The Funding Lifecycle: What Happens Before, During and After a Business Gets Funded?

When you think about getting your business funded, what comes to mind?

You might picture submitting an application, answering a few questions, going through due diligence, and eventually receiving the capital you need to grow. But getting funded is rarely that straightforward. There is a process behind every funding decision, and understanding that process can help you see what is expected of your business at each stage and why certain information matters.

That context is particularly important in a market where access to finance remains a challenge. In Nigeria, for instance, fewer than one in 20 MSMEs has access to bank credit, according to the World Bank, even though MSMEs account for nearly half of the country's GDP and a large share of employment. The financing gap is even more significant across emerging markets and developing economies, where the International Finance Corporation (IFC) estimates that formal MSMEs face a $5.7 trillion financing gap, rising to nearly $8 trillion when informal enterprises are included.

When the need for capital is this significant, the conversation cannot stop at whether a business can access funding. It also needs to consider what the whole process entails: how a business prepares for assessment, how a capital provider evaluates the available information, how a funding decision is reached, and what happens after capital is deployed.

This is the funding lifecycle, and looking at these activities together helps us understand business funding as a lifecycle rather than a single transaction.

Let's take a closer look at the funding lifecycle, from funding readiness and due diligence to funding decisions, capital deployment and post-funding monitoring.

Before Funding: Preparing Your Business for Assessment

Before a business can be considered for funding, it must answer a more fundamental question: Is the business ready to be assessed?

Funding readiness is not simply about having a strong business idea or knowing how much capital you want to raise. It is about being able to give a clear and credible picture of how your business operates, how it is performing, what the funding is intended to support, and whether the information needed to assess the business is available.

If you want to understand what this looks like in practice, our guide to what it means for a business to be funding-ready breaks down the key areas to consider and includes a free funding-readiness checklist you can use to assess your business. Download the guide here.

What does a funder need to know?

The answer depends on the type of funding and the capital provider, but the assessment will typically cover several areas of the business.

1. Financial health: Revenue, expenses, cash flow, assets, liabilities and other financial information help a funder understand the business's current position and financial performance.
2. Business structure and ownership: Registration details, ownership information and the people responsible for the business help establish who the business is and who controls it.
3. Operations and track record: Information about products or services, customers, suppliers and operating history provides context around how the business actually works.
4. Management and governance: Funders may also consider the founders, directors and key people responsible for running the business and executing its plans.
5. Use of funds: A business should be able to explain how much capital it needs, what it will be used for and how the funding fits into its broader plans.

Taken together, these areas give a capital provider a more complete view of the business. They also show why preparing for funding involves more than putting together a pitch deck or financial projection.

Getting your information ready

Once a business enters the funding process, the information it provides may need to be verified as part of due diligence. This makes the quality and consistency of the underlying information important from the start.

Businesses may need to have documents such as financial statements, registration records, ownership information, contracts, tax records, and other evidence of business activity readily available.

The objective is not to produce as many documents as possible. It is to enable a funder to understand the business and verify the information that matters for the funding decision.

This is where business credibility becomes important. Credibility is built through information that is accurate, consistent and supported by evidence. A business may have strong revenue or significant growth potential, but funders still need to establish whether the wider picture supports those claims.

Once the business has the right information in place, funders can move beyond the initial assessment and take a closer look at the business. This is where due diligence begins: examining available information to understand the business, assess the opportunity, and identify potential risks.

During Funding: Due Diligence and the Funding Decision

Once a business is ready and its information is available, the next stage of the business funding process is assessment. This is where a capital provider examines the business more closely to determine whether the opportunity fits its criteria and what risks may need to be considered before funding is provided.

At the centre of this process is due diligence.

Due diligence is the process of investigating and verifying the information provided by a business before making a funding decision. The depth of this process varies depending on the type and size of the funding, but the objective remains the same: to build a reliable understanding of the business before capital is committed.

What does due diligence involve?

There is no single checklist that applies to every funding decision. However, due diligence will often examine several areas of a business.

1. Financial due diligence examines a company's financial position and performance. This can include revenue, expenses, cash flow, assets, liabilities, financial statements, and projections. The aim is to understand how the business generates and manages revenue, and whether its financial position supports the requested funding.
2. Legal and corporate due diligence examines the company's legal structure, ownership and obligations. This may include business registration, shareholders, directors, contracts, licences, regulatory requirements and potential legal issues.
3. Operational due diligence looks at how the business functions in practice. A funder may consider its products or services, customers, suppliers, employees, processes and operating history to understand whether the business has the capacity to execute its plans.
4. Commercial due diligence considers the market in which the business operates. This can include customer demand, competitors, market conditions and the assumptions behind the company's growth projections.

🔗Also read: What is Due Diligence?

Are verification and due diligence the same?

These terms are often used interchangeably, but they serve different purposes.

Verification asks whether information can be confirmed. Due diligence goes further by using that information to understand the business, its opportunities, and its risks.

For example, verifying a company's registration can establish that the business exists and confirm details about its legal identity. Due diligence may then consider what that information means in light of the company's ownership structure, financial position, and other available evidence.

This distinction matters because a funding decision rarely depends on one piece of information. It depends on how different pieces of information fit together to form a reliable picture of the business.

What happens after due diligence?

Once due diligence is complete, the funder has a clearer picture of the business, its financial position and the risks associated with providing capital. This information feeds into the funding decision, including whether to provide funding, how much capital to provide and under what terms. The decision may consider:

• The strength and potential of the business
• Its financial position and performance
• The risks identified during due diligence
• The amount of capital required
• The intended use of the funds
• The terms of the proposed funding

Depending on the type of funding, the outcome could be an approval, a rejection, or a request for additional information or revised terms.

Once funding is approved, the process moves into negotiation and documentation. The parties agree on the funding terms, complete the necessary legal documentation, and carry out any final checks before the capital is released.

But the funding lifecycle does not end when the money reaches the business. Once capital is deployed, the focus shifts from deciding whether to fund the business to understanding how the capital is used and how the business performs over time.

After Funding: What Happens Once Capital Is Deployed?

Once the money reaches the business, two things happen. The business gets to work using the capital for the purpose it was raised for, while the funder starts looking at what happens next. Is the business hitting its targets? Is it using the money as expected? Has its financial position changed? Are there any new risks worth paying attention to?

This is where post-funding monitoring comes in. Instead of relying only on the information gathered before the funding decision, funders need an up-to-date view of the businesses they have backed.

How do investors monitor businesses after funding?

The exact approach depends on the type of funding and the agreement between the business and its funder. But it can involve regular updates on financial performance, business milestones and how the capital is being used.

Some of the information funders may track includes:

• Revenue and cash flow
• Business and operational KPIs
• Customer or user growth
• Progress against agreed milestones
• Use of funds
• Changes in ownership or leadership
• New financial, legal or regulatory developments

The purpose is not to watch every move a business makes. It is to understand whether the business is developing as expected and identify changes that could affect the investment.

Why does post-funding monitoring matter?

The information used to make a funding decision reflects the business at a particular point in time. But businesses change. Revenue can increase or fall. A company can take on new debt, change its ownership, enter a new market or lose a key customer. Some changes may have little consequence. Others can significantly alter the business's risk profile.

Regular monitoring helps funders keep their understanding of a business up to date rather than relying on information that may no longer reflect reality.

For businesses, it also creates a performance record that can support future funding conversations. A business that can consistently demonstrate where it stands, how it is performing and how it is using capital is better positioned for the next stage of its growth.

In other words, funding creates an ongoing relationship with information at its centre. The questions may change after the money is deployed, but the need for reliable business information does not.

Conclusion

Getting a business funded is not a single transaction. It is a process that starts with preparing the business and making its information available, moves through verification and due diligence, and continues after capital has been deployed.

For businesses, understanding this process makes it easier to prepare for what funders need to know and why maintaining accurate information matters. For funders, it provides a framework for assessing businesses, making informed funding decisions, and staying informed after capital has been deployed.

Ultimately, every stage of the business funding lifecycle depends on having reliable information. A business needs to show who it is, how it operates, and how it is performing. Funders need to verify that information, assess the associated risks, and understand how things change over time.

That is the gap Acreed Insights is addressing. Acreed provides credibility intelligence for Africa, using continuous, verifiable data to help capital providers make more informed decisions and businesses build a credible, verifiable record over time. Be among the first to experience Acreed. Join the waitlist.