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Fresh Funding Ideas to Fuel New Growth

Jul 21, 2017 9:00:00 AM |

Rebecca Geiger

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Funding Growth-121168-edited.jpgJust about every business that creates a business plan will project some growth. While it’s important to set an intention around growth at the start of the year, it takes more than just a number in a forecast to successfully grow throughout the year. In many cases, it will take new money to make new money. Does your business plan account for the funding necessary to support your growth projections?

Some funding ideas apply to businesses at any stage in the life cycle. Others might be more suited to a startup trying to figure out how to keep the lights on while it gets off the ground. A mature business that has hit some kind of growth plateau might need to consider another set of options. The key is to remember that there are two sides to the funding equation: a business can free up investment funding through internal changes and cash reserves, or it can seek outside help through loans or equity investments.

Cash Is King

When it comes to fueling new growth, few assets can stoke the fire more quickly than cash. When owners and executives are committed to a growth strategy, a business can focus on reinvesting profits into operating reserves in order to keep funds available for growth opportunities that may require fast action.

One way to keep cash on the balance sheet and improve liquidity ratios is to lease equipment rather than buy. For startups, operating leases can make your initial capital investment last longer and allow more lead time for your product or service to gain a following. Mature businesses may be able to improve cash positions by replacing capital assets with leased equipment as they wear out. If there’s a market for used equipment, a business might even get a short-term cash boost from selling the assets and shifting to operating leases sooner.

Plan for Debt If Needed

Loans can be a key part of a growth strategy as long as you plan ahead for them and stay within limits. As noted above, keeping cash on hand serves the dual purpose of providing reserves to fund growth and making your balance sheet more attractive to lenders. Be sure to budget effectively for the amount of debt you plan to take on and the rate you expect to pay. Stay within those limits when you negotiate. If a lender offers you the funds you need but the terms will bust your budget, you need to be ready to walk away.

Operational Efficiencies

The more mature a business is, the more likely that it may have underperforming components that can be sold off or restructured to provide resources for new growth. These can sometimes be hard decisions, as it may mean acknowledging that a previous growth strategy hasn’t panned out. Mergers, acquisitions or expansions into new products, services or geographic areas are always subject to risks that may not be known until after resources are committed. If your plans to fund growth through cash and debt come up short, think strategically about where your customers and your company are headed and consider selling or modifying segments of your business that aren’t moving in that direction. Shifting existing human resources and working capital from a declining sector to a growing one can revitalize a group that may have been falling short of its goals.

Governments Love Growth

If your plans for growth include creating new jobs, federal, state and local governments offer resources to help. Incentives include everything from tax credits and small business financing at the federal level to custom-tailored state and local incentive plans for new businesses that bring jobs. Be sure to research all of the cost-saving opportunities available when you project the costs and revenues associated with growth.

The most important part of any growth plan is finding the right mix of cash, debt and strategy that works for your business. These ideas are designed to get you thinking about options that might work for you, but they are no substitute for a customized plan focused on the specific needs of your business and the customers that it serves. Our team at HORNE is ready to strategize with you to implement a plan and help you along the way. We look forward to serving you.

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Rebecca is an assurance services senior manager at HORNE LLP. She provides Sarbanes-Oxley consulting, internal audit and assurance services primarily to public and middle market clients in a variety of industries, including manufacturing, agribusiness, energy, transportation and distribution. Rebecca also has a significant level of experience assisting nonprofits, government contractors and employee benefit plans.

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