To finance the growth of one’s business, several types of financing can be mobilized: capital increase, honor loan, bank loan, operating subsidies, short-term financing, etc. Some must be favored according to needs. In all cases, diversifying sources will have the advantage of optimizing financing conditions, but also of reducing risks and activating the leverage effect. Indeed, a Business Account Manager in a bank must ensure the company’s ability to meet its financial commitments. He will therefore check that the funding requested targets a clearly identified need or development project and that the prospects presented respect healthy financial balances. A business plan, an executive summary of this business plan and a 3-year financial forecast must therefore complete the application. It is also essential to properly quantify the need for financing, but also the repayment capacity of your company. When an entrepreneur provides this evaluation work by linking it to the results of his company, the correlation between the two reassures the banker.
One of the first financial indicators that a banking or financial institution looks at is the amount of the company’s equity. The higher these funds, the more the company will be perceived as solid and therefore, the more it will be willing to grant growth funding. To increase its equity, the company has several options. It can, for example, rely on an investment by its leaders themselves or their other business streams. But other tools exist, in particular the honorary loans offered by networks. These are zero-rate personal loans that must be allocated to the company in capital or in the partners’ current account. They precisely aim to create a leverage effect to facilitate access to other financing such as bank loans.
The growth of your business requires adapted financing methods and solutions consistent with your projects.
- The development of my company’s activity, its economic and environmental performance require investments in capacity or productivity.
- Increasing its market share goes through external growth operations, by buying one or more competing companies. These acquisitions should accelerate the growth of my company, by gaining faster access to technologies, innovations, distribution channels, customers that I do not currently control.
- My company’s turnover is too concentrated on the national market. International development is one of the pillars of the growth strategy.
- The financial management of my company, built up over time, deserves to be rethought and organized differently. Funding, in the short, medium or long term, must be adapted to my current and future needs, and shared with partners who are committed to my side.
- What financial engineering should be implemented to optimize the financing of my projects?
- What financing firms can provide the funds when my company needs it? There are several trusted financing companies – such as MARS Capital, which provides the funding from $3 million to $100 million.
Financing the growth of your company
- Liquidity is a company’s ability to raise cash when it needs it.
- Liquidity is a measure of a company’s ability to pay off its short-term liabilities—those that will come due in less than a year. It’s usually shown as a ratio or a percentage of what the company owes against what it owns. These measures can give you a glimpse into the financial health of the business.
- Companies use assets to run their business, manufacture items or create value in other ways. Assets can include things like equipment or intellectual property. Inventory, or the products a company sells to generate revenue, is usually considered a current asset, because generally it will be sold within a year. For an asset to be considered liquid, it needs to have an established market with multiple interested buyers. Also, the asset must have the ability to transfer ownership easily and quickly.
- Bank loans remain the most obvious and simplest resource to implement.
- Based on the business plan drawn up, structured financing makes it possible to profile the lines of credit automation as closely as possible to your current and future needs. In addition, it federates in a sustainable way a circle of banking partners that you have chosen and who support the growth of your business over time.
- The entry of an investor among the shareholders of your company provides it with additional equity, which is essential for the deployment of your strategy.
- This permanent capital is also intended to strengthen the financial structure of your company, or even to allow additional debt leverage.
- Financing the growth of your business requires raising equity from a majority financial investor or several minority financial shareholders.
- The implementation of a fundraising process makes it possible to best promote your company and to choose the most suitable partner to support you in your development projects.
Why Liquidity is important?
Liquidity is, along with yield and security, the third vertex of the “magic” investment triangle. Before the March 2020 crisis, many operators prioritized the profitability of their portfolio, partly sacrificing security and liquidity to ensure a sufficiently attractive return. Institutional investors with long-term commitments, in particular, do not have significant liquidity needs and can often live with an illiquid portfolio if it allows them to obtain better returns while meeting the requirements of security. However, these investors should not resort too exclusively to illiquid instruments. The market crash in March showed once again how important it is to ensure that there is some availability of investments in the portfolio, in order to be able to adjust it if fundamental valuations change. Ultimately, a good investment decision only pays off if it can also be implemented quickly and at a favorable time.