What is Use of Proceeds?

A use of proceeds statement is a short document summarizing how a company plans to spend the funds secured through additional capital

It’s a snapshot of where the funds raised will be spent. The statement is no more than 2 pages long (normally shorter).

The use of proceeds statement is normally included alongside documents such as a business plan or prospectus. It’s sometimes called “intended use of proceeds” to emphasize that plans may need to be adjusted due to issues such as company challenges or market conditions.

What does a use of proceeds statement look like?

The use of proceeds statement can be presented as a written summary, a table of figures, and/or a graph.

Using a graph (most commonly, a pie chart or donut chart) is particularly common where the use of proceeds is being shown during a presentation to prospective investors. However, it may be more effective to use a Gantt chart, timeline, or other visualization that lets investors see how you plan to use the money over the next 12 - 24 months.

The use of proceeds statement might also describe what the company won’t spend the money on. For instance, it might state that the company won’t use the invested money to settle debts.

Why is a use of proceeds statement important?

The use of proceeds statement helps to convince investors to invest money in a company. Understandably, investors will be keen to see that the company has a clear and workable plan for using that money in order to grow.

A use of proceeds statement should instantly show how the company plans to use the money, such as on marketing, on research and development, or on customer support. This lets investors understand how their money will be used.