How Financial Services Support Small Business Growth

If your business is turning a profit and its future outlook is positive, it might be time to consider expansion. Expanding your business can come in different forms. You might need new equipment to meet increased product demand, additional inventory to expand your product offerings, or additional real estate because you’re opening additional store fronts.

For small business owners, the decision to finance growth can be stressful and even a little scary. Turning to your local banker for financial guidance is a critical first step. Good bankers do more than lend money. They will help you think through important questions and provide the resources required to navigate every phase of business growth.

Two common types of business growth are product or service expansion and business acquisition. Product or service expansion can take a couple different forms. Your business could be preparing to launch a brand-new product to the market. Or you might be considering expanding your available services. For example, after conducting market research, a hair salon owner might determine it would be profitable for the salon to also offer spa services.

With this type of business growth there are a couple ways a bank can provide financial assistance. Opening a line of credit with the bank will help stretch cash flow so you’re not feeling the crunch every month when its payroll time or you need to purchase inventory. You can also work with your bank to gain access to working capital. A working capital loan can be used to cover costs related to inventory, employees or rent.

When you acquire a business, the company you are purchasing is fully absorbed. Creating one larger business with people, processes and resources that need to be brought together efficiently. Look to your banker to help you evaluate the processes that are in place for each business – yours and the one you are acquiring – to help you identify financial products like remote deposit capture, ACH origination or wire origination that will streamline processes, help manage cash flow and reduce your payables costs.

In addition to financial support, your banker will also be able to provide guidance on what type of loan you will need. Depending on the industry you are in and the type of business you are acquiring, you could need a commercial real estate loan, an equipment loan and a line of credit. The line of credit is important because your business will now have an increased amount of receivables, inventory and payables. Every phase of business growth includes a period of time when cash flow is tight and the extra line of credit helps business owners get through those times.

When exploring opportunities for expanding your business, there are important financial considerations that need to be discussed. Sitting down with your banker in the beginning will help you think through where you see yourself and your business in the next 5-10 years. And help you determine what will be the most profitable for your business.

If you are considering expanding your business, visit with one of our commercial banking experts to learn how financial services can support your goals.