How to Finance Your Growing Business

A group of three businessmen in professional suits discuss reports on a large desk in a brightly lit office space.

As you grow your business you’ll likely find the greatest opportunities often bring very real challenges. Welcome challenges, to be sure, but challenges nonetheless as you figure out how to navigate the new demand—both operationally and financially—while maintaining a healthy cash flow.

That may sound like a tall order, but—trust us—you’ve got this.

Especially with the following strategies in your back pocket.

Renegotiate Better Terms With Suppliers and Customers

Managing, to whatever degree possible, the timing of cash in and outflow can provide much-needed wiggle room to a fledgling or evolving business. And increasing the volume of your orders provides an opening to negotiate.

Some practical steps: Ask suppliers if you can expand a 30-day payment term to 60 or even 90 days. Schedule payments as late as possible within your payment window to give yourself more time with your cash to deal with present needs. Can you shorten payment terms so you are paid sooner for your services or receive an upfront or mid-way deposit if you work on long-term projects? Consider offering a discount if a customer can pay you sooner—say, within 10 or 15 days—this incentivizes promptness and you’ll have cash in hand.

Project Your Expected Needs for Better Financial Reporting

Tracking expenses and forecasting future cash flow can allow you to spot areas where you’re overspending too much and any trouble brewing on the horizon—before it becomes a bigger issue than it need be. It can also help you plan inventory purchases to ensure that you don’t tie up too much cash in supplies or end up with a shortage at a pivotal time. This is particularly important if you’re filling larger orders or expanding your service reach—i.e., providing more product. Which costs more money.

Your cash flow focus will depend on whether you're growing your market size, going into new markets or going into new products. There are a variety of cash flow apps that can aid you as you strive to get your house in better order or you can use a spreadsheet to chart your progress.

Borrow Responsibly to Meet Demand

A business loan or line of credit can go a long way towards bridging a gap when you’re trying to meet increased demands—especially if you’re boosting production but won’t see sales revenue for several months. Different kinds of loans offer different degrees of flexibility. Take your time. Shop around for one that meets your unique needs. Just be sure you have a plan to pay back the loan according to the terms of your agreement.

If you’re expanding your product line or branching out into new services, you may be working with new manufacturers or suppliers. It could make sense to look into a potential blend of angel investment or venture funding along with a line of credit to make the cash equation work.

It won’t be as cash intensive as starting the business, but many of the expenses will be similar. You may need to finance new equipment, for example, if you’ll need it to meet increased demand.

Think Globally

If you’re expanding your business overseas, you must keep international concerns in mind. You may require import and export licenses or multicurrency loans to make the move feasible. Investigate what happens when you convert money in and out, including any tax implications. You will need a bank that transacts in both countries.

Identify Risks in Advance

You may be an ace at handling your current situation, but a financial curveball could put your business underwater. Consider worst case scenarios—a local branch (or multiple branches) closes, a competitor wins a pivotal deal, your departmental budget is significantly decreased—and think about what you’d need to do if any occurred. If a significant unfortunate event would put you in a tight spot, adjust your safety net accordingly so you’re prepared for anything.

Think, for instance, of companies that had contracts with the government—and what they had to do during the government shutdown. Without a cash reserve, businesses can find themselves in dire straits.

The Bottom Line

A bit of proactive tracking and creative thinking can help you keep your head above water while your organization continues to grow. Try the strategies above to keep more cash on hand and your business scaling ever-greater heights.

The views expressed by the author are not necessarily those of Fifth Third Bank and are solely the opinions of the author. This article is for informational purposes only. It does not constitute the rendering of legal, accounting, or other professional services by Fifth Third Bank, National Association or any of their subsidiaries or affiliates, and are provided without any warranty whatsoever. Deposit and credit products provided by Fifth Third Bank.