Use of funds is one of the most important parts of a loan request because it connects the amount borrowed to the business purpose. A lender does not just need to know the total request. They need to understand what the money will do inside the business.
Start by listing each major category. Common categories include equipment, inventory, working capital, leasehold improvements, acquisition costs, refinance, marketing launch costs, and professional fees. Keep the categories specific enough that someone outside the business can follow the plan.
Then explain why each use matters. Equipment might add capacity, inventory might support a new contract, working capital might cover payroll during a ramp-up period, and buildout costs might make a location ready to operate. The explanation should connect the spending to revenue, stability, or execution.
Avoid vague phrases such as growth capital without detail. Growth is a result, not a use of funds. If funds support growth, explain the actual spending behind it and the assumptions that make the spending reasonable.
When the use-of-funds section is clear, the rest of the plan becomes easier to review. The lender can compare the request with projections, collateral, owner contribution, and repayment ability. That is why this section should be direct, organized, and tied to the numbers in the projection workbook.