In Brief:
- When businesses expand, it usually takes time for revenue to catch up to increased expenses, making it important to be proactive about financial planning.
- Creating a solid business plan, ensuring strong cash flow, and building cash reserves can help businesses scale without stress.
- Treasury tools like ACH services, fraud protection, automated payables and receivables, and centralized cash management help businesses be more efficient as they grow.
- Combining lending and treasury at INB can support both financing and day-to-day operations with responsive service, local decision-making, and solutions that scale with your company.
Growing pains for a business are almost always stressful – but even more so for companies that aren’t financially ready.
Opening another location, hiring staff, increasing inventory, or entering a new market can all have a major impact on cash flow, which can make or break a small business going through these changes.
That’s why proactive financial planning and treasury management are essential for businesses that want to scale with less stress and headache.
“From a lender’s perspective, we like to see businesses enter expansion from a position of strength – with good reporting and realistic projections, as well as a clear understanding of working capital needs,” says Joe Fendi, SVP, Commercial Banking at INB St. Louis. “Preparation creates confidence for both the business owner and the bank.”
Laying the Financial Foundation Before Expanding
Expansion should strengthen a business, not strain it.
Before making a move, business owners should take a close look at their financial position because expansion usually means spending more money before more revenue starts coming in the door.
“Before expanding, make sure your finances are strong, debts are manageable, cash is available, and you have a clear plan showing the expansion will pay off,” says Steve Keenan, INB’s Illinois Market President for Commercial Lending.
From his decades of experience helping business owners scale, Steve says entrepreneurs should focus on:
- Creating a detailed business plan that includes the expansion strategy, market research, and financial projections to show the bank you’ve already evaluated potential risks
- Making sure all financial statements are accurate and up-to-date
- Ensuring that current and future cash flow remains solid throughout the proposed expansion
- Building cash reserves to cover any unforeseen issues. “This gives the bank additional comfort and shows how much funding needs to come from loans and/or investors,” Steve shares.
- Paying down current debt before taking on expansion liability
- Understanding your collateral needs
“Sometimes businesses focus too much on the exciting opportunity to grow instead of how it might impact operations,” Steve says. “Having the right systems and financial visibility in place can make the transition much smoother.”
Cash Management Challenges Created by Expansion
“Business expansion directly relates to increasingly positive cash flow,” shares Brian Hintz, VP, Treasury for INB St. Louis. However, cash flow management also becomes more complex when businesses experience growth.
“One of the biggest challenges is timing,” Joe explains. “Expenses usually increase immediately, while revenue often lags behind. Businesses may need to hire staff, purchase inventory, invest in equipment, or build out space before they fully realize additional income.”
Having multiple accounts in multiple locations makes it tougher to see what’s happening as well, which increases fraud risk.
That’s where the right treasury tools come in. Treasury tools can enable tremendous growth, rather than simply being “one more service” to add.
“Treasury management tools can help businesses maintain control during that transition and improve efficiency to overall operations,” Joe says.
Joe encourages his business clients to consider implementing tools like:
“Our products and services help clients to expedite the receivables into their accounts and time their payables to meet obligations and take advantage of vendor discounts,” Brian shares. “Our most successful and growing customers at INB take advantage of these tools to boost their balances, protect their cash from fraud, and expand their businesses.”
Local Decision-Making + Scalable Treasury = Smoother Expansion
Not only is growth easier when you plan ahead, but the partners who make up your team also play an important role.
“Bankers, accountants, and attorneys are the most trusted advisors any business can have. At INB, we honor that trust by taking that role very seriously!” Brian says.
INB’s ability to help our clients financially prepare and make confident, forward-thinking decisions comes from truly understanding each company.
“Often,” Brian notes, “a commercial banking relationship begins by fulfilling a borrowing need.” But as our treasury team collaborates closely with our lending team at INB, we have a deeper knowledge of a company’s operations, challenges, and needs.
The right banking relationship should support both lending and day-to-day cash management, with treasury solutions that evolve alongside the business. INB stands out not only because of our robust services, but also our team’s responsiveness and local decision-making.
“Our ability to be flexible with our customers and provide quick solutions to their needs fulfills on our brand promise to make banking easy!” Brian says. “Our Treasury Support team is a key differentiator with their ability to be readily accessible, offer thorough training, and quickly troubleshoot customer issues. Business clients find this to be a very refreshing experience especially when compared to our large bank competitors.”
Thinking about expanding your business? Connect with INB Treasury today to make sure you’re prepared and have the right tools on your side!