Writing a Use-of-Funds Narrative Investors Trust

A use-of-funds narrative that survives diligence has one line per initiative, and every line carries five things: what will be bought or built, who owns it by name, the month it completes, the capital it consumes, and the return it produces with evidence from your own history that you can produce it. A pie chart reading expansion 40 per cent, marketing 30 per cent, working capital 20 per cent, general corporate 10 per cent fails not because it is vague but because nothing in it can be checked, and checking is the entire activity on the other side of the table.

The harder point is what happens to the document after the money arrives. In most negotiated deals the use of funds stops being a slide and becomes either a schedule to the subscription agreement, a condition to drawdown, or the baseline your quarterly board pack is measured against. Write it as a promise you will be held to, because you will be. The version that reads well and commits to nothing is the version that creates the covenant breach in year two.

Why do generic use-of-funds slides fail diligence?

Because the reader is running a capital efficiency test on your past before believing your future. An investor looking at a request for IDR 20 billion of capital expenditure will pull your last three years of fixed asset additions from the audited accounts, divide the revenue growth that followed by the capital that went in, and use the result as the prior for your new plan. If your last IDR 10 billion of capex produced no measurable increase in output, the new IDR 20 billion is priced as though it will not either.

This is also where unaudited accounts become expensive. Article 68 of Indonesia's Law 40/2007 on Limited Liability Companies requires a company with assets or annual turnover of at least IDR 50 billion to have its financial statements audited by a public accountant, and the shareholders' meeting cannot ratify statements that are not. Where a company in that band has no audit history, there is no reliable record of what past capital produced, so the use-of-funds narrative has nothing to stand on and the investor falls back on collateral or on a lower multiple.

What structure works?

A table, one row per initiative, and no row larger than about a quarter of the raise unless it is a single physical asset. These are the columns that get read.

Phasing is the column founders leave out and the one that changes the deal most. A raise where 60 per cent of the cash is needed in months 7 to 18 can often be structured as a smaller first tranche, which cuts dilution or interest immediately. Investors do not volunteer this.

Before and after, written out

Both examples below are hypothetical and the numbers are invented to show the form. Assume a packaging manufacturer in East Java asking for IDR 20 billion.

Before. "Proceeds will be used for capacity expansion (40 per cent), sales and marketing (30 per cent), working capital (20 per cent) and general corporate purposes (10 per cent), supporting our growth strategy over the next three years."

After.

• IDR 11.8 billion, second blow-moulding line, Gresik plant. Owner: plant manager. Quoted price from the supplier of the existing line, order to commissioning eight months. Adds 1,750 tonnes of annual capacity against 2,400 tonnes of orders declined in the 12 months to June. The first line cost IDR 9.6 billion in 2022 and reached 92 per cent utilisation in month five, which is the basis for this forecast.
• IDR 4.2 billion, 11 field sales and technical service hires. Owner: commercial director. Hiring across four quarters, IDR 3.1 billion of salary and IDR 1.1 billion of vehicles and tooling. Existing eight-person team averages IDR 2.8 billion of revenue per head; the plan assumes IDR 1.9 billion per new head by month 18, below the current team to allow for ramp.
• IDR 3.1 billion, resin inventory. Owner: finance director. Working capital to hold 45 days of resin instead of 21, which removes the premium currently paid on spot purchases. Cost of that premium in the last financial year was IDR 640 million, which is the return on this line.
• IDR 0.9 billion, transaction and audit costs. Owner: finance director. Two years of catch-up audit, legal fees and the adviser's retainer, paid at signing.

The second version is falsifiable at every line, which means an investor can price it rather than discount it. Note the fourth line: putting your own transaction costs in the schedule beats discovering in week six that the raise is 5 per cent short.

What do investors cross-check it against, and what do they catch?

Four documents, usually in this order. The audited accounts, for historic capex and what it produced. The monthly management accounts, for whether the hiring and spending you describe as planned has quietly already started. The payroll and organisation chart, for whether the named owners exist and have capacity. And the tax filings, because a use-of-funds line for a new warehouse sits awkwardly beside a balance sheet that never showed the last one.

The tells that get the document sent back:

• Round numbers. IDR 5,000,000,000 for equipment means no quotation was obtained. IDR 4,830,000,000 means one was.
• "Marketing" as a category. Nobody can audit a category called marketing, whereas digital acquisition at a stated cost per lead, trade promotions with a named channel partner and a trade show with a booked stand are all auditable.
• Working capital as the catch-all. Working capital is a legitimate line when it is a specific change in inventory days or receivable days with the current figure stated. When it absorbs whatever is left over, it reads as a contingency you did not want to call a contingency.
• Percentages instead of amounts. Percentages float with the size of the raise, which tells the reader the plan was fitted to the money rather than the money to the plan.
• A total that matches the ask exactly. Real plans have a contingency line. Label it, size it at 5 to 10 per cent, and say what it covers.

One thing we cannot tell you from outside: how much detail is too much for your particular counterparty. A regional bank credit committee wants three lines and a valuation report. A private credit fund will read fourteen. If you do not know which you are dealing with, write the long version and cut it down, because the reverse does not work under time pressure.

How the narrative changes by investor type

Private credit sits close to the bank column with a wider tolerance. The Alternative Investment Management Association and the Alternative Credit Council, in their 2025 report Private Credit in Asia, found 90 per cent of Asia-Pacific private credit transactions involve borrowers with no private equity sponsor, which means the fund is doing the underwriting itself and your use-of-funds document is the credit paper. Venture lenders are stricter on sizing than on substance: re-cap's August 2026 guide notes venture debt is typically sized at 25 to 35 per cent of the last equity round, so a use-of-funds plan asking for more than that will be cut regardless of how well it reads.

What to do, depending on where you are

If you are more than a year out, start recording what capital produced as you spend it: cost, completion month, output change. Almost nobody keeps that record, and it is what makes the next narrative credible. If you are in a process now, rewrite the section using the six columns above, phase the cash, then have your finance director try to break each line against the management accounts before an investor does. Managed diligence typically shortens that phase by 30 to 40 per cent, and a schedule that reconciles on first reading is much of the reason.

If you are weighing a raise against a sale, price both. The Conyers South and Southeast Asia M&A Report for Q1 2026 found buyers across ASEAN moving towards majority stakes as sellers accepted lower prices, so the capital you are trying to raise may be available more cheaply as proceeds. Our guides to raising growth capital as an SME in Indonesia and venture debt versus equity for Southeast Asian SMEs set out the options, and what buyers look for in due diligence covers everything else they will open. Our 2026 outlook for mid-market M&A in Southeast Asia covers who is buying at this size.

If you want the use-of-funds section read by people who price these plans for a living before an investor sees it, you can start a confidential, no-obligation conversation about what your business looks like to a buyer.

Frequently Asked Questions

How long should a use-of-funds section be?

One page of table plus one page of notes for a raise under US$10 million, with a longer appendix holding the quotations and hiring plans. Length is not the variable that matters; the number of unverifiable lines is. Four specific initiatives beat twelve categories.

Should I include a contingency line?

Yes, labelled as contingency, sized at 5 to 10 per cent of the raise, with a sentence on what it covers. Investors expect one. A plan whose line items sum exactly to the amount requested reads as a plan built backwards from the number.

Can I put founder proceeds in the use of funds?

Only where the instrument allows it, and then state it plainly. Lenders will not fund shareholder payments and most will prohibit them by covenant. Equity buyers frequently will, and treating it as a separate line is better than burying it, because it will be found in the sources and uses statement anyway.

What if my plan changes after the money arrives?

Tell the investor before the quarter closes, not after. Where the use of funds is a schedule to the agreement or a drawdown condition, reallocating without consent can be a breach regardless of whether the new plan is better. The reporting covenant is usually the cheapest term in the document to comply with and the most expensive to ignore.