What Is an Investment Proposal?

Malcolm Tatum

An investment proposal is a type of document that is prepared with the goal of motivating potential investors to enter into a mutually beneficial business relationship with a firm or project. The idea is to include information within the body of the proposal that helps investors or lenders to see the value of the firm or the project, understand the potential rewards associated with investing, and provide information that helps to address and resolve and concerns or reservations that the investors may have with the activity. A proposal of this type may be prepared as a generic document intended to address a wide range of investors, or be a document prepared and customized to attract the participation of a single investor or it may be an elite group of angel investors.

A startup company may prepare an investment proposal in order to attract investors and secure funds.
A startup company may prepare an investment proposal in order to attract investors and secure funds.

The use of an investment proposal is common with a wide range of investment opportunities. A startup company may prepare this type of presentation in order to attract investors and secure the funds needed to get the business going and sustain the effort until it begins to generate revenue from sales. Established firms may utilize this type of proposal to attract investors to support an expansion project or the launch of a new product. Municipalities may prepare an investment proposal to demonstrate the benefits of investing in a bond issue that will help raise money for building projects or other improvements in the community.

Whatever the scope of the investment proposal, the document will usually include a few key sections that are intended to provide important information to investors. The text will usually begin with data about the nature of the investment opportunity, usually providing some background and history about how the opportunity came about. From there, the proposal will address the mechanics of how the opportunity will be structured, providing information on how a return can be made from the venture. The text will go on to include a timeline of events to occur, including when the investor can anticipate receiving some sort of return, the nature of security measures that will be taken to protect the investor’s holdings, and even a schedule that focuses on when each interest payment can be expected and how the principal investment will be repaid.

Within the scope of the investment proposal, there will be some data relating to possible objections to the project. Here, the goal is to proactively address the more likely concerns of investors and provide factual data that indicates how those concerns can be addressed and diffused. This includes concerns about what impact changes in the economy could have on the success of the project, what other sources of revenue will be used to protect the interests of the investors, and even how this particular opportunity compares to similar opportunities in the marketplace.

The ultimate goal of any investment proposal is to attract enough investors to fund the project with sufficient resources to give the effort a reasonable chance of succeeding. It is not unusual for an investment proposal to be considered an ongoing work, with the originator of the proposal amending the text as more data about what is on the minds of investors is made available. While the basics such as the amount of interest paid and the mechanics of the project will usually remain the same, additional data may be added as well as some sections of the document adapted so that it is more clear and concise, an effort that helps to increase the chances of connecting with and ultimately earning the support of investors.

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