If you’re like most entrepreneurs, you aspire to grow and expand your business. While business growth is good — and obviously preferable to the alternative — it can also lead to a number of challenges.

In particular, growth and expansion will have a significant financial impact on your business. Expansion requires capital to purchase more raw materials and inventory, hire more employees and perhaps purchase or lease additional space. If expenses like these aren’t planned for carefully in advance, companies can literally grow themselves right out of business.‍

Your Banker’s Critical Role‍

Your banker can play a critical role in helping you devise a business growth plan for achieving your expansion objectives. This starts with helping you determine how you will finance your expansion. The two main sources of growth financing are owner’s equity that has been retained in the business and funding from an outside source.

Outside financing takes the form of debt or equity. Debt is simply a business loan that must be repaid over a set period of time. There are several different types of bank loans that can be used to support business growth, including SBA loans, term loans, commercial mortgages, construction loans, equipment leases. Your banker can discuss these financing options with you in more detail.

Equity financing is very different from debt. Here, you would sell a percentage of ownership in your company to one or more outside investors who would provide the expansion capital. Private equity firms, venture capitalists and “angel investors” are the most common sources of equity. Your banker can help you determine whether equity financing might be right for your situation.‍

Going Beyond Financing‍

Beyond securing growth financing, there are a number of other ways your banker can help you plan for business expansion. For example, your banker will:‍

1. Bring an insider’s understanding and perspective. Your banker has likely worked with other businesses similar to yours and helped them meet their growth and expansion challenges. This experience can prove invaluable in helping you execute your expansion plans — especially when it comes to avoiding common growth obstacles and mistakes.  

2. Assist with financial forecasting. Accurate sales and revenue forecasting is critical when it comes to planning business growth and expansion. With years of experience and a trained eye, your banker will be able to help you make more accurate financial projections, which will increase the chances of a successful expansion.

3. Provide a cash flow analysis. An accurate cash flow analysis is also important to a successful business expansion when you consider the cash flow challenges growth presents. By helping you perform this analysis, your banker can possibly help you avoid cash flow shortfalls caused by expansion, which are one of the most common causes of business failure.

4. Offer unbiased guidance and advice. Your banker will put the best interests of you and your business first. He or she can be an unbiased sounding board you can approach with questions not only about business expansion, but also about any other aspect of your company. Your banker may also challenge assumptions you might have about expansion that could be holding your business back from reaching its full potential.

5. Bring other experts into the fold. This is one of the most valuable roles played by a banker in a business expansion. Your business banker can call on experts from other areas of the bank to help in specific areas, as needed. He or she can also bring in experts from outside the bank if necessary, such as accountants, attorneys and real estate professionals.‍

Prepare Now for Business Expansion‍

Some economists are projecting a sharp economic rebound this year once the coronavirus pandemic is finally in the rear-view mirror. This could open the door to expansion opportunities for your business.

If so, be sure to talk to your banker before moving forward with your growth and expansion plans. Tapping into this valuable resource could pay big dividends for your business in the future.