5 financial tips to growing your business

Business growth is exciting. A big contract comes through, a new customer relationship takes off or marketing is delivering the results you expected. Financing can be a critical resource to sustain the growth. But from a lender’s perspective, growth financing is about more than momentum. The real question is whether the business can support that growth — and repay the debt that may come with it.

For companies planning to expand, here are five considerations to expect before receiving a “yes” to new financing.

1. What’s driving the growth, and will it last?

One of the first questions a lender may ask is simple: What’s causing the growth?

There’s a difference between planned growth and unexpected growth. Maybe you landed a major contract. Maybe an existing customer is sending more work your way. Maybe demand is increasing because of market trends or new marketing. Each scenario carries a different level of risk.

What matters most is durability. Is this a short-term spike or the start of a reliable revenue source? Lenders look for indicators supporting continued demand, such as backlog, signed contracts, repeat customers, purchase patterns and inventory turn. If the growth is measurable and sustainable, financing becomes easier to discuss.

2. Revenue growth alone isn’t enough. Your balance sheet should support it.

A common misconception is a focus almost entirely on revenue and profit while overlooking the impact of growth to the balance sheet.

Growth usually requires cash before it generates cash. Business leaders may need to hire people, buy equipment, increase inventory, or invest in systems and facilities. A lender will be interested in knowing whether your company has the operational and financial capacity to handle that next stage.

Can your team execute? Do you have enough working capital? Will capital expenditures be required? What happens to cash flow while you wait to get paid?

A sound growth plan doesn’t stop at projected sales; it shows how the business will support those sales.

3. Conservative projections matter more than ambitious ones.

If you’re asking a bank to finance growth, be prepared to show how that debt will be serviced. That means realistic projections — ideally for at least three years.

This shouldn’t rely upon rosy assumptions. In fact, aggressive forecasts may hurt your credibility. Lenders are interested in seeing that you understand timing, pressure points and risk. They want to know what happens if expenses rise faster than revenue, customer payments slow down or the ramp-up takes longer than expected.

That matters because growth often creates a mismatch between spending and collections. A company may need to invest now and wait 30, 60 or 90 days for receivables to turn into cash. If that gap isn’t planned for, even a profitable company can get into trouble.

4. The right financing structure depends on how your business works.

Not every company finances growth the same way.

For some businesses, a traditional term loan or line of credit, for example, is the right fit to allow greater flexibility for managing cash on hand. For others, especially those carrying significant receivables, inventory or equipment, asset-based lending may make more sense.

The right structure depends on the assets and the rhythm of the cash cycle.

That’s why lenders look closely at collateral quality. If receivables are part of the story, they’ll be interested in aging, collection history and customer concentration. If inventory is involved, they’ll want to understand turnover, days on hand, product type and marketability.

Financing is not just about whether the business is growing; it’s about whether the structure matches the way cash actually moves through the business.

5. Preparation and communication can make all the difference.

The companies that tend to have the most effective banking relationships engage early, prepare and communicate consistently.

That means having a clear business plan and talking with your lender about topics that include multiyear projections, receivables aging, cash-flow forecasts and a thoughtful explanation of what you need and why. It also means treating your banker as part of your ongoing advisory team, alongside your accountant and attorney, rather than considering them a resource only when cash is tight.

Proactive communication builds trust. It gives your lender time to understand the opportunity, recommend a structure reflective of your needs, and help identify risks before they become problems.

For business leaders interested in being more finance-ready in the months ahead, here’s one smart step to consider taking now: Build a 12-month cash flow forecast. Not just a profit projection, but a monthby-month view of when cash goes out, when it comes in and where gaps may emerge. That exercise alone can sharpen planning and make for a much stronger conversation with your lender.

Growth is good. But bankable growth is growth that is understood, supported and properly structured. The more clearly you can show that, the better your odds of getting the financing you need.

Bob Beveridge is an SVP, commercial banking, with Eastern Bank based in Portsmouth, NH. He specializes in helping middle market companies grow, and may be reached at R.Beveridge@easternbank.com.