Top Challenges for Funding Business Growth – and Solutions

Most business owners have goals to grow and scale their business.  They often worry more about failure than success when it comes to growth, but success can come with a new set of unanticipated challenges.  Missteps during an expansion phase could hinder a businesses’ chances for long-term success, creating challenges like those below.

CHALLENGE 1: Needing cash in advance of receivables.

Just secured a big new customer or project? After a few high fives, the focus will inevitably turn to what is needed to get the work done. The list may include things like:

• Buy additional equipment
• Upgrade existing machinery
• Invest in newer technology
• Hire additional staff
• Buy supplies
• Expand inventory

 These items may require significant capital expenditures far in advance of collecting payment. Many small and medium-sized companies don’t have cash on-hand to cover all of these upfront expenses at once.

CHALLENGE 2: Needing a loan without adequate collateral.

When a business is being evaluated for a loan, collateral is an important factor. Collateral are assets used to substantiate the loan amount and provide security to the bank if the loan isn’t repaid.

There are factors that might make collateral worth less to the bank that what was originally paid. Examples include specialized equipment with a small aftermarket, depreciation, or property located in a rural area.  Reduced collateral value likely presents challenges obtaining the full loan amount needed.

CHALLENGE 3: Maintaining positive cash flow.

As they say, “cash is king”!  Maintaining a positive cash flow ensures a business can pay employees, vendors, and creditors on-time. During times of growth, many things can eat up cash quickly, like increased labor costs, inventory, and equipment upkeep. If a business takes on debt to fund business growth, its important that repayment is manageable and doesn’t move cash flow-to-debt ratios into dangerous territory.

CHALLENGE 4: Identifying dangerous risks.

In order to seize exciting new opportunities, businesses can find themselves in need of access to capital, fast. But quick solutions may come with greater risk. The changing landscape of financial technology has produced a number of new fast-capital options. While they fill a void in the marketplace, its very important that business borrowers thoroughly consider the impacts of higher interest rates, additional fees, and accelerated repayment schedules.

CHALLENGE 5: Finding a financial institution that understands your business.

Commercial and industrial businesses, like those in the manufacturing, construction, transportation, mining, and wholesale industries, often experience challenges finding a bank that understands their business and has the expertise to customize financing packages that benefit the business.

So, what’s a growing business to do?

Your first action item is to reach out to the commercial and industrial financing team at Lincoln Savings Bank. We’ll start with a conversation to learn more about your business and make recommendations that factor in the challenges listed here.

We have financial tools available that serve complex business needs just like the big national banks, but with a very personal touch that can only be found at a community bank with empowered employee-owners:

• Small Business Administration and U.S. Department of Agriculture loans, which allow businesses to obtain loans for working capital, or with limited or no collateral. SBA and USDA loans also have favorable interest rates, and extended terms that provide manageable repayment.
• Commercial real estate financing
• Debt refinancing
• Lines of credit
• Leasing
• Depository services
• Treasury management

We’ve worked hard to earn banking relationships with businesses for over 115 years and would like the opportunity to earn your business.  Contact us to start the conversation.