Financing for growth

Supporting your expansion plans.

Taking the decision to grow your business can be both exciting and daunting. Careful financial planning will give your plans the best chance of success. We’ll guide you through the process of deciding whether your business is ready to grow and available funding options to achieve growth.

The right time to grow?

Timing is all important when looking to grow your business. You need to judge whether your business is in a good place to put your growth strategy into action.

Ask yourself:

  • How is your business performing against budget?
  • How does your business use available resource to generate profit?
  • Is your market expanding or contracting?
  • How are your competitors behaving?
  • How much readily available cash do you have?

How to grow

There is no single best way to achieve growth – your strategy should suit your business and the markets you’re in.

Here are some frequently used strategies:

Diversification

Branching into new areas can extend your brand’s reputation and its range of products and services. It can help you reach new customers and move into new markets.

Exporting

If your UK growth has peaked you could find a whole new market abroad. Find out more by visiting our international pages.

Franchising

By licensing your business format to others that are looking for a business opportunity, you can earn a share of all revenues earned.

Mergers and acquisitions

Buying other companies, or joining them, can help you move into new markets or grow your market share. This can be a fast track to:

  • Removing competitors from the market.
  • Buying in experienced staff.
  • Acquiring the latest technology.
  • Getting access to a better performing business.

Once you’ve chosen a strategy, draw up a budget to show projected profitability in the short, medium and long term, and modify it for a series of “what if” scenarios (such as “What if a new player in the market undercuts our prices?” or “What if a key piece of technology fails?”). This should help you firm up your plans and help convince any financial backers of the strategy’s merits.


The implications of growth

Though you grow a business to improve revenues and profits you’ll probably increase your costs too.

Here are some additional costs you may need to be prepared for:

  • More staff (both from a salary and tax perspective).
  • Employing or hiring specialists.
  • New buildings, equipment, machinery and systems.
  • International trade.
  • Moving premises.
  • Increasing the size of your management team.
  • Changing your management structure.
  • Increasing the amount of inventory you hold.
  • Introducing new business and financial controls.
  • Sourcing new suppliers and customers.
  • Professional assistance.
  • Integrating a new acquisition.

Funding growth

You’ll almost certainly need funds to finance your expansion plans. Work out if the business has any existing funds that could be released, then assess how much you’ll need to borrow or get from investors.

Here are some options to consider:

Use spare business cash

If you’re lucky enough to have surplus funds in your business bank accounts, not required for the day-to-day running of the business, use it for your expansion.

Cut your costs

Work out where you spend money and ways to cut costs:

  • Using cheaper suppliers.
  • Negotiating bulk discounts.
  • Reducing staff in a declining area.
  • Shopping around for cheaper utilities such as electricity.

Share options

You can offer selected employees the chance to work for reduced pay in exchange for the option to buy an equity stake in the business at a fixed price at some point in the future. This keeps staff motivated to achieve targets whilst cutting the wage bill for the business.

Sell assets you no longer need

Examine your asset base – could anything be sold for cash? Such as:

  • Investment property that’s not providing a great return.
  • Inefficient or underused plant/machinery.
  • Pool cars that are seldom used.

Manage your working capital more effectively

Get an injection of cash by shortening the cash operating cycle:

  • Collect cash in from customers more quickly.
  • Pay your suppliers more slowly.
  • Hold less stock for a shorter period.

Borrowing money

There are a range of sources available to help you, including:

  • Bank overdrafts.
  • Loans.
  • Hire Purchase & Leasing.
  • Factoring.
  • Private equity.
  • Grants.
  • Friends and family.

Find out more about Bank of Scotland business loans.


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