Preparing your business for growth

You’ve made the big decision to take your company to the next level by acquiring another business, entering a new market, or expanding into a different industry. So now what?

In the 24th episode of the Sharing Knowledge Series, host Kevin Vonderau, chief lending officer at Westfield Bank, discusses topics related to business growth with Bob Filipiak, executive director of Cascade Capital, and Carrie Malotte, VP, commercial loan officer at Westfield Bank.

Below are some of the highlights from the discussion with Bob and Carrie.

The role of business advisors

The best business decisions are never made alone. That’s why the importance of having an advisory team in your corner as a business owner – including a CPA, attorney, banker, financial advisor, insurance agent, and even mentors or other business owners – can’t be stressed enough.

Business owners know their business best, but when you transition your business into an expansionary phase, that’s when the expertise of these other business professionals becomes critical.

The value of a plan

Some of the most common options for businesses to grow include:

  • Acquisitions, which can enter you into a new market or increase your existing market size
  • Organic business growth by expanding customer base or breaking into a new industry

But before any business pursues these growth options, Bob and Carrie agree that owners should have a well thought out vision and formal plan in place.

“It’s really important for a business to understand where they want to go,” Carrie says of the value of having a formal business plan. This roadmap for growth is key for keeping your team informed while also helping to identify threats or challenges that may stand in the way of achieving certain goals.

Bob explains that the main components of an effective business plan include outlining a clear understanding of your needs for future employment, capital expansion, and future financing.

How will I pay for this?

Making the decision to pursue growth is the easy part. The not-as-easy part is figuring out how your business is going to afford it.

Business owners often turn to working capital lines of credit, term loan financing for equipment needs, or economic development financing (via federal Small Business Administration loans or other state programs). Bob explains that economic development financing can be particularly helpful to business owners because it offers below market fixed rates of interest, extended terms, and can provide up to 90 percent of financing.

At Cascade Capital, Bob and his team are experienced in working with the SBA 504 and the Ohio Regional 166 loan programs.

  • 504 loan: “The 504,” Bob believes, “is the top economic development finance program in the country.”

    The 504 loan provides long-term, fixed rate financing for major fixed assets that promote business growth and job creation. The maximum loan amount is up to $5.5 million and is designed for small companies, defined as those with a net worth of less than $15 million and net profits that don’t exceed an average of $5 million for the last two years.
  • Ohio 166 loan: Bob describes this as a hidden gem for Ohio business owners. This program from the state loans up to $1 million for eligible projects including building renovations or construction, equipment and machinery purchases, and land purchases.

Carrie has found the SBA 7(a) loan to be very popular for financing acquisitions when there are collateral shortfalls that need to be filled. Small businesses looking to buyout a partner, finance startup costs, refinance debt, or for working capital can benefit from favorable terms, lower down payments, and loan amounts up to $5 million. Ohio’s GrowNOW program is also a good option as it offers a 3% interest rate reduction on loans up to $400,000 for business owners who commit to creating one full-time or two part-time jobs for each $50,000 in loans received.

Oftentimes good candidates for economic development loans are hesitant because of the application process, requirements, and perceived limitations of its benefits. Working with the right partner, especially financial institutions that are designated as SBA Preferred Lenders like Westfield Bank, can help you efficiently navigate this process, understand the job creation terms and retention requirements, choose the right loan, and ultimately realize the full upsides to the various loans offered by the SBA and the state.

Growth amid uncertainty

Recession or not, 2023 has brought business owners plenty of uncertainty this year. Nonetheless Carrie and Bob don’t believe this means businesses can’t pursue their goals for growth. Businesses can continue to grow by doing the following:

  • Assess your future vision, evaluate, and prepare for your goals
  • Preserve as much cash as possible and then use it for new hires, equipment purchases, etc.
  • Identify favorable financing options, especially those that offer interest-rate protection

Like most other aspects of running a business, the team you surround yourself with can make or break your success. When pursuing growth opportunities, having the right team of experts helping you overcome the challenges that you’ll inevitably counter along the way is one of the best decisions you can make.

Learn more about how our SBA lending solutions, as a preferred lender, can help your business grow.