring, and to working together with a team of very committed colleagues at the PRA to deliver on this business plan.

11 April 2024

Overview of responsibilities and approach

The PRA has two primary objectives: a general objective to promote the safety and soundness of PRA-authorised persons, and an objective specific to insurance firms for the protection of policyholders.

The PRA has two secondary objectives:

the competition objective, which is focused on facilitating effective competition in the markets for services provided by PRA-authorised persons in carrying on regulated activities; and
the competitiveness and growth objective, which is focused on facilitating, subject to alignment with relevant international standards, (a) the international competitiveness of the economy of the UK (including, in particular, the financial services sector through the contribution of PRA-authorised persons), and (b) its growth in the medium to long term.

In its December 2022 recommendations letter to the Prudential Regulation Committee (PRC), HM Treasury (HMT) set out aspects of the Government’s economic policy to which the PRA must have regard, while building on the important themes of openness, competitiveness, competition, and innovation, as well as delivering energy security and net zero.

In December 2023, the PRA published a consultation paper (CP)27/23 – The Prudential Regulation Authority’s approach to policy , which sets out the PRA’s approach to policymaking as it takes on expanded rule-making powers introduced through FSMA 2023. These expanded powers will enable the PRA to replace relevant assimilated law (previously known as retained EU law) with PRA rules and other policy material, and move towards a more British system of regulation, with most of the technical rules made by independent UK regulators within a framework set by Parliament. In addition, FSMA 2023 introduces new accountability measures that require the PRA to keep its rules under review , and to establish a Cost Benefit Analysis (CBA) Panel composed of external members, which will scrutinise and provide input into the PRA’s CBA framework. These measures should enable the PRA to deliver policies that are well suited to the UK’s financial sector. In addition:

In December 2023, the PRA took a significant step towards implementing the remaining Basel III standards in the UK by publishing the first of two near-final sets of rules with policy statement (PS)17/23 – Implementation of the Basel 3.1 standards near-final part 1 , which takes account of responses received to CP16/22 . The near-final rules aim to promote the safety and soundness of PRA-regulated firms and support their international competitiveness by making capital ratios more consistent, comparable, and aligned with international standards. The PRA will publish its second near-final policy statement in 2024 Q2 on the remaining aspects of the Basel 3.1 package, which include credit risk, the output floor, reporting, and disclosure requirements. The PRA plans to implement the Basel 3.1 standards over a 4.5-year transitional period beginning on 1 July 2025 and ending on 1 January 2030. Among other things, the PRA will also continue to support international efforts to monitor and promote the implementation of Basel 3.1.
In December 2023, the PRA published PS15/23 – The Strong and Simple Framework: Scope Criteria, Liquidity and Disclosure Requirements , taking account of feedback to CP4/23 . The policy addresses liquidity and disclosure requirements for Simpler-regime Firms and Pillar 3 remuneration disclosure. The PRA will move further towards finalising and implementing the Strong and Simple prudential framework for Small Domestic Deposit Takers (SDDTs) during 2024. footnote [1]
Following the publication of discussion paper (DP)3/22 – Operational resilience: Critical third parties to the UK financial sector , in December 2023, the PRA published CP26/23 , jointly with the Bank of England (‘the Bank’) and FCA (‘the supervisory authorities’). CP26/23 sets out the supervisory authorities’ proposed requirements for critical third parties (CTPs), footnote [2] including the mechanism for identifying potential CTPs, recommending them for designation by HMT, incident notification triggers and requirements, and proposed CTP Fundamental Rules. In 2024, the PRA will continue to work with the supervisory and other authorities to develop the final policy and oversight approach.
In September 2023, the PRA published CP19/23 – Review of Solvency II: Reform of the Matching Adjustment , which marks a significant milestone in the PRA's reforms to the Solvency II regime for the UK insurance market. Following the publication of PS2/24 – Review of Solvency II: Adapting to the UK insurance market and PS3/24 – Review of Solvency II: Reporting and disclosure phase 2 near-final , the PRA will publish its final rules, subject to alignment with anticipated legislation, in 2024.

The PRA’s objectives and priorities are delivered through regulation and supervision, and by developing standards and policies that set out expectations of firms. The PRA’s approach to supervision is forward-looking, judgement-based, and focused on the issues and firms that pose the greatest risk to the stability of the UK financial system and policyholders. This approach is set out in the PRA’s approach to supervision of the banking and insurance sectors .

The PRA’s regulatory focus is primarily at the individual firm and sector level, with the most important decisions taken by the PRC, which works with the Bank’s other areas of remit, including its role as supervisor of Financial Market Infrastructures (FMIs), the UK’s Resolution Authority, and its committees, including the Financial Policy Committee (FPC), which has responsibility for the stability of the entire UK financial system. The PRA also works closely with the Financial Conduct Authority (FCA), including through the Chief Executive of the PRA being a member of the FCA Board and the Chief Executive of the FCA being a member of the PRC.

The PRA regulates 1,330 firms and groups. footnote [3] These consist of 730 deposit-takers (banks, building societies, credit unions, and designated investment firms footnote [4] (DIFs)), and 600 insurers of all types (general insurers, life insurers, friendly societies, mutuals, the London market, and insurance special purpose vehicles (ISPVs)).

Chart 1: PRA supervised deposit-takers, as at January 2024

Chart 2: pra supervised insurers, as at january 2024, the pra’s strategy, shaping the pra’s strategy.

Each year, the PRA is required by law footnote [5] to review and, if necessary, revise its strategy in line with its statutory objectives:

the general primary objective to promote the safety and soundness of PRA-authorised firms;
specifically for insurance firms, a primary objective to contribute to the securing of an appropriate degree of protection for those who are or may become policyholders;
a secondary objective to act, so far as is reasonably possible, in a way that facilitates effective competition in the markets for services provided by PRA-authorised firms; and
a new secondary objective to act, so far as reasonably possible, in a way that facilitates the UK economy’s international competitiveness and its growth over the medium to long term, subject to alignment with international standards.

In addition to the statutory objectives, the PRA’s strategy is shaped by other responsibilities, such as the requirement to implement legislation and other changes necessary to meet international standards, and to continue to adapt to market changes in areas such as financial technology (FinTech), climate change, and digitalisation.

When considering how to advance its objectives, there are a set of regulatory principles to which the PRA must also have regard. This includes regulatory principles from FSMA 2000, and considerations from HMT’s December 2022 letter to the PRC on the Government’s economic policy, the Equality Act 2010, the Legislative and Regulatory Reform Act 2006, and the Natural Environment and Rural Communities Act 2006. In its pursuit of its objectives, the PRA will review all the regulatory principles, identify which are significant to the proposed policy, and judge the extent to which they should influence the outcome being sought.

Furthermore, as part of the Bank, the PRA contributes to the delivery of the Bank’s wider financial stability and monetary policy objectives, for example by:

maintaining and, where appropriate, strengthening or updating prudential standards;
being at the forefront of identifying new and emerging risks, and developing international policy; and
ensuring that banks and other financial institutions can continue to provide essential services.

Strategic priorities for 2024/25

This year’s business plan continues to be structured around the PRA’s four strategic priorities, as set out in its 2023/24 Business Plan . The PRA’s strategic priorities for 2024/25 will remain unchanged because the PRA updated its priorities in 2023 to take account of its new powers, new secondary objective, and expanded role brought about by FSMA 2023. The strategic priorities for 2024/25 are to:

maintain and build on the safety and soundness of the banking and insurance sectors, and ensure continuing resilience;
be at the forefront of identifying new and emerging risks, and developing international policy;
support competitive and dynamic markets, alongside facilitating international competitiveness and growth, in the sectors that we regulate; and
run an inclusive, efficient, and modern regulator within the central bank.

PRA Business Plan 2024/25

Maintain and build on the safety and soundness of the banking and insurance sectors and ensure continuing resilience.

During the decade following the financial crisis of 2007-09, the PRA designed and implemented extensive reforms that materially improved the safety and soundness of firms, insurance policyholder protection, and financial stability. Since then, the robust regulatory standards that the PRA has implemented and its strong international collaboration have played a key role in maintaining the resilience of the banking and insurance sectors, consistent with its objectives and those of the FPC. The PRA will continue to ensure that the firms it regulates remain adequately capitalised and have sufficient liquidity and stable funding profiles, with appropriately defined impact tolerances for disruption to their business services. The PRA’s regulatory framework encourages PRA-regulated firms to take a holistic approach to managing risks by identifying, monitoring, and taking action to remove or reduce systemic risks.

The PRA’s role as a rulemaker was further expanded following the introduction of FSMA 2023. Under the new regulatory framework , the PRA will continue to be a strong, accountable, responsive, and accessible policymaker, and make rules to meet its regulatory obligations, while adopting a risk-based approach, as set out in CP27/23 , in a way that is tailored to the specific features of financial services in the UK. Among other things, the PRA will continue to faithfully implement agreed international standards and reforms in a way that best serves the UK. For example, in 2024 the PRA will publish its final rules on the implementation of the Basel 3.1 standards and on replacing relevant and/or remaining firm-facing Solvency II requirements from assimilated law with the PRA’s own rules, which will become part of the PRA’s Rulebook and other policy materials. In addition, the PRA will move further towards finalising and implementing the Strong and Simple prudential framework , which provides a simpler but robust set of prudential rules for non-systemic, domestic-focused banks and building societies in the UK.

The PRA will also continue to pay particular attention to the business opportunities and threats that are posed by changes in the economic environment, both in the UK and other jurisdictions, that could pose risks to the UK.

The PRA will continue to promote a strong risk culture among regulated firms, including a conscious and controlled approach to risk taking activities, and ensure that this is supported by adequate financial and non-financial resources. At the same time, the PRA will maintain a robust regulatory regime that is able to respond to the external factors that pose the greatest risk to firms’ safety and soundness.

Risk factors also include global geopolitical risks, which have intensified over the past year. The PRA will continue to ensure that PRA-regulated firms are resilient to such risks by liaising with both domestic and international regulatory counterparts and continuing to monitor and engage with affected firms. Effective international collaboration remains central to addressing global risks and maintaining UK financial stability as well as the safety and soundness of internationally active firms.

The PRA will monitor and assess firms’ ability to manage cyber threats through the ongoing use of threat-led penetration testing ( CBEST and STAR-FS ) and the cyber questionnaire ( CQUEST ). In collaboration with the FCA, including in response to known technology, cyber and third-party incidents, the PRA will continue to monitor and engage with firms on their execution of large and complex IT change programmes. Furthermore, the FPC’s cyber stress testing has broadened the PRA’s understanding of how operational disruptions such as cyberattacks may affect financial stability.

The PRA will continue to engage in collective action to develop a view on sector-wide risks, support the building of firm- and sector-level resilience, and enhance the sector’s ability to respond to system-wide disruption. This will include ongoing sector engagement through the Cross-Market Operational Resilience Group (CMORG), which delivers industry guidance, response capabilities, and technical solutions, and through cross-jurisdictional coordination via the G7 Cyber Experts Group (CEG). Through CMORG, the PRA will deliver a sector-wide simulation exercise (SIMEX24) to assess the sector’s resilience to major operational disruption. The PRA will continue to develop its ability to respond to operational incidents in the sector through its authorities ( Authorities Response Framework ) and sector ( Cross Market Business Continuity Group ) response mechanisms.

Financial resilience – banking

Implementation of the basel 3.1 standards.

In March 2023, the PRA concluded its consultation on proposals published in November 2022 about the parts of the Basel III standards that remain to be implemented in the UK (‘Basel 3.1’). In September 2023, the PRA announced that it would split the publication of the near-final Basel 3.1 rules in two, moving implementation back by six months to 1 July 2025 to reduce the transitional period to 4.5 years and ensure full implementation by 1 January 2030, in line with the proposals set out in CP16/22. The first near-final PS17/23 – Implementation of the Basel 3.1 standards near-final part 1 , covering market risk, credit valuation adjustment risk, counterparty credit risk, and operational risk, was published in December 2023. The PRA will publish the second near-final PS, covering the remaining elements of credit risk, the output floor, as well as Pillar 3 disclosure and reporting requirements, in due course.

The near-final rules from the two PSs will be made final once Parliament has revoked the relevant parts of the Capital Requirements Regulation (CRR). The PRA expects this to happen later in 2024. In addition to finalising Basel 3.1 rules, the PRA will continue to increase its supervisory focus on firms’ implementation plans.

Bank stress testing

The concurrent stress testing of firms is one of the key tools used by the PRA and the Bank to support their microprudential and macroprudential objectives. Banking stress tests examine the potential impact of a hypothetical scenario on the major UK banks and building societies that make up the banking system, and on the system as a whole. The PRA normally runs two types of banking stress test – the annual cyclical scenario and other exploratory scenarios.

In 2024, the PRA will support the Bank in taking stock of and updating its framework for concurrent bank stress testing. The stocktake will draw on lessons from the first decade of concurrent stress testing, and so ensure that the framework continues to support the FPC and PRC in meeting its objectives. The PRA will also contribute to supporting the Bank’s desk-based stress test in 2024, which is being conducted in place of an ACS. The desk-based exercise will make use of the PRA’s risk expertise along with models developed in the PRA and elsewhere in the Bank to test the financial resilience of the UK banking system under more than one adverse macroeconomic scenario. Stress testing exercises involving firm submissions of stressed projections are currently expected to resume in 2025.

In addition, the Bank is conducting a system-wide exploratory scenario (SWES), working closely with and with the full support of the PRA, FCA, and TPR (The Pensions Regulator). The exercise was launched in June 2023 and aims to improve the understanding of the behaviours of banks and non-bank financial institutions (NBFI) in stressed financial market conditions. The participating firms in this exercise are representative of markets that are core to UK financial stability.

Private equity and credit

The evolving macro environment is expected to challenge firms’ approach to risk management, increasing the need for robust governance, risk management, and controls. One area of focus for the PRA will be exposures to NBFI, particularly any challenges that may manifest around the trend toward illiquid private equity financing and private credit. The PRA will continue to closely monitor private asset financing and the way that firms consider the risks they could face from these activities. In particular, the PRA will look for further improvements in firms’ ability to identify and assess correlations across financing activities with multiple clients.

Replacing assimilated law

HMT has prioritised the CRR as one of the initial areas of focus in the process of transferring assimilated law into the supervisory authorities’ rules and legislation following the enactment of FSMA 2023. The latter granted the PRA expanded rulemaking powers to replace assimilated law with PRA rules, thereby moving towards a more British system of regulation. In 2024/25, the PRA will consult on proposed rules to replace, with modifications where appropriate, the relevant firm-facing provisions in Part Two of the CRR.

Model risk management (MRM) and internal ratings-based approach/hybrid models

Banks’ use of and reliance on models and scenario analysis to assess future risks has increased significantly over the past decade. The introduction of new, sophisticated modelling techniques – including the potential use of Artificial Intelligence and Machine Learning (AI/ML) – has highlighted the need for sound model governance and effective model risk management practices.

In 2023, the PRA published a supervisory statement (SS)1/23 – Model risk management principles for banks , which applies to firms with internal model (IM) approval to calculate regulatory capital requirements. It is structured around five high-level principles that set out the core disciplines necessary for a robust model risk management framework to manage model risk effectively across all model and risk types. The adoption of these principles will help banks to develop good practices of model risk management, raising prudential standards at banks operating in the UK. The new policy comes into effect on 17 May 2024. Banks within the scope of the policy are expected to conduct an initial self-assessment against these principles, and, where relevant, prepare remediation plans to address any identified shortcomings.

During 2024, the PRA will focus on how banks are embedding and implementing the expectations set out in SS1/23. In particular, the PRA will seek to understand the extent to which banks’ management teams are adopting the principles and promoting the management of model risk as a risk discipline in its own right across their firms.

The PRA has published a range of policy statements on changes to the internal ratings-based (IRB) approach to credit risk over recent years. footnote [6] The PRA will continue to work with firms as they progress their model approval and review submissions in line with these requirements and expectations. The PRA will focus on the ‘hybrid’ approach to mortgage modelling, and the IRB repair programme, both carried forward from previous years.

Where appropriate, firms are holding post-model adjustments (PMAs) in the form of risk-weighted asset (RWA) add-ons, helping to mitigate potential capital underestimation while they develop their new models. During 2024, the PRA will continue to assess the adequacy of the PMAs to ensure any potential capital underestimation is addressed.

Liquidity risk management

The events of 2023 brought a further focus on the liquidity and funding risks faced by deposit takers, in particular the deposit outflows experienced by CS and SVB leading up to their acquisition and resolution, respectively.

The PRA will continue its close supervision of firms’ liquidity and funding risks in light of recent stresses. Through its ongoing supervision of banks and building societies, the PRA will follow up on how firms are taking account of the lessons they learnt from the events at CS and SVB. The PRA will continue to use its regular programme of Liquidity Supervisory Review and Evaluation Processes (L-SREPs) across PRA-authorised firms to assess their liquidity and funding risks, in quantitative and qualitative terms, and to ensure appropriate financial and non-financial resources are in place to manage and mitigate these risks.

The PRA will also continue to engage with firms and within the wider Bank on PRA-authorised firms’ access to the Bank’s Sterling Monetary Framework .

The PRA will also monitor closely how firms consider changes in depositor behaviour in the current funding environment and proactively take into consideration forthcoming changes in bank funding and liquidity conditions. footnote [7]

Credit risk management

The PRA is closely monitoring firms’ credit risk management practices given the uncertain credit risk outlook across key markets. The PRA’s assessment will include a focus on how credit risk management practices have evolved – in particular, how they can remain robust and adaptable to changing conditions, whether there is appropriate consideration of downside and contagion risks, as well as firms’ monitoring and planning for the impacts of customer refinancing. The PRA will undertake a thematic review of smaller firms’ credit risk management frameworks during 2024/25.

The PRA will monitor changes to firms’ business mix and credit exposures, and continue to monitor vulnerable segments, including cyclical sectors and key international portfolios, as well as traditionally higher-risk portfolios such as buy-to-let, credit cards, unsecured personal loans, small to medium-sized enterprises, leveraged lending, and commercial real estate. In addition, counterparty credit risk will remain a key area of supervisory focus through 2024, especially exposures to NBFI across certain business lines.

Separately, in 2024, the PRA will continue to progress its review of regulatory policies to assess whether the policy framework for trading book risk management, controls, and culture is adequate, robust, and accessible.

The UK banking system is well capitalised. However, the overall operating and risk environment remains challenging, and firms must manage their financial resilience to ensure that the financial sector can continue to support businesses and households. The PRA will continue to assess firms’ capital positions and planning, including firms’ use of forward-looking capital indicators, stress testing, and contingency plans.

The PRA intends to review its Pillar 2A methodologies (see section ‘Review of the Pillar 2 framework’ of PS17/23 ) for banks after the rules on Basel 3.1 are finalised, with a view to consulting on any proposed changes in 2025.

Securitisation regulation

HMT has prioritised the Securitisation Regulation as one of the initial areas of focus in the process of transferring assimilated law into regulatory rules and legislation following the enactment of FSMA 2023. The PRA will publish its final policy (simultaneously with the FCA) on final rules to replace or modify the relevant firm-facing provisions in the Securitisation Regulation and related Technical Standards in 2024-25.

The PRA also intends to consult on draft PRA rules to replace firm-facing requirements, subject to HMT making the necessary legislation. The PRA has gathered views and evidence from firms through DP3/23 – Securitisation: capital requirements , which will inform its approach to capital requirements for securitisation.

Financial resilience – insurers

Solvency uk implementation.

In June 2024, the PRA will publish its final policy on the matching adjustment (MA) reforms set out in CP19/23 – Review of Solvency II: Reform of the Matching Adjustment . The majority of these reforms will take effect from end-June to allow PRA-authorised firms to take immediate advantage of new investment opportunities. The remaining Solvency II reforms consulted upon in CP12/23 – Review of Solvency II: Adapting to the UK insurance market will take effect on 31 December 2024.

To facilitate implementation of the reforms consulted on in CP12/23 and CP19/23, the PRA will streamline the application processes for new internal model permissions and variations of existing permissions. There will be similar proposals for MA permissions, if the final policy is the same as set out in the CP. The PRA remains committed to assessing and providing decisions on applications for permissions as quickly as possible and aims to do this within the timescales published in the associated statements of policy. This will be supported by the establishment of dedicated, specialised teams for reviewing applications.

In practice, delivering timely decisions will in part depend on good engagement between firms and the PRA during the application process, and on the preparation of high-quality and complete applications by firms. To facilitate this, the PRA will publish templates for use by firms , including templates for reporting the updated Matching Adjustment Asset and Liability Information Return (MALIR) and the Analysis of Change (AoC) and Quarterly Model Change (QMC) for internal models. These measures are intended to assist with a smooth transition to the Solvency UK regime.

A variety of proposals were made in responses to CP19/23 to further reform the MA in the form of so-called ‘sandboxes’, which would allow an element of self-certification of eligibility, or a route to further expand eligibility in response to innovations in primary financing markets. In 2024, the PRA will explore these proposals with industry with the goal of determining whether they can be developed into schemes that further advance the objectives of the Solvency II review.

Solvency II reporting reforms

To deliver the regulatory reporting and disclosure reforms consulted on in CP14/22 and CP12/23 , the PRA published PS3/24 – Review of Solvency II: Reporting and disclosure phase 2 near-final , including finalised templates and instruction files. The PRA will also publish a finalised single taxonomy package in 2024 Q2, which encompasses proposals in CP14/22 and CP12/23 , and deletions published in PS29/21 . The PRA will engage with firms, including through industry roundtables, to prepare them in meeting the new reporting requirements coming into force from 31 December 2024.

Solvency II transfer

The PRA will publish a CP in 2024 H1 that will set out how it will transfer the remaining Solvency II requirements from assimilated law into the PRA Rulebook and other policy material such as supervisory statements or statements of policy (‘the UK framework’).

This will provide a more comprehensive Rulebook and will make it easier for firms to access and navigate the rules that apply to them.

Insurance stress testing

Stress testing forms an important part of the PRA’s supervisory approach and risk assessment of insurance firms, helping to assess and identify the vulnerabilities of life and general insurance sectors to a range of risks in different scenarios.

Major life insurers participate in regular and concurrent stress testing prescribed by the PRA, and the next test will take place in 2025. For the first time, the PRA will publish the individual results of the largest annuity-writing firms to help inform stakeholders about the level of firms’ resilience in the scenarios set out, and thereby strengthen market discipline.

The PRA will continue to engage with the industry on the technical, operational, and communication aspects of the stress test, and will publish an approach document for the life insurance stress test 2025. The 2025 test will for the first time include an exploratory scenario to assess exposure to the recapture of funded reinsurance contracts.

For general insurers, the PRA has previously conducted four general insurance stress test exercises between 2015 and 2022. In 2025, the PRA will run its first dynamic stress test . The objectives of the exercise will be to:

assess the industry’s solvency and liquidity resilience to a specific adverse scenario;
assess the effectiveness of insurers’ risk management and management actions following an adverse scenario; and
inform the PRA’s supervisory response following a market-wide adverse scenario.

The dynamic nature of the 2025 exercise represents a significant change from previous exercises and will involve simulating a sequential set of adverse events over a short period of time. The PRA has begun engaging with industry trade bodies and will provide more details of this exercise (including participation, design, and timelines) during 2024. Results of this exercise will be disclosed at an aggregate industry level.

Cyber underwriting risk

As the scope of technology continues to expand globally, cyber underwriting risk has become increasingly relevant, as reflected in the actual and planned growth of cyber insurance within the UK sector. As well as being inherently volatile and systemic in nature, cyber underwriting risk is diverse in how it can manifest in different lines of business.

Given the uncertainty of this risk, robust risk management, risk appetite-setting, and stress testing will be important factors in ensuring that capital and exposure management capabilities reflect firms’ actual exposures.

Monitoring and assessing cyber underwriting risk will be at the core of the PRA’s supervisory focus, particularly for firms with material exposures. The PRA will share the aggregate findings of its recent thematic project focused on cyber underwriting risk with industry, and continue to monitor the risk landscape and market dynamics to identify and assess potential risk drivers, including areas such as contract (un)certainty risk.

Model drift

The PRA will continue its scrutiny of internal models used by insurers to calculate capital requirements and aid risk management, to identify potential trends in the strength of firms’ calibrations, and as an indicator of the effectiveness of firms’ risk management.

In its 2023 model drift analysis , the PRA identified a number of findings across firms using internal models within the non-life sector. These are related to levels of allowances for inflation uncertainty, potential optimism in expected underwriting profits, potential optimism in the cost and benefit of reinsurance, and the limited allowance for economic and geopolitical uncertainties.

In 2024, the PRA will address perceived systemic trends that may weaken the robustness of models used across the market as a whole. The PRA will also focus on specific model drift within individual firms, with an emphasis on improving the effectiveness of internal model validation, so that firms can develop the capability to self-identify and address potential challenges.

Funded reinsurance

In 2024, the PRA will continue to pay close attention to the rapidly increasing use of funded reinsurance transactions in the UK life insurance market, and the risks that the growth in their use may pose to policyholder protection and UK financial stability. The PRA is particularly focused on the risk of an erosion in standards for assets used as collateral in these transactions, and individual and sectoral concentrated exposures to correlated, credit-focused counterparties.

As well as preparing to examine exposures to the recapture of funded reinsurance in the 2025 life insurance stress test, in 2024. The PRA will also, subject to responses to CP24/23 – Funded reinsurance , finalise and implement its policy expectations for UK life insurers that use funded reinsurance arrangements. As stated in the PRA’s letter on ‘ Insurance supervision: 2024 priorities ’, these policy expectations will cover how firms should manage risks associated with funded reinsurance at both individual transaction and at aggregate level. This will include the expectation that firms place limits on their activities to ensure sound risk management.

Impact on general and claims inflation

Claims inflation continues to be a significant risk for general insurers. Following a thematic review, the PRA published a Dear Chief Actuary letter in June 2023 setting out its findings that, while reserves have increased, there remains material uncertainty and the potential for excessive optimism with respect to reserving, pricing, and capital and reinsurance planning.

The PRA expects a continued lag in the emergence of claims inflation in the data, which insurers should be alert to. The PRA will continue to monitor the ongoing impact through the regulatory data collected and supervisory activities throughout 2024. Should the PRA’s assessment of this risk change, further focused work may be considered.

Market-wide stresses in March 2020 and September 2022 highlighted gaps in insurers’ liquidity risk management frameworks and, consequently, the importance of having comparable, accurate, and timely information on insurers’ liquidity. The PRA will build on the existing liquidity framework, currently based on risk management expectations set out in SS5/19 – Liquidity risk management for insurers , and develop liquidity reporting requirements for insurance firms most exposed to liquidity risk. The information collected will be used to supervise firms’ liquidity positions more effectively and produce meaningful peer comparisons. The PRA will work closely with firms to inform them about its development of these requirements and explore the necessity of a minimum liquidity requirement as part of a future policy consultation.

In addition, the Bank has signalled its intention to develop a new lending tool for eligible NBFIs to help tackle future episodes of severe dysfunction in core markets that threaten UK financial stability. The development of the PRA’s approach to supervising liquidity will therefore inform the design of the lending tool as it relates to insurers.

The reforms to Solvency II offer life insurers opportunities to expand the range of credit risk assets that are used to back their annuity liabilities, and enable them to meet their commitment to invest in assets that contribute to the productivity of the economy and the transition to net zero. These opportunities require sophisticated credit risk management, and insurers’ capabilities will remain a key focus. Increased activity in the bulk purchase annuity (BPA) market is expected to lead to further growth in firms’ exposure to credit risk, and potentially to concentrations in exposure to internally valued and rated assets.

The PRA will continue to focus on the effectiveness of firms’ credit risk management capabilities and seek further assurance that firms’ internal credit assessments appropriately reflect the risk profile of their asset holdings. The PRA will assess how firms’ credit risk management frameworks are evolving in line with its supervisory expectations, and also review the suitability of firms’ current and forward-looking internal credit assessment validation plans and approaches. In both cases, the PRA will seek to provide feedback on a firm-specific or thematic basis as appropriate.

Regulatory reforms

Operational risk and resilience (including the implementation of the critical third-party regime).

Operational disruption can impact financial stability, threaten the safety and soundness of individual firms and financial market infrastructures, or cause harm to consumers, policyholders, and other parts of the financial system. The PRA defines operational resilience as the ability of firms and the financial sector to prevent, respond to, recover, and learn from operational disruptions, including cyber threats.

The FCA, Bank, and PRA’s operational resilience policies came into force in March 2022 . Firms have now identified their most important business services, set impact tolerances, and commenced a programme of scenario testing. The PRA will continue to work closely with the FCA to assess firms’ progress, with a particular focus on the ability of firms to deliver important business services within defined impact tolerances during severe but plausible scenarios over a reasonable time frame, and no later than March 2025.

The PRA will also continue to monitor threats to firms’ resilience, including their growing dependency on third parties, while respecting the principle of proportionality.

Critical third parties to the UK financial sector

Section 312L of FSMA 2023 gave HMT the power to designate certain third-party service providers as ‘critical’ if they provide services to the financial sector, which, if disrupted or subject to failure, could cause financial stability concerns or risks to the confidence in the UK’s financial system. Prior to designating these parties, HMT must consult with the Bank, PRA, and FCA (the authorities the Act appoints as Regulators of the new regime). FSMA 2023 also gives the Regulators new powers to oversee the services provided by critical third parties (CTPs) to regulated firms. In December 2023, the PRA, Bank, and FCA jointly published CP26/23 – Operational resilience: Critical third parties to the UK financial sector , proposing how these powers could be used to assess and strengthen the resilience of services provided by CTPs to firms and FMIs, thereby reducing the risk of systemic disruption. The PRA will continue to work with other authorities to develop the final policy and oversight approach in 2024.

Additionally, the PRA is developing regulatory expectations on incident reporting, aligned with its operational resilience expectations.

Review of enforcement policies

Enforcement supports and supplements the PRA’s regulatory and supervisory tools by ensuring that it has credible mechanisms for holding regulated firms to account when they do not meet requirements and expectations. Enforcement policies also provide a wider deterrent effect. The PRA is therefore committed to holding individuals to account and, when appropriate, taking regulatory and/or enforcement action against those individuals that breach its standards. The PRA clearly sets out, for the benefit of the whole regulated community, the actions and standards of behaviour that are considered unacceptable ( The Bank of England’s approach to enforcement ).

In January 2024, following a review of its policies and public consultation, the PRA published PS1/24 – The Bank of England's approach to enforcement , which sets out the revised approach to enforcement across the Bank’s full remit (including when acting as the PRA).

The PRA is committed to conducting any enforcement investigations as promptly and efficiently as possible. In line with that aim, PS1/24 introduced a new Early Account Scheme (EAS or ‘the Scheme’), which provides for a new path for early cooperation and greater incentives for early admissions with the aim of reaching outcomes more quickly in specific cases.

Diversity and inclusion in PRA-regulated firms

Enhancing diversity and inclusion (D&I) can support better governance, decision-making, and risk management in firms by reducing groupthink and promoting a culture that allows employees to feel able to speak up and challenge the status quo.

In September 2023, the PRA published CP18/23 – Diversity and inclusion in PRA-regulated firms . Under the proposals, all in-scope firms would need to understand their D&I position, develop appropriate strategies to make meaningful progress, and monitor and report on progress. The proposals are flexible and carefully tailored to recognise that firms are at different stages of their work on D&I, and, most importantly, are best placed to develop their own D&I solutions.

The PRA also outlined that the proposals in CP18/23 contribute towards its secondary objectives of ensuring effective competition and facilitating competitiveness and growth, because enhanced D&I can help support greater innovation and make firms more attractive in the labour market.

In 2024, the PRA will continue its industry engagement, assess responses to CP18/23, and provide a further update in due course.

The PRA maintains flexibility to adapt and respond to changes in the external environment, economic and market developments, and any other risks that may affect its statutory objectives or priorities. The PRA has continued to use its horizon-scanning programme to achieve the following aims:

identify emerging external risks, regulatory arbitrage, and potentially dangerous practices;
highlight features of the regulatory regime that are not yet delivering the desired results; and
allocate supervisory and policy resources to tackling the highest-priority risks in a timely manner.

Consistent with its mission, the PRA will continue to contribute to lessons learned internationally, policy/standards evaluation, and, in particular, internationally agreed standards with the aim of promoting the safety and soundness of the firms it regulates. For example, in 2024/25, the PRA will continue to focus on identifying and addressing emerging risks internationally, working closely with the BCBS on its response to consultations launched in 2023 (including on cryptoassets; disclosure for climate-related financial risks; and the Basel Core Principles and other outstanding work in support of its 2023/24 work programme and strategic priorities ). The PRA will also continue to work closely with the International Association of Insurance Supervisors (IAIS) on its finalisation of the Insurance Capital Standard (ICS), Insurance Core Principles on valuation (ICP 14) and capital adequacy (ICP17) .

In addition, the PRA will continue to monitor the potential for capital and profit erosion in firms that are slower to adopt new technologies, as well as firms’ involvement in new technologies, and changes in the profile of cyber-risks they face.

International engagement and influencing regulatory standards

The PRA plays a leading role in influencing international regulatory standards and will continue to participate actively in global standard-setting bodies, such as the Basel Committee on Banking Supervision (BCBS) , the IAIS, and the Financial Stability Board (FSB) .

Building on the BCBS’s report on the 2023 banking turmoil , the PRA will work with international stakeholders and the BCBS to strengthen supervisory effectiveness and identify issues that could merit additional guidance at a global level. The PRA will work with BCBS to pursue additional follow-up analytical work based on empirical evidence to assess whether specific features of the Basel Framework have performed as intended, such as liquidity risk and interest rate risk in the banking book, and assess the need to explore policy options over the medium term, alongside supporting the BCBS in pursuing its medium-term programme on evaluating the impact and efficacy of Basel III, and in light of lessons drawn from the Covid-19 pandemic.

In addition, the PRA pursues international collaboration through less formal mechanisms, for example through regular bilateral and trilateral engagements, ensuring close collaboration on a number of supervision, risk, and policy topics of joint interest. The PRA also collaborates internationally on joint global thematic reviews with other regulatory authorities, for example, to address a joint interest in banks’ exposures to NBFIs and the use of critical third parties.

The PRA will also continue to support international efforts to monitor and promote consistent implementation of Basel 3.1, as well as the implementation and monitoring of the ICS.

Supervisory co-operation

Effective international collaboration remains crucial to addressing global risks, and is central to maintaining UK financial stability, the safety and soundness of internationally active firms, and reducing regulatory arbitrage.

The PRA will continue to promote international collaboration through supervisory colleges and set out clear expectations for firms wanting to branch into the UK. The PRA will also maintain its existing memoranda of understanding (MoUs) and, if needed, expand the number of jurisdictions with which it has an MoU to facilitate the supervision of international groups and therefore enhance the safety and openness of the UK for financial services activities.

The PRA will continue to support HMT via its international collaboration activities (eg The Berne Financial Services Agreement ) and with assessments of other jurisdictions to facilitate safe access to overseas markets for UK firms, among other benefits.

Overseas bank branches

The PRA will consult on targeted refinements to its approach to banks branching into the UK, reflecting lessons from the failure of SVB to ensure the PRA’s framework for assessing branches captures activities of potential concern. The PRA is committed to the UK remaining a responsibly open jurisdiction for branches, and expects the vast majority of branch business to be unaffected by any changes. The PRA also intends to consult on clarifying expectations for group entity senior manager functions (SMFs) footnote [8] and expectations of booking arrangements.

Operational and cyber resilience

The PRA engages internationally on operational and cyber resilience, in support of its supervision objectives and to raise international standards. The PRA co-chairs the G7 Cyber Expert Group (CEG), which works to coordinate cyber resilience strategy and management across G7 jurisdictions. The PRA also co-chairs the European Systemic Cyber Group (ESCG), which helps European authorities develop systemic capabilities to prevent and mitigate risks to the financial system that might emanate from cyber incidents. The PRA has also led work at the Financial Stability Board (FSB) on cyber incident reporting. In 2024, the PRA will continue to engage with standard-setting bodies and bilaterally with other jurisdictions on third-party risk management and CTPs.

Managing the financial risks arising from climate change

Climate change presents a source of material and increasing financial risk to firms and the financial system. Managing the risks to firms’ safety and soundness from climate change requires action and remains a key priority for the PRA. The Bank first set out expectations around enhancing banks’ and insurers’ approaches to managing the financial risks emanating from climate change in April 2019 via SS3/19 – Enhancing banks’ and insurers’ approaches to managing the financial risks from climate change . The PRA has since provided further guidance via two Dear CEO letters, footnote [9] incorporating observations from supervisory processes and the 2022 Climate Biennial Exploratory Scenario exercise , as well as by providing thematic feedback via Dear CFO letters footnote [10] to promote high-quality and consistent accounting for climate change .

As noted in its 2024 priorities letter to firms, the PRA expects firms to make further progress and demonstrate how they are responding to the PRA’s expectations, and to set out the steps they are taking to address barriers to progress. The PRA will continue to assess firms’ progress in managing climate-related financial risks. In 2024, the PRA will commence work to update SS3/19 and publish thematic findings on banks’ processes to quantify the impact of climate risks on expected credit losses.

The PRA, alongside the FCA, will continue to work with industry through the Climate Financial Risk Forum to produce practical guides and tools that help financial firms embed the financial risks from climate change into their operations. The PRA will also continue to engage with domestic and international partners, including international standard-setters, to contribute to the development of international frameworks in support of managing climate-related risks.

Artificial Intelligence and Machine Learning

Following the publication of a feedback statement (FS)2/23 – Artificial Intelligence and Machine Learning , the PRA and FCA intends to conduct the third edition of the joint survey on machine learning in UK financial services , in 2024 Q2. Responses to the survey will allow the PRA and FCA to further explore how best to address the issues/risks posed by AI/ML in a way that is aligned with the PRA’s and FCA’s statutory objectives. The PRA will also continue to monitor firms’ compliance of its expectations, as set out in SS1/23 , and will seek to explore further updates where necessary.

International policy on digitalisation and managing associated risks

The PRA aims to be at the forefront of identifying and responding to opportunities and risks faced by PRA-authorised firms as they seek to use technology in innovative ways to attract and retain customers, reduce costs, and increase efficiencies.

External context and business risk are important facets of the PRA’s approach to supervision. Developments are monitored, with specialist input from the Bank’s Fintech Hub , to identify risks such as fragmentation of the value chain, novel outsourcing arrangements, and concentration risks across and within firms.

In order to take a responsive and responsibly open approach, the PRA will continue to consider policy proposals to respond to digitalisation and adapt its supervisory approach accordingly. Through the New Bank Start-up and Insurer Start-Up Units, the PRA will continue to engage with applicant firms that have novel uses of technology. The PRA will continue to work closely with domestic and international partners, and through engagement with industry and stakeholders, to take a pro-active approach to digital innovations within the financial sector.

The PRA is a significant contributor to discussions on digitalisation in international standard-setting fora, and will continue to support the BCBS’s work on the developments in the digitalisation of finance and the implications for banks and supervisors . The PRA will also continue be an active part of the IAIS Fintech Forum.

Digital money and innovation

In February 2023, HMT published a consultation and Call for Evidence on the future financial services regulatory regime for cryptoassets , focused on enhancing market integrity, custody requirements, and transparency. The consultation closed in October 2023 with the publication of an update on the government’s plans for its legislative approach to the regulation of stablecoins. HMT confirmed that tokenised deposits would continue to be regulated as deposits. The PRA will continue to work with HMT and the FCA to ensure that the regulatory perimeter and the boundaries between different activities are clearly and robustly delineated.

In November 2023, the Bank, PRA, and FCA published a cross-authority package on innovations in money and payments . As part of this, the PRA published a Dear CEO letter to provide clarity on the PRA’s expectation on how deposit-takers should address risks arising from the emergence of multiple forms of digital money and money-like instruments. footnote [11] It published the letter alongside the Bank’s proposed regime for systemic payment systems using stablecoins and related service providers , and the FCA’s proposed regime for stablecoin issuers, custodians, and the use of stablecoins as a means of payment. A roadmap paper was also published to explain how these regimes fit together.

The PRA will continue to contribute to the Bank’s broader work on innovation in money and payments, which in 2024 will include work on wholesale payments and settlements – and their interaction with retail payments.

In 2024, the PRA will continue to work within the global regulatory community to finalise a set of amendments made to the international standard on the treatment of banks’ cryptoassets exposures. These amendments were published for consultation by the Basel Committee in December 2023, following the finalisation of the standard in 2022.

Once the amendments are finalised, the PRA will implement the standard within the UK, following the PRA’s policymaking process. Alongside this, the PRA will continue to engage with international partners, including the BCBS, to assess bank-related developments in cryptoassets markets, the role of banks as issuers of stablecoins and tokenised deposits, custodians of cryptoassets, and potential channels of interconnections with the cryptoassets ecosystem.

The PRA advances its primary and secondary objectives by making rules that support competitive and dynamic markets in the sectors that it regulates. The PRA will go further in developing proportionate and efficient prudential requirements, thereby reducing the burden on firms where appropriate, and pursuing its secondary objectives. The PRA also remains committed to playing an active role in international standard-setting, given the important role of global rules in safeguarding the UK’s open economy through ensuring safe financial markets.

Regulatory change – embedding the PRA’s approach to rule-making

FSMA 2023 has significantly changed the powers and responsibilities of the PRA, allowing it to ensure the UK financial services framework is fit for the future, reflecting the UK’s position outside of the EU. FSMA 2023 also introduces enhanced objectives and accountability requirements that support the PRA’s transparency and accountability to Parliament.

FSMA 2023 provides a framework to repeal and replace assimilated law relating to financial services. Most technical rules will now be made by operationally independent regulators within a framework set by Parliament, enabling the PRA to deliver policies better suited to the UK financial sector. The PRA’s responsibility, in cooperation with HMT and FCA, is to ensure that the new rules are made in accordance with the PRA’s remit and statutory objectives, including the new secondary competitiveness and growth objective.

The PRA has worked closely with HMT and FCA on the sequencing of the repeal and the replacement of the files of assimilated law. Once the replacement material is in PRA rules, the PRA will have the power to evaluate these rules, amend them if needed, and/or create new rules when required.

The PRA has already made good progress with respect to the files that HMT has prioritised into the first two ‘tranches’, including key files such as Solvency II, Securitisation, CRR, among others. The PRA has consulted on significant parts of tranches 1 and 2 in 2023 and will continue this work throughout 2024 and 2025. The completion of the repeal and replacement of Solvency II and Securities Regulation files is expected by the end of 2024, and the last of the PRA's tranche 1 and 2 files is planned for implementation in 2026. Work on the remaining files that were not included in tranches 1 and 2 will begin in 2024.

The PRA is consulting its stakeholders as it develops its approach to policymaking in light of the new requirements. In December 2023, the PRA published CP27/23 , setting out the proposed approach to policy under the regulatory framework as amended by FSMA 2023, and building on the previously published DP4/22 – The Prudential Regulation Authority’s future approach to policy . CP27/23 outlines the PRA's planned approach to maintain robust prudential standards, which are the cornerstone of UK financial stability and long-term economic growth, while addressing risks and opportunities in a responsive manner, appropriately adapted to the circumstances of the UK. Responses to CP27/23 will inform the PRA’s finalised approach document to be published in 2024 H2.

Secondary competitiveness and growth objective (SCGO)

FSMA 2023 gave the PRA a new secondary objective which requires the PRA to act, so far as reasonably possible, to facilitate the UK economy’s international competitiveness (including in particular the financial services sector through the contribution of PRA-authorised persons) and its growth over the medium to long term, subject to alignment with international standards. FSMA 2023 maintained the PRA’s other objectives without change.

In addition to specific policy measures, the PRA has taken practical steps to embed the SCGO in its operations, including through internal changes, and the launch of a research programme to deepen its understanding of the ways prudential requirements can affect the international competitiveness and growth of the UK economy.

The PRA will continue to look for ways in which it can facilitate the UK’s competitiveness and growth when discharging its general functions. The approach focuses on strengthening the three regulatory foundations that were set out in CP27/23, specifically:

Maintaining trust among domestic and foreign firms in the PRA and UK prudential framework via a range of policies, including those that promote strong prudential standards appropriately calibrated for the UK, and the alignment of said policies with international standards.
Adopting effective regulatory processes and engagement, including providing for the efficient handling of regulatory processes, such as authorisations and data collections, as well as facilitating the accessibility of the PRA Rulebook to reduce the operating costs of firms.
Taking a responsive and responsibly open approach to UK risks and opportunities, including making rules that account more effectively for the needs of the UK. This approach means responding faster to emerging risks and opportunities in the UK financial sector, for example, by using regulatory tools to support innovation safely. To this end, in 2024, the PRA will hold a pilot roundtable to gather stakeholders’ views on how the PRA can help to reduce the barriers to innovation that the industry faces.

The policy initiatives discussed in the rest of this section provide examples of how the PRA will advance its secondary objectives in 2024/25.

Furthermore, the Bank’s Independent Evaluation Office (IEO) is evaluating the PRA’s approach to its new secondary objective. Both the outcome of the IEO’s evaluation and the PRA’s response to it will be included in the PRA’s – ‘Secondary Objectives Report’ to be published alongside the PRA’s Annual Report 2023/24. The Secondary Objectives Report will also give an overview of all the PRA’s policy initiatives that have advanced the SCO and the SCGO .

Strong and Simple framework

In 2021, the PRA published FS1/21 – A strong and simple prudential framework for non-systemic banks and building societies , that set out a vision to simplify prudential requirements for smaller, domestic-focused banks and building societies, while maintaining those firms’ resilience.

As outlined in the PRA 2023/24 Business Plan , the PRA will continue its planned programme of work on creating a simpler but equally resilient prudential framework for smaller, domestically focused banks and building societies, known as the Strong and Simple framework. This framework is designed to maintain the financial resilience of banks and building societies operating in the UK, while reducing costs associated with prudential requirements for non-systemic banks and building societies. In 2023/24, the PRA published its final policy on scope criteria and simplified liquidity and disclosure requirements for SDDTs in PS15/23.

In December 2023, the PRA published PS16/23 – The Strong and Simple Framework: Scope criteria, liquidity and disclosure requirements , which finalises the scope of the framework. The PS builds on the first layer of the Strong and Simple framework, which focused on the smallest firms and is known as the SDDT regime. The overall aim of the framework is to maintain the financial resilience of banks and building societies operating in the UK, while addressing the ‘complexity problem,’ under which the same prudential requirements are applied to all firms, regardless of size, even though the costs of interpreting and operationalising those requirements are higher for small firms, relative to the associated public policy benefits.

In 2024/25, the PRA will move further towards finalising and implementing the Strong and Simple prudential framework for SDDTs. A key step will be to implement the simplifications to liquidity requirements that were introduced in Phase 1. The PRA will also finalise the rules for the Interim Capital Regime, which will allow firms eligible to be SDDTs to stay under capital rules equivalent to those currently in place until the simplified capital regime for SDDTs is implemented. The PRA plans to consult on a simplified capital regime for SDDTs in 2024 Q2.

Insurance Special Purpose Vehicles regime

In 2017, the PRA introduced a framework for the authorisation and supervision of ISPVs to provide guidance for parties wishing to obtain authorisation as an ISPV, or for insurers and reinsurers seeking to use UK ISPVs as risk mitigation in accordance with Solvency II.

The UK ISPV regime has not seen as much activity as originally envisaged. While new issuances of insurance-linked securitisations (ILS) transactions in the UK over the last two years have exceeded USD400 million, there are steps to be taken which can improve the regime and increase its usage.

The PRA has been in discussion with industry on this matter with the aim of understanding the key areas of the regime in which market participants would recommend changes.

The PRA expects to consult on a package of reforms to the UK ISPV regime. These reforms are intended to:

allow a wider range of transaction structures in the UK regime;
improve the speed of the application process, and thereby also reduce costs for applicants; and
clarify the PRA’s expectations of UK insurers who cede risks to ISPVs, wherever they are established.

Remuneration reforms

The PRA’s remuneration rules ensure that key decision-makers and material risk-takers at PRA-regulated firms have the right incentives and can be held accountable. In 2023, following consultation, the PRA removed the bonus cap and made changes to its rules to enhance proportionality for small firms .

In advancing its primary and secondary objectives, the PRA is considering further changes to the remuneration regime that is better suited to the UK’s financial sector, while maintaining the remuneration regime’s overall structure and objectives, which are based on internationally agreed FSB principles and standards . The PRA intends to consult on any changes in 2024 H2.

Implementing changes to the Senior Managers & Certification Regime (SM&CR)

In March 2023, the PRA and FCA jointly published DP1/23 – Review of the Senior Managers and Certification Regime (SM&CR) , with a particular focus on gathering views about the regime’s effectiveness, scope, and proportionality. HMT in parallel launched a Call for Evidence covering the legislative aspects of the SM&CR. The period for sending responses to the discussion paper ended on 1 June 2023.

The PRA received over 90 responses relevant to its work as a prudential regulator, reflecting the significant level of stakeholder interest in the regime. The PRA, working closely with the FCA and HMT, is considering potential policy options for reform in response to the comments received and intends to consult on proposed changes to the regime in 2024 H1.

Complete the establishment of the Cost Benefit Analysis (CBA) Panel

The PRA is continuing to make progress under the new framework provided by FSMA 2023, setting out CBA as an integral part of developing the best possible policy approach, and the results will help shape the PRA’s policymaking. CBAs inform and refine the policy approach to identified issues, helping to design approaches that offer the greatest benefits.

One of the key elements of enhancing the PRA’s scrutiny and accountability mechanisms relates to its approach to CBA and the establishment of a new CBA panel. The role of the CBA Panel is to support increased transparency and scrutiny of the PRA’s policymaking by providing regular, independent input into the PRA’s CBAs relating to PRA rules and the PRA’s statement of policy in relation to CBAs . The Panel will review how the PRA is performing more generally in carrying out its duties with regard to CBA and may provide recommendations to the PRA.

The PRA has completed an open, competitive, and rigorous recruitment process for identifying and appointing a diverse range of expert individuals to constitute the CBA Panel. The PRA will finalise the set-up of the Panel and then start consulting it on the PRA’s statement of policy in relation to CBAs and on the preparation of CBAs. The appointments, including that of the Chair, will be announced in due course.

In 2024, the PRA will consult on its CBA framework, which will set out how the PRA intends to continue to conduct a robust CBA and how it engages with the CBA panel.

PRA Rulebook

The new regulatory framework set out in FSMA 2023 enables the PRA to develop a more coherent and easily accessible Rulebook. The aim is to improve the efficiency and accessibility of the PRA Rulebook by reducing the number of policy document formats currently in use to three: rules, supervisory statements, and statements of policy. In order to achieve this, the PRA’s specialist teams will begin the process of reviewing the EU Guidelines, European Supervisory Authorities (ESA) Q&As, and UK technical standards (UKTS) that are relevant to PRA rules, to determine what should be incorporated into those rules or related supervisory statements and statements of policy. Once the review of these documents is completed, references to the EU Guidelines, ESA Q&As, and UKTSs will be removed.

The PRA is also looking at grouping the elements in the Rulebook to make it easier for users to access relevant information. To support usability and clarity, the PRA will take a consistent approach to the structure of, and language in its policies.

The speed at which the PRA will achieve many of its ambitions for the Rulebook will partly depend on the Government’s approach to the repeal of relevant assimilated law and its replacement in PRA rules and other policy materials. However, the PRA will move ahead with the proposed reforms as quickly as possible to help users more easily navigate the new regulatory landscape.

Banking Data Review

The Banking Data Review BDR, launched in 2023-24, will be delivered as an integral part of the Transforming Data Collection TDC programme. The work will enable the PRA’s banking regulatory data collections to be better aligned with the day-to-day needs of supervisors, ensure the PRA has good-quality data to carry out its new policymaking responsibilities in line with the post-Brexit regulatory framework, and reduce burdens on firms by better integrating and streamlining data collections.

The PRA will consult on the first of three phases of reforms under the BDR in 2024 H2. The consultation will focus on streamlining of the existing regulatory reporting estate, removing reporting templates that may no longer be needed or which contain information that can be gathered at lower cost elsewhere, reviewing collections of counterparty credit information, and incorporating lessons from recent market events.

In parallel, the PRA will continue to work on plans for future phases of reform, focused on credit risk in the second phase, and with all remaining areas covered in a third phase. Engagement with industry participants will be done under the newly appointed TDC Advisory Board, which will be responsible for setting industry working groups on key topics relating to TDC. The TDC’s main industry forum in this area is the Data Standards Committee (DSC), which led the work on the recommendations underpinning the jointly published response by the Bank and the FCA, entitled Transforming data collection – Data Standards Review with recommendations and Bank of England and FCA response . A further working group is the BDR Industry Consultative Forum that is open to all PRA-regulated banks.

Supporting and authorising new market entrants via new ‘mobilisation’ regime

The PRA will continue to support potential market entrants in navigating the authorisation process. This includes providing clear online guidance and industry engagement to build awareness of expectations and seek feedback on firms’ experience of the process. The PRA offers potential applicants the opportunity to meet with staff through a structured pre-application stage, allowing firms to iterate and develop their proposition to support a better-quality application.

The PRA will continue to make use of the mobilisation stage for newly authorised banks, where appropriate, to allow them to operate with restrictions while they complete their set-up before starting to trade fully.

In line with PS2/24 – Review of Solvency II: Adapting to the UK insurance market , the PRA will introduce a new ‘mobilisation’ regime to facilitate entry and expansion for new insurers from 31 December 2024, similar to the mobilisation stage for new banks. Mobilisation will help to facilitate competition, and the international competitiveness and growth of the UK insurance sector, with the aim of benefiting firms who are contemplating applying for authorisation as an insurer in the UK now or in the future.

Newly authorised insurers in mobilisation could be offered the option of using a set period of extra time to build up systems and resources while operating with business restrictions, proportionate regulatory requirements, and lower minimum capital requirements. New insurers could be suitable for mobilisation when they have a shortlist of activities to complete before they can meet full regulatory requirements.

Ease of exit

Improving how firms can leave regulated markets in an orderly way is a vital corollary to greater ease of entry into those markets. It enables a dynamic and competitive market which entrants can join and leave with minimal impact on the wider market and the PRA’s statutory objectives. The PRA has published the first of two planned policy in this topic, (eg, PS5/24 – Solvent exit planning for non-systemic banks and building societies ). A further PS on solvent exit planning for insurers is expected in 2024 H2, following the completion of the market consultation initiated by CP2/24 – Solvent exit planning for insurers . Both of these form part of the PRA’s strategic focus on increasing the ease of exit.

Ring-fencing regime

The Bank and PRA continue to work closely with HMT on implementing the recommendations made in March 2022 by the Independent Review of Ring-fencing and Proprietary Trading , led by Sir Keith Skeoch. On 28 September 2023, both HMT and the PRA published consultations with the aim of giving effect to recommendations of that review.

HMT consulted on removing the blanket restriction which prevents ring-fenced bodies (RFBs) operating in countries outside the EEA. The PRA consulted on introducing a new rule and updating SS8/16 – Ring-fenced bodies (RFBs) , to align with HMT’s proposed legislative changes. These changes aim to implement certain safeguards to ensure that RFBs are not exposed to material risks through the business of their overseas subsidiaries or branches. The PRA will publish its policy and a rule Instrument once the legislative changes are brought into force. Simultaneously, the PRA will update SS8/16 to reflect the changes.

FSMA requires the PRA to conduct a review of its ring-fencing rules and provide a report to HMT every five years. The first such review was completed on 12 December 2023 and the resulting report was laid before Parliament on 25 January 2024 and published on the Bank’s website.

The PRA intends to consult on potential changes to the ring-fencing regime identified by the Rule Review once a fuller exploration of costs and benefits has been undertaken. The Bank and PRA will continue to support HMT with technical advice to enable HMT to finalise its legislative changes, and to consider responses to its Call for Evidence on longer-term reforms.

Effective authorisation processes

The PRA handles over 1,800 regulatory transactions a year, ranging from new firm authorisations to variations of permission for existing firms and cancellations of permission for firms leaving the market. Over the coming year, the PRA will continue to handle these transactions in more streamlined, efficient, transparent, and accessible way while maintaining strong risk controls to ensure the UK’s success as a global financial centre.

In parallel to consulting on reforms to the SM&CR, the PRA will continue to enhance and streamline internal processes on SM&CR applications and other transactions to drive further improvements in operational effectiveness, as measured through the quarterly publication of metrics on timeliness of decisions. This will include close collaboration with the FCA to ensure an efficient and coordinated review of cases, as well as improvements to case handling and recording technology platforms. The PRA will extend existing industry engagement on New Bank Start-ups to also cover new insurers and SM&CR applications in order to promote transparency and spread best practice in support of efficient case handling. In addition, the Wholesale Insurance Accelerated Authorisation Pathway, developed jointly by the PRA and FCA, will continue to provide an accelerated route for the authorisation of a sub-set of London market wholesale applicants.

The PRA’s operation within the Bank plays a critical role in maintaining the stability and integrity of the UK’s financial system. In pursuit of its objectives and work programme, the PRA ensures that its regulatory framework is inclusive, considering the diverse landscape of financial institutions. It aims to create a level playing field, while recognising and planning for the potential impact of the changes in the environment in which we are operating.

In line with its mission, the PRA continually adapts regulations to address emerging risks and opportunities, fostering inclusivity to enhance trust, transparency, and accountability in the financial sector. As a prudential regulator, the PRA maintains and strives for operational efficiency in its regulatory processes, technology, and its workforce. This involves streamlining procedures, driving inclusive recruitment, and leveraging technology to enhance effectiveness – noting that efficient regulation benefits both regulated entities and the broader economy by reducing unnecessary burdens and facilitating smoother interactions between financial institutions and the regulator.

Data and technology

The PRA will continue its programme of work to strengthen and transform its data-related capabilities. The PRA will also continue to play a leading role in international collaboration on the regulatory use of data and technology, liaising closely with other regulators, central banks, academic institutions, and industry. The PRA intends to run a multi-day innovation-focused event for PRA colleagues to support learning and increase awareness about the impact of technological advances and initiatives across the financial sector.

Transforming Data Collection by building on digital regulatory reporting

The PRA will continue to work towards achieving the objectives of the TDC programme for 2026:

Goal 1: the PRA has the data and tools it needs to rapidly identify and probe emerging issues, risk, and policy questions, including integration into a single customisable supervisory dashboard; and
Goal 2: the PRA only collects data that it needs from firms, thereby reducing unnecessary burdens on firms.

Regarding Goal 1, the PRA will continue to improve existing and deliver new priority data visualisation and analysis tools to support supervision, covering financial and operational data for PRA-regulated firms. The PRA will also make use of speech-to-text technology to support day-to-day work for staff, and to contribute to the Bank’s wider work on the appropriate use of artificial intelligence to support its objectives, including large third-party language models. This will be underpinned by ongoing support for PRA staff undertaking renewed digital skills training alongside individual and group coaching for some staff cohorts, and planning for those programmes in future years.

Regarding Goal 2, the PRA will continue to work with the FCA and the wider Bank on the TDC programme , which envisions that ‘regulators are able to get the data they need to fulfil their mission at the lowest possible cost to industry’ through improvements to the integration of reporting, reporting instructions, and data standards. Over the coming years, TDC therefore aims to deliver a new target operating model for all of the Bank’s regulatory, statistical, and stress-testing data collections.

Diversity, equity and inclusion at the PRA

The PRA continues to take action to strengthen its culture and working environment. The Bank’s Court review into ethnic diversity and inclusion reported its findings in July 2021. The PRA, alongside the rest of the Bank, is implementing the recommendations of this review and has made considerable progress in terms of embedding inclusive recruitment, investing in talent development, and advancing a psychologically safe culture to promote employees’ ability to voice their opinions via the ‘speak my mind’ initiative. There is also increased accountability for senior leaders to advance a diverse and inclusive Bank.

The PRA recognises the importance of all staff feeling valued and being able to thrive. Key focus areas for 2024/25 include progressing initiatives to improve psychological safety, ethnic and gender representation, and disability disclosure. The PRA continues to benefit from the Bank’s excellent employee networks that cater to diverse groups such as disability, LGBTQ+, social mobility, gender, age, carers, different ethnicities, and many more.

PRA Agenda for Research

The PRA plans to build on its research efforts in 2024/25, including through improving central coordination and capacity-building projects.

Research priorities are captured in the PRA Research agenda 2023+ below (Table 1). The PRA will continue to deliver on those, while making sure that a timely delivery of high-quality research, expertise, and critical evaluation is given to PRC, FPC, and other senior decision-making activities. These deliverables are captured in the research metrics and the PRA Research Annual. The metrics track the quantity, quality, and impact of the PRA’s research, while the PRA Research Annual provides further details on how timely and effective the research advisory (inside and outside the institution) has been. New for this business year is that the PRA will additionally produce impact cases, with the purpose of tracking the lifespan of key research projects and evaluating their total policy/social impact.

To ensure that the organisation has the right capacity and skills, the PRA will initiate new capacity-building projects on models, tools, and data, while reinforcing external collaborations on those. It will also continue efforts to disseminate this work and foster strategic cooperations with research departments at other central banks, regulatory authorities, research institutes, or universities.

Table 1: PRA Research agenda 2023+

Risks to delivery of business plan.

Operating in a complex and fast-moving environment gives rise to risks to the delivery of this business plan. The PRA monitors, manages, actively mitigates (where possible), and reports these risks to the PRC and relevant Bank fora on a regular basis.

Over the course of 2023/24, attrition levels reduced and there was an improvement in recruitment into key roles. Looking ahead to 2024/25, headcount required to deliver this Business Plan is forecast to remain broadly flat.

The PRA will continue to impose discipline on how it deploys its budget to ensure resources are allocated appropriately. The PRA will also need to reprioritise during the year in response to changes in the external environment, as it routinely does. The PRA will continue to focus on managing operational risks and strengthening horizon-scanning capabilities so that it can respond quickly to changes in risk and drive decisions on prioritisation, business planning, and resourcing.

Having access to the right technology and data remains a key area of focus in 2024/25 as part of a multi-year investment across the PRA and the Bank to ensure that the PRA’s technology capabilities support its strategic priorities. This focus will take account of developments in regulatory technology, reduce inefficiencies, and leverage the benefits of being a regulator within the UK’s central bank. There is a risk that the PRA may be unable to deliver its intended technology ambition given the congested change agenda across the Bank. This challenge is being managed through careful prioritisation and scoping of key projects, including delaying some lower-priority activities.

Dependencies

Given the interconnected nature of the global financial system, dependencies on external parties, such as the FCA, HMT, and overseas regulators, could present a risk for the PRA. Policy development, authorisation processes, and supervision activities are contingent on maintaining relationships and co-operation with these parties. The PRA fosters its domestic relationships to ensure effective regulation and supervision across the UK financial sector. The PRA also works closely with international regulators to address cross-border risks for firms operating internationally. The PRA continues to foster these important relationships at all levels of the organisation through several channels, including international committees, supervisory colleges, joint reviews, information-sharing, and joint publications.

PRA Budget 2024/25

The PRA’s provisional budget for 2024/25, which is subject to finalisation of pension costs and year-end adjustments, is estimated at £353.0 million. This is an increase of £34.0 million (11%) on the 2023/24 budget. To reduce the impact to firms in 2024/25, the PRA has taken two measures, as set out in CP4/24 , to limit the increase in fees paid by firms to 7%. This increase follows a 1% reduction to fees in 2023/24 compared with 2022/23.

The PRA is constraining the increase in its own direct costs to 2%, which means a real-terms cut to the budget that will be managed by increasing efficiency in the PRA’s supervisory approach, end-to-end policymaking process, and operations. Alongside this, the PRA needs to fund inflation-driven increases in support services provided to the PRA by the Bank and the PRA’s share of tackling obsolescence in the Bank’s technology estate on which the PRA relies.

Budgeted headcount is forecast to remain broadly flat for 2024/25 ending the year at 1,541 (this compares closely to the actual year-end headcount position for 2023/24 of 1,537). The budgeted headcount reflects the PRA’s need to invest in key areas, including increasing the capacity to approve the efficiency of the IRB model review process, the implementation and supervision of CTPs, investment in the BDR, and implementing lessons learned from the failure of SVB and CS.

Details on how the PRA proposes to fund its budget can be found in CP4/24 – Regulated fees and levies: Rates proposals 2024/25 . It includes proposals for allocating costs of the PRA’s 2024/25 ongoing regulatory activities across PRA fee payers.

Abbreviations

ACS – Annual Cyclical Scenario

AI/ML – Artificial Intelligence/Machine Learning

AoC – Analysis of Change

Bank – Bank of England

BCBS – Basel Committee on Banking Supervision

BDR – Banking Data Review

CBA – Cost Benefit Analysis

CEG – Cyber Expert Group

CEO – Chief Executive Officer

CMORG – Cross Market Operational Resilience Group

CP – Consultation Paper

CRR – Capital Requirements Regulation

CTP – Critical Third Party

DEI – Diversity, equity, and inclusion

DP – Discussion paper

DSC – Data Standards Committee

D&I – Diversity and inclusion

EAS – Early Account Scheme

EU – European Union

ESA – European Securities and Markets Authority

ESCG – European Systemic Cyber group

FCA – Financial Conduct Authority

FinTech – Financial Technology

FMI – Financial Market Intermediary

FMIs – Financial Market Infrastructures

FPC – Financial Policy Committee

FRF – Future Regulatory Framework

FSB – Financial Stability Board

FSMA – Financial Services and Markets Act 2000 (as amended)

HMT – His Majesty's Treasury

IAIS – International Association of Insurance Supervisors

ICS – Insurance Capital Standard

ILS – insurance-linked securitisations

IRB – internal ratings-based

IRRBB – interest rate risk in the banking book

ISPV – Insurance special purpose vehicle

L-SREPs – Liquidity Supervisory Review and Evaluation Processes

MA – Matching adjustment

MALIR – Matching Adjustment Asset and Liability Information Return

MDA - Maximum distributable amount

MoU – Memorandum of Understanding

MRM – Model Risk Management

NBFI – Non-Bank Financial Institution

PMA – Post Model Adjustment

PRA – Prudential Regulation Authority

PRC – Prudential Regulation Committee

PS – Policy statement

QMC – Quarterly Model Change

RFB – Ring-fenced bodies

RWA – Risk-weighted asset

SCGO – Secondary Competitiveness and Growth Objective

SCO – Secondary Competition Objective

SDDT – Small domestic deposit takers

SMCR – Senior Managers and Certification Regime

SME – Small and medium-sized enterprise

SMF – Senior management function

SS – Supervisory statement

SVB – Silicon Valley Bank

SWES – System-wide exploratory scenario

TDC – Transforming Data Collection

TFSME – Term Funding Scheme with additional incentives for SMEs

TPR – The Pension Regulator

UKTS – UK Technical Standards

Contacting the Bank of England and the PRA

Please send any enquiries related to this publication to [email protected] .

In PS15/23, the PRA set out its rationale to rename Simpler-regime firms to Small Domestic Deposit Takers (SDDTs), and Simpler-regime consolidation entities to SDDT consolidation entities. To avoid confusion, throughout the rest of this document, the PRA will refer to SDDTs, SDDT consolidation entities, the Small Domestic Deposit Takers regime or SDDT regime, and SDDT criteria, rather than Simpler-regime firm, Simpler-regime consolidation entities, simpler regime, and Simpler-regime criteria, even when referring to past consultations.

A CTP is an entity that will be designated by HMT by a regulation made in exercise of the power in section 312L(1) of 2000, as amended by the FSMA 2023.

As at 1 January 2024.

Strictly speaking, DIFs do not accept deposits and are included under the category of deposit-takers for presentational purposes only.

Section 2E of FSMA.

SS11/13 – Internal Ratings Based (IRB) approaches .

As set out in the 2024 priorities letter on UK deposit takers .

SMFs are a type of controlled function carried out by ‘approved persons’, ie individuals who have to be approved. SMFs are the most senior people in a firm with the greatest potential to cause harm or impact upon market integrity.

Managing climate-related financial risk – thematic feedback from the PRA’s review of firms’ SS3/19 plans and clarifications of expectations and Thematic feedback on the PRA’s supervision of climate-related financial risk and the Bank of England’s Climate Biennial Exploratory Scenario exercise .

Thematic feedback from the 2021/2022 round of written auditor reporting and Thematic feedback from the 2022/2023 round of written auditor reporting.

‘Digital money’ refers to claims on deposit-takers or other financial institutions, which exist only in electronic form and whose value is preserved through a combination of strict regulation and issuers’ access to central bank deposits. ‘Digital money-like instruments’ refers to other assets that exist only in electronic form and are used for payments. Some of these are regulated to support a stable value, but their issuers do not have access to central bank deposits and are subject to lighter regulation.

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Artificial intelligence (AI) has incredible potential to transform the economy, improve the way we work, and enhance our way of life. The global race to scale up and adopt AI is on, and Canada is at the forefront of this technology. To make sure we can seize every opportunity in the economy of the future, and set every generation up for success, we need to scale up our innovation ambitions. And do it in a way that brings everyone along. For Millennials and Gen Z, who feel their hard work isn’t paying off like it did for previous generations, we must invest in good-paying opportunities that help them get ahead. That’s why we’re focused on creating more good jobs, including in innovation and technology, which are among the highest paying of all industries.

AI is already unlocking massive growth in industries across the economy. Many Canadians are already feeling the benefits of using AI to work smarter and faster. The rapid advance of generative AI today will unlock immense economic potential for Canada, significantly improving productivity and reducing the time workers have to spend on repetitive tasks. Researchers and companies in Canada are also using AI to create incredible new innovations and job opportunities across all facets of the Canadian economy, from drug discovery to energy efficiency to housing innovation. In the past year, job growth in AI increased by nearly one third in Canada – among the highest growth of any sector. And most AI jobs pay well above the average income.

Canada has a world-leading AI ecosystem – from development, to commercialization, to safety. We have an advantage that can make sure Canadian values and Canadian ideas help shape this globally in-demand technology. Canada was the first country in the world to introduce a national AI strategy and has invested over $2 billion since 2017 to support AI and digital research and innovation. Since then, countries around the world have begun investing significant funding and efforts into AI to advance their economies, particularly in computing infrastructure. In order to maintain Canada’s competitive edge, and secure good paying jobs and job security for generations of young Canadians, we must raise the bar.

The Prime Minister, Justin Trudeau, today announced a $2.4 billion package of measures from the upcoming Budget 2024 to secure Canada’s AI advantage. These investments will accelerate job growth in Canada’s AI sector and beyond, boost productivity by helping researchers and businesses develop and adopt AI, and ensure this is done responsibly.

These measures include:

Investing $2 billion to build and provide access to computing capabilities and technological infrastructure for Canada’s world-leading AI researchers, start-ups, and scale-ups. As part of this investment, we will soon be consulting with AI stakeholders to inform the launch of a new AI Compute Access Fund to provide near-term support to researchers and industry. We will also develop a new Canadian AI Sovereign Compute Strategy to catalyze the development of Canadian-owned and located AI infrastructure. Ensuring access to cutting-edge computing infrastructure will attract more global AI investment to Canada, develop and recruit the best talent, and help Canadian businesses compete and succeed on the world stage.
Boosting AI start-ups to bring new technologies to market, and accelerating AI adoption in critical sectors , such as agriculture, clean technology, health care, and manufacturing, with $200 million in support through Canada’s Regional Development Agencies.
Investing $100 million in the NRC IRAP AI Assist Program to help small and medium-sized businesses scale up and increase productivity by building and deploying new AI solutions. This will help companies incorporate AI into their businesses and take on research, product development, testing, and validation work for new AI-based solutions.
Supporting workers who may be impacted by AI, such as creative industries, with $50 million for the Sectoral Workforce Solutions Program, which will provide new skills training for workers in potentially disrupted sectors and communities.
Creating a new Canadian AI Safety Institute, with $50 million to further the safe development and deployment of AI. The Institute, which will leverage input from stakeholders and work in coordination with international partners, will help Canada better understand and protect against the risks of advanced or nefarious AI systems, including to specific communities.
Strengthening enforcement of the Artificial Intelligence and Data Act, with $5.1 million for the Office of the AI and Data Commissioner. The proposed Act aims to guide AI innovation in a positive direction to help ensure Canadians are protected from potential risks by ensuring the responsible adoption of AI by Canadian businesses.

Today’s announcement is about investing in innovation and economic growth to secure Canada’s world-leading AI advantage today and for generations to come. This will create good-paying opportunities for every generation, boost innovation across the economy, raise productivity, and accelerate economic growth – and it’s just one of the things that we are going to be doing in Budget 2024. Alongside these measures, we’re building more homes faster, ensuring every kid has the food they need, investing in health care, making life more affordable, and creating good jobs to make sure every generation can get ahead.

“AI has the potential to transform the economy. And our potential lies in capitalizing on the undeniable Canadian advantage. These investments in Budget 2024 will help harness the full potential of AI so Canadians, and especially young Canadians, can get good-paying jobs while raising our productivity, and growing our economy. This announcement is a major investment in our future, in the future of workers, in making sure that every industry, and every generation, has the tools to succeed and prosper in the economy of tomorrow.” The Rt. Hon. Justin Trudeau, Prime Minister of Canada

“Today, we are making a significant investment to boost our economic growth. This will keep Canada a global leader in AI and ensure we are at the very cutting-edge of new technologies. And most importantly, this will mean more high-paying careers for Canadians who are leading the charge in AI.” The Hon. Chrystia Freeland, Deputy Prime Minister and Minister of Finance

Quick Facts

The Government of Canada’s Budget 2024 will be tabled in the House of Commons by the Deputy Prime Minister and Minister of Finance on Tuesday, April 16, 2024.
In 2017, Canada was the first country to establish a national AI strategy. The Pan-Canadian Artificial Intelligence Strategy is helping Canada maintain its position as a world leader in AI, businesses be more competitive, and Canadians benefit from growth in the digital economy. Phase 2 of the strategy was announced in 2022 with funding of more than $443 million.
The federal research granting agencies – the Canadian Institutes of Health Research (CIHR), the Natural Sciences and Engineering Research Council (NSERC), and the Social Sciences and Humanities Research Council (SSHRC) – together have awarded $936.8 million in funding for AI-related research since 2017-18.
Since 2017, the National Research Council of Canada Industrial Research Assistance Program (NRC IRAP) provided $705.8 million in contributions to AI-related firms. This funding supported 1,111 firms and 3,837 projects in the AI and Big Data Technology space.
In addition, the NRC Digital Technologies Research Centre has invested over $27 million both directly to firms and on collaborative AI projects related to natural language processing, Indigenous languages, and high-performance computing for AI.
In 2023, Canada announced renewed funding for the Global Innovation Clusters , including Scale AI , bringing total funding for the company to up to $284 million. Scale AI is dedicated to promoting collaboration in AI and supply chain management research and innovation by strengthening linkages between researchers in industry, academia, and research institutes in Canada and abroad, and providing financial support for AI and supply chain management projects.
Canada has also made significant investments in fast-scaling AI-related companies through the Strategic Innovation Fund , including Sanctuary AI and semiconductor firm Ranovus .
Canada was recently ranked number 1 among 80 countries, tied with South Korea and Japan, in the Center for AI and Digital Policy’s 2024 global report on Artificial Intelligence and Democratic Values .
The Artificial Intelligence and Data Act (AIDA) was introduced in Parliament as part of Bill C-27 in June 2022. It is designed to promote the responsible design, development, and use of AI systems in Canada’s private sector, with a focus on systems with the greatest impact on health, safety, and human rights. Since the introduction of the bill, the government has engaged extensively with stakeholders on the novel challenges posed by generative AI. Canada is one of the first countries in the world to propose a law to regulate AI. Learn more .
The Voluntary Code of Conduct on the Responsible Development and Management of Advanced Generative AI Systems – announced in September 2023 and signed by major tech firms including Cohere, Ada, Coveo, BlackBerry, TELUS, OpenText, and IBM – enables companies to demonstrate that they are developing and using generative AI systems responsibly and strengthen Canadians’ confidence in the technology.
The Public Awareness Working Group on AI was launched in 2020 under Canada’s Advisory Council on Artificial Intelligence with a mandate to examine avenues to boost public awareness and foster trust in AI. Its objective is to help Canadians have a more grounded conversation around AI, and help citizens better understand the technology, its potential uses, and its associated risks. The Working Group published a report on its public engagement activities in February 2023. A further public report is upcoming specifically on the Working Group’s engagement with First Nations, Inuit, and Métis communities to better understand their needs, interests, and priorities for AI development and use.
Since the 1990s, Canada has been a leader in AI and deep learning, made possible by the research and innovations of the “Godfathers of AI”, Canadians Yoshua Bengio and Geoffrey Hinton. In the decades since, Canada has built up a robust and growing AI industry across Canada, anchored by our three national AI institutes in Montréal, Toronto, and Edmonton.
In 2022-23, there were over 140,000 actively engaged AI professionals in Canada, an increase of 29 per cent compared to the previous year.
Canada has 10 per cent of the world’s top-tier AI researchers, the second most in the world.
Canada ranks first globally for year-over-year growth of women in AI (67 per cent growth in 2022-23 alone), first in the G7 for year-over-year growth of AI talent, and since 2019, has ranked first in the G7 for the number of AI-related papers published per capita.
The number of AI patents filed by Canadian investors increased by 57 per cent in 2022-23 compared to the previous year – nearly three times the G7 average of just 23 per cent over the same period.
In 2022, the Canadian AI sector attracted over $8.6 billion in venture capital, accounting for nearly 30 per cent of all venture capital activity in Canada.
Canada ranks third in the G7 in total funding per capita raised for AI companies, with more than 670 Canadian AI start-ups and 30 Canadian generative AI companies receiving at least one investment deal valued at more than $1 million USD since 2019.
Restore generational fairness for renters, particularly Millennials and Gen Z, by taking new action to protect renters’ rights and unlock pathways for them to become homeowners. Learn more .
Save more young families money and help more moms return to their careers by building more affordable child care spaces and training more early childhood educators across Canada. Learn more .
Create a National School Food Program to provide meals to about 400,000 kids every year and help ensure every child has the best start in life, no matter their circumstances. Learn more .
Launch a new $6 billion Canada Housing Infrastructure Fund to accelerate the construction or upgrade of essential infrastructure across the country and get more homes built for Canadians. Learn more .
Top-up the Apartment Construction Loan Program with $15 billion, make new reforms so it is easier to access, and launch Canada Builds to call on all provinces and territories to join a Team Canada effort to build more homes, faster. Learn more .
Support renters by launching a new $1.5 billion Canada Rental Protection Fund to preserve more rental homes and make sure they stay affordable. Learn more .
Change the way we build homes in Canada by announcing over $600 million to make it easier and cheaper to build more homes, faster, including through a new Homebuilding Technology and Innovation Fund and a new Housing Design Catalogue. Learn more .

Associated Links

Responsible use of artificial intelligence (AI)
Sectoral Workforce Solutions Program

International edition
Australia edition
Europe edition

Thames Water has six weeks to agree survival plan with Ofwat

While the company believes it has cash to last 15 months, it will have to move fast to stave off insolvency

Analysis: Thames Water is everyone’s problem and time is running out to fix it

Thames Water has just six weeks to convince its regulator that it has a viable survival plan for its business, the Guardian can reveal.

While the company believes it has enough cash to survive for about 15 months, insiders and investors fear that it must move quickly to strike a deal with its watchdog to stave off insolvency.

The UK’s largest water monopoly must present a new turnaround strategy and business plan before 23 May – Ofwat’s final board meeting before it issues a verdict on how much water companies will be allowed to charge consumers.

Thames, which has 16 million customers across London and the Thames valley, has been thrown into crisis after its shareholders last month pulled the plug on a plan to inject £500m into the business , amid a deepening battle with the watchdog.

This has forced Thames’s holding company, Kemble Water Finance, to admit it will not be able to repay a £190m loan due by the end of April.

Thames holds cash reserves which should fund its operations for 15 months without a substantial increase in bills, but investors, including bondholders in the operating company, are understood to believe it may struggle to meet debt obligations if a deal is not struck by May.

Ofwat is understood to be sceptical that Thames’s current business plan for the next two years or its longer turnaround plan – aimed at revamping its management and infrastructure – are viable or fair on consumers.

Sources have claimed that Ofwat is concerned about bills rising without there being a clear strategy to overhaul how the business is managed, since this would risk the burden of poor business decisions being pushed on to customers.

Thames’s operating company, which is ringfenced by the regulator so it can continue even if Kemble collapses, is labouring under debts of almost £15bn, making it Britain’s most indebted water company. It was privatised in 1989 with no debt .

Investors in Thames backed out of providing £500m of emergency funding in March, after the regulator refused the company’s demands for a 40% increase in bills.

Investors, which include UK university pension scheme USS, Canadian investor Omers and China’s sovereign wealth fund, said Ofwat’s current position – to limit bill increases, levy fines and restrict payment of dividends – rendered the company “uninvestible” .

Ofwat reviews water companies’ business plans and holds a price review in order to set the amount the utility firms can raise their bills over the next five-year period.

Despite its rejection of Thames’s plan, it is understood that bills are still expected to rise by as much as 35%, on average, over the next five years .

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Thames’s owners are running out of time because the regulator must issue its so-called draft determination on bill increases for each regional monopoly company in June. Those plans will govern how much water investors can earn and how much they must invest over the next five years.

If Thames and Ofwat cannot agree on a new financial plan and a fresh strategy for how to run the company by then, it will ramp up the likelihood of nationalisation.

Bondholders in the operating company have said they may be forced to write down their investment. A likely knock-on effect would be to increase borrowing costs for Thames, and bring forward possible nationalisation of the company via a so-called special administration.

Lenders to Thames argue that forcing them to incur losses on their debts would also drive up the cost of borrowing for all UK water companies, and potentially other utilities such as gas and electricity.

An Ofwat spokesperson said: “We do not comment on speculation. Ofwat is continuing to work on draft determinations that will be published in June.

“We will continue to monitor Thames Water as it seeks to turn around its performance for customers and the environment.”

Thames Water declined to comment on the record. Its board in March agreed a turnaround plan that it believes is “well under way” .

Thames Water
Water industry
Water bills

More on this story

Australia’s Macquarie among lenders to Thames Water’s parent company

Thames Water parent tells creditors it has defaulted on debt

Thames Water funding crisis: the key players in the row over its future

Chinese lenders key as Thames Water’s owner seeks time to pay debts

Thames Water owner bond slumps to record lows amid uncertainty over firm

Thames Water hires restructuring advisers amid fears of collapse

What now for Thames Water as investors turn off the taps?

Thames Water on road to state rescue amid investor standoff with Ofwat

Who will win in standoff between Thames Water’s investors and watchdog?

Thames Water investors pull plug on £500m of funding amid standoff with regulator

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How To Write the Funding Request for Your Business Plan
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.
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Funding Request
The funding request section of a business plan is an outline of the future funding requirements of a company. The name and nature of the company, location, owners, service or product offered, target audiences, etc., must be included in the section. It must specify if the company is looking for a short-term loan or an investment in exchange for ...
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How To Write the Funding Request for Your Business Plan

Key Takeaways

An Outline of the Business

Current Financial Situation

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

How Will the Funds Be Used?

Current and Future Financial Plans

How do you request funding for a nonprofit?

What are three methods of funding?

How To Write a Business Plan

Table of contents

Step 1: Write your executive summary

Step 2: Do your market research homework

Step 3: Set your business goals and objectives

Step 4: Plan your business strategy

Step 5: Describe your product or service

Step 6: Crunch the numbers

Step 7: Finalize your business plan

Compare the Top Small-Business Banks

The takeaway

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Key Takeaways

Understanding Your Target Audience

Assessing Market Trends and Opportunities

Setting Goals and Strategies

Financial Projections and Budgeting

Registering Your Business

Understanding Permits and Licenses

Self-Funding vs. External Funding

Grant and Loan Opportunities

Branding Your Business

Digital Marketing and Social Media

Hiring and Training Staff

Scaling Your Business

How to Write Your Business Plan to Secure Funding

Introduction to Writing a Funding-Worthy Business Plan

Importance of a Well-Written Business Plan

Understanding the Purpose of a Business Plan

Key Components of a Funding-Worthy Business Plan

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

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

Research and Gather Information

Define Your Business and Goals

Conduct a Comprehensive Market Analysis

Develop a Strong Marketing and Sales Strategy

Outline Your Organizational Structure and Management

Create Financial Projections and Analysis

Craft a Compelling Executive Summary

Polish and Revise Your Business Plan

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

Keep it Clear and Concise

Tailor Your Plan to the Target Audience

Support Claims with Data and Research

Seek Professional Help if Needed

Q: What is a funding-worthy business plan?

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

Q: How long should my business plan be?

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

Q: How often should I update my business plan?

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