What are my options for funding growth in an established company?

by Tyler Heap, Chief Credit Officer

Business growth is a high priority for new companies that want to tap into the market they aim to serve. Discussions of financing for the purpose of funding growth are often tied to these younger ventures, but there are many circumstances where more mature and established organizations also want to increase their reach.

Let's look at the unique considerations more developed businesses should make when deciding to grow, their often beneficial financial and market positions and how they can effectively access the funding necessary for expansion.

Why established companies may want to expand

An established company generally has a relatively stable set of processes and a dependable customer base, at least compared to new enterprises that are trying to attract business and develop awareness of their offerings. While substantial growth can mean leaving a comfort zone of predictable patterns, it can also help mature organizations build more relationships and, ultimately, improve their bottom line.

Some reasons why expansion may be in the cards include:

• Customers requesting more products or services than can be provided, based on a company's existing infrastructure.
• Business leaders recognizing an opportunity to grow into a new, underdeveloped territory, or take advantage of the absence of support created by a competitor leaving the market.
• A desire to expand into a related field where the business has institutional knowledge and experience, but currently lacks the capability to consistently operate within it.
• Identifying a unique potential for growth that's dependent on the specifics of your industry.

The Harvard Business Review identified six overarching categories into which growth opportunities can be sorted: new customers, experiences, features, models, offerings and processes. Once the type of development is identified, you can consider your company's financial situation and start looking into financing options.

Understanding your financing position as a mature business

If growing your existing business makes good sense and has the backing of company leaders, you should be happy to know that, in general terms, you have some advantages when it comes to seeking out financing. With a track record of consistent operations, you're more likely to access favorable terms from lenders and face less resistance or uncertainty when making contact with them. Similarly, if your company has strong cash reserves, you may be able to leverage them when finding financing.

This doesn't mean you should simply choose the first trustworthy financing provider you come across, however. Different financiers will offer varying rates, terms, fees and levels of support. All of these variables need to be considered with your company's needs and abilities in mind to make the best possible decision.

Considering different financing options and how they meet your needs

There are many different financing options available to established companies. Consider how TAB Bank's offerings can align with your objectives and current financial position:

Asset-based lending

A traditional approach to financing is often inflexible. It can still be a worthwhile consideration. However, if your plans are subject to some level of change and you find yourself needing a change in funding, you may not be able to adjust your agreement to be more in line updated projections.

Asset-based lending takes a more responsive approach to your business growth needs. Instead of only using your balance sheet and cash flow, we also take your accounts receivable, inventory and, in some cases, equipment into account as well. That maximizes liquidity and allows you to support business growth as effectively as possible.

Accounts receivable financing

Your accounts receivable - the money owed to your business for products already provided or services rendered in the past - can be a major benefit for your company. While customers owe money to your organization, you may have to wait weeks or even months to gain access to it depending on the payment cycles established in your industry.

A/R financing allows you to leverage this asset on a much shorter timeline, using it as a line of credit that can be replenished over time. You can quickly tap into the funds, which can prove invaluable in situations where a growth opportunity will only exist for a short period of time or your company quickly needs to address a concern tied to its plans for development.

TAB Bank has more than two decades of experience providing business financing to companies across the modern economy. We also pride ourselves on offering a high level of support to all of our partners throughout the financing process. That includes a dedicated relationship manager who is ready, willing and able to help you navigate all parts of the financing process and offer ongoing support whenever necessary.

To learn more about securing financing for your established business through TAB Bank, get in touch with us today!

If you are looking for more advice for your small business check out our eBook titled, Effective and Practical Advice for Small Business Success.  You can click on the tile below and download this valuable resource today.

About the Author

Tyler has spent his career analyzing businesses from both an owner’s and lender’s perspective. His love for small business and the entrepreneur budded as he co-founded a business in college which paid for his education and resulted in the sale of the company shortly after graduation. Tyler worked for a manufacturer and distributor of sporting goods after graduating from college, where he managed the company’s finances and investor relationships. His banking career includes vast experience in relationship, portfolio, distressed loan, and underwriting management.

In his current role, Tyler is responsible for leading the underwriting, special assets, and collateral monitoring teams in conjunction with managing overall credit quality at TAB Bank. He received a double Bachelor of Finance and Economics from Utah State University. Over the years he has been an active participant in the International Factoring Association, Commercial Finance Association, Utah Bankers Association, and the Pacific Coast Banking School. Tyler is also an active member of his community through volunteering and donating to local charities, schools, and special cause groups.

Follow on Linkedin More Content by Tyler Heap