Stage 3 · Choose and negotiate financing · Lesson 4 of 6

How much to ask for, and how to prove it

The amount you ask for is one of the first numbers a committee checks. This lesson builds it line by line, adds the line quotes often leave out, then puts it through the banker’s test.

KWritten by the KAPEX team from the credit grids of banks in Tana and Port Louis, publications by Proparco, Norfund and IFC, and files taken to committee. The fish farm followed here is a worked example, made up for the exercise; sources are dated in the text. Updated 13 October 2026.

The round number

500,000 dollars on the form, 310,000 in the quote

A worked example, made up for the exercise. A tilapia farm near Antsirabe, selling to two hotels and a wholesaler in Tana, wants to go from four ponds to eight. Its quote, in dollars:

ponds and earthworks 118,000, aerators and pumps 46,000, cold room 52,000
legal fees and security 14,000
feed for six months 61,000, two technicians for a year 19,000
total: 310,000 dollars

Yet the “Amount sought” box in the file says 500,000, because 310,000 looked small. The committee sees a round number that nothing explains. It concludes that the cost of the project is not known.

The quote is not the right amount either: it is too short. The rest of this lesson rebuilds the request and arrives at 377,000 dollars.

Build from the bottom

The amount is the sum of four lines, each with its proof

You build an amount from the bottom up. List what the money buys, cost each line with a quote or a track record, and add them up. If the total looks too high or too low, change a line, never the total on its own.

1Equipment, works and feesWhat is bought once and lasts: ponds, pumps, a cold room, vehicles, fit-out, plus legal and security fees. Proof: dated quotes. This is the line a bank can take as security.
2Working capitalThe money that turns in the business: stock, feed, advances to suppliers, customers who pay at 60 days. It is not spent, it is tied up, and it grows with your sales. Proof: your cycle in days.
3Hiring and salariesThe people the project adds, for the period before their sales pay for them. A technician hired in January costs twelve months of salary, not one. Proof: contracts or a salary scale.
4BufferFor what you did not plan: a customs delay, a breakdown, a cyclone, a customer who pays at 90 days. Never zero. If it weighs too much, the reader starts doubting the other lines. Proof: a written assumption.

These are the four lines expected in the “Planned use of funds” field, in the “Funding” step of your file.

The test for a line: you can defend it in one sentence and check it against a document. “216,000 dollars for four ponds, the pumps and a cold room, three quotes dated August 2026” can be checked. “Around 200,000 for investment” cannot. Give each line as a percentage of the total too: it is often the first thing a committee reads.

The line the quote leaves outYour turn

The quote counted one cycle’s feed, not the money tied up for the whole cycle

The quote has 61,000 dollars of feed, six months of growing. But the money goes out long before it comes back. Follow one cycle at the farm, from the day the feed is paid for to the day the hotel pays.

The farm pays for feed and fingerlingsday 0
On order. The money leaves the account.
The fish grow180 days
About six months in the pond. All that time, the money is in the water.
Delivery and invoiceday 180
To the two hotels and the wholesaler.
The customer takes its time60 days
60 days, measured on the last invoices paid.
The money comes backday 240
240 days after it left.

Cycle = days of stock + days of customer credit − days of supplier credit. Here: 180 + 60 − 0 = 240 days. A worked example, made up for the exercise.

Worked example

Days of stock (here, the growing time)180

Days of customer credit (actual)60

Days of supplier credit (actual)0

Purchases and costs over a year ($)137,000

Your cash conversion cycle240 days

Money locked up at all times90,082 $

Above 90 days, each cycle ties up a large sum for a long time. It needs its own line in your use of funds.

Working capital need ≈ (stock days + customer days − supplier days) ÷ 365 × purchases and costs over a year. It is an approximation, the same one used in “Profit on paper, empty till”. Starting values: the four new ponds in the example.

The values of the example. In your KAPEX space, this calculation runs on your own numbers.

For the farm: 240 ÷ 365 × 137,000 ≈ 90,000 dollars. The 137,000 is the four new ponds’ operating spending over a year: 122,000 of feed, and 15,000 of fingerlings, energy and upkeep. The quote had 61,000. It left out the money that stays out while the hotels pay, and the other costs.

Financiers call this money, stuck between the day you pay and the day you are paid, the working capital need. It only comes back if the business stops, so it is financed like a machine. The calculation is an approximation, and a cautious one: it treats every cost as paid on the first day of the cycle. Use your real payment times, read from your bank statements, not the contract terms. If production doubles, the need doubles.

Your use of fundsYour turn

The amount you can defend: 377,000 dollars, in four lines

With working capital worked out and a buffer on its own line, the farm’s budget changes. Here are the three amounts side by side.

On the form500,000 $

500,000 $

No breakdown 500,000 $

A round number with no lines behind it.

The original quote310,000 $

230,000 $

Equipment, works and fees 230,000 $Working capital 61,000 $Hiring and salaries 19,000 $

Working capital cut down to one cycle’s feed, no buffer.

The plan built from the bottom377,000 $

230,000 $

Equipment, works and fees 230,000 $Working capital 90,000 $Hiring and salaries 19,000 $Buffer 38,000 $

61% equipment, 24% working capital, 5% salaries, 10% buffer.

A worked example, made up for the exercise. A buffer of 38,000 dollars: a little over three months of the new ponds’ operating spending (137,000 ÷ 12 ≈ 11,400 a month).

Worked example · Planned use of funds

Equipment, works and fees ($)230,000

Working capital ($)90,000

Hiring and salaries ($)19,000

Buffer ($)38,000

Amount sought377,000 $

Share of each line

Equipment, works and fees61 %

Working capital24 %

Hiring and salaries5 %

Buffer10 %

What a reader will notice A readable budget: four costed lines, a visible buffer, working capital financed. Keep the quotes and the day count to hand; you will be asked for them.

Share of a line = line ÷ total. Nothing is scored or sent. The total goes in “Amount sought”, the four lines and their percentages in “Planned use of funds”, in the “Funding” step.

The values of the example. In your KAPEX space, this calculation runs on your own numbers.

Replace the values with your own. In the example, the plan asks for 67,000 dollars more than the quote and 123,000 less than the form. The 67,000 can be explained line by line: 29,000 of forgotten working capital and 38,000 of buffer.

How much marginYour turn

Margin is counted in months if you raise equity, in the life of the asset if you borrow

The buffer covers the unexpected. How long your amount has to last depends on the form of the money. Answer for your own file.

Question 1

Is an investor going to take a share of the company, in other words become your partner?

See the whole tree

Is an investor going to take a share of the company, in other words become your partner?

Yes
Does your cash after the raise, divided by your monthly spending, give at least 18 months?
- YesThe amount carries you to the next stage.
- NoThe amount is too short.
No
Does the loan term follow the life of what it pays for: years for a cold room, a few months for stock?
- Yes
  Does your DSCR reach 1.2, that is, what the business generates in a year divided by what you repay in that year?
  - Yes
    If the ariary loses 20%, does your DSCR stay above 1? If you borrow in the currency you sell in, answer yes.
    YesThe amount passes the banker’s test.
    NoThe exchange rate breaks the repayment.
  - NoThe amount is too large for this term.
- NoSplit the request.

Runway = cash available ÷ monthly spending. DSCR = cash generated in the year ÷ (capital + interest due in the year). The thresholds are common practice: each funder sets its own.

Two reference points for these questions. With equity, twenty-four months of runway has become the cautious target in the 2025-2026 market (CRV, runway guide, consulted September 2026). With debt, the buffer often takes the form of a grace period: a few months when you pay interest only, while the asset starts producing.

On currency, the bank tests the fall. If the ariary loses 20%, a dollar costs 25% more: 4,380 Ar becomes 5,475 Ar. The ariary lost nearly 18% against the dollar between early 2020 and August 2025, from about 3,650 to 4,450 Ar/$. It then regained about 7% in the first half of 2026, to around 4,380 Ar/$ on 23 September 2026 (BFM, AfDB). A lender does not count on that rise continuing.

Too little, too much, right

Asking for too little costs as much as asking for too much

The two mistakes show up at different times. A padded amount is spotted in committee. An amount that is too short is discovered six months after the money arrives.

Too littleThe mistake that shows late

The ponds are dug but there is no cold room, so nothing sells
A second round in a hurry, on worse terms
Working capital is the first line to be dropped

A funder usually prefers to finance a whole project once than half a project twice

The plan’s amountWhat can be defended

Four costed lines, each with its proof
A buffer on its own line
A term that follows the asset, or 18 to 24 months of runway with equity

It is negotiated line by line, which opens a discussion

Too muchThe mistake that shows at once

A round number with no quote behind it
With equity: dilution paid on money you do not need
With debt: a DSCR that fails the first test

The committee then doubts the rest of the file

Rescue rounds are harder to find: in Africa, deals of 100,000 to 1 million dollars fell from 179 in the second half of 2025 to 100 in the first half of 2026, down 44% (Africa: The Big Deal, 2026).

Ask for what the plan justifies, and prepare what you will cut if you are offered less. For the farm, with 240,000 dollars: two ponds instead of four, the whole cold room, both technicians, and the working capital for those two ponds. That is 148,000 of equipment, 45,000 of working capital, 19,000 of salaries and 25,000 of buffer: 237,000. An answer like that opens a negotiation. “I will manage” does not.

What your amount is compared to

Your amount is read next to four other numbers

None of these comparisons is an official limit. They are reading habits, and each funder has its own thresholds.

Your revenueAsking for several times your annual revenue means explaining why, with a contract or a capacity behind it. Asking for a fraction of it is barely discussed. In between, it depends on how solid the quotes are.

Your collateral and your own contributionFor a loan, banks in Madagascar often ask for security worth 100 to 150% of the amount, depending on the bank and the asset. Without a land title or a pledged contract, your collateral caps the amount, whatever the plan says. Your own contribution counts too: its absence gets noticed.

The usual ticket of each funderEvery window has a floor and a working ceiling. Business angel: 10 to 150k dollars. Grant: 25 to 250k. SME or impact fund: 0.5 to 5m. African Series A: 3 to 10m. Norfund direct from 5m dollars, Proparco from 10m euros (Norfund January 2026, Proparco, AVCA 2025). An amount that falls between two windows struggles to find a reader.

Your monthly spendingWith equity, this is the committee’s quickest sum: cash after the raise ÷ monthly spending. The answer in months, your runway, says more than a paragraph about prudence.

The hidden buffer

Margin hidden in the equipment line makes every quote look doubtful

Wanting some margin is normal: every business needs it. Hiding it is expensive. Padding equipment by 20% to keep a reserve breaks the one line the reader could check, because the quotes no longer match. The reader does not see caution there. They conclude the quotes are wrong, and carry that doubt into the rest of the file.

The round number comes from the same reflex. The example’s 500,000 contains 123,000 dollars nobody can explain.

The way out is simple: the buffer on its own line, with its reason and its length. “38,000 dollars, a little over three months of operating spending, for a late delivery of the aerators or a customer paying at 90 days” can be defended in committee.

In your file

The fields in your file that carry the amount

Most are in the “Funding” step of the file. Monthly spending is on the “Complete your dossier” page, in the “Your key figures” block.

Amount sought

The total of your four lines, even if it is not round. It also steers the file towards funders: a fund that starts at 500,000 dollars will not read a request for 377,000.

Currency

The currency of your request, to be set against the currency of your sales. Borrowing in dollars while selling in ariary creates an exchange risk you will be asked to put a figure on. Say so before it is found.

Planned use of funds

The four lines, in amounts and percentages, including working capital. A named buffer line is better than a margin hidden in equipment.

Preferred funding horizon

With debt, the life of the asset financed, plus the grace period it needs to start producing. With equity, the investor’s horizon, generally 5 to 7 years for a fund. A cold room financed over 24 months puts the repayments under strain.

How much do you spend each month to move the project forward?

Your monthly spending, gross: everything that leaves the account in a month. It is the divisor of your runway. With equity, if cash after the raise covers less than 18 months, the amount is probably too short.

Your strengths & security

In the “Your strengths” step. The value of your collateral limits what a bank can lend, often 70 to 100% of that value depending on the asset and the bank. Fill it in before you set the amount of a loan.

What to write in your file

Four lines, their total, and a number of months

The amount is the sum of four lines, each with its proof: equipment, working capital, hiring, buffer.
Working capital need ≈ (stock days + customer days − supplier days) ÷ 365 × yearly purchases and costs.
The buffer has its own line. With debt the term follows the asset; with equity, aim for 18 to 24 months of runway.

To do now, fifteen minutesOpen your project, then “Edit”, “Funding” step. In “Planned use of funds”, write your four lines in amounts and percentages, following the example below. Put their total in “Amount sought”, even if it is not round. Then, on the “Complete your dossier” page, “Your key figures” block, check “How much do you spend each month to move the project forward?” and work out your runway.

Sample answer“Amount sought: $377,000. Equipment, works and fees: $230,000 (61%), three dated quotes. Working capital: $90,000 (24%), a 240-day cycle on $137,000 of yearly operating spending. Hiring: $19,000 (5%), two technicians for twelve months. Buffer: $38,000 (10%), a little over three months of operating spending.”

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FAQ

If I ask for exactly what is needed, I have no room to negotiate.

The room is in the lines, not the total. Prepare what you cut if you are offered less, and in what order. Someone who answers “two ponds instead of four, and I keep the working capital” is negotiating. Someone who padded the total gets taken apart on their quotes.

Where do I put the buffer so it does not put people off?

On its own line, with its reason and its length in months. A named buffer reassures, because it shows you have thought about delays. A buffer hidden in equipment, once found, casts doubt on every other line.

What if I do not know my real customer payment times yet?

Take your last six months of invoices and count the days between issue and payment. If you have no customers yet, write down the assumption and its source, for example the terms hotels in your area work on. A written assumption can be discussed; an empty box cannot.

The words of this lesson

Each word links to its full definition in the glossary.

Working capital: The money stuck in your stock and in invoices your customers have not yet paid.
Runway: The number of months your company can keep going on the money in the bank, if nothing new comes in.
Monthly spending: Everything that leaves the account in a month, without deducting what comes in.
DSCR: What you earn, divided by what you must repay this year.
Use of funds: What you will buy or pay for with the money requested, item by item, in percentages.
Pre-money valuation: What your company is worth today, before the new money arrives. An estimate, to be discussed with the investor.
Security: What the lender can seize if you do not repay: land, a machine, money your customers owe you.

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