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Growing Companies Ready to Put Credit to Work

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 Opening a new location.  Upgrading supply chain software. Adding new delivery vehicles.  Expanding globally.  While opportunities abound, many small and mid-sized companies have been waiting for the right time to invest in growth, locked in the “if” portion of the business cycle - IF we hit the sales numbers, IF the market responds, IF we get the approval, etc.

SunTrust research suggests there is a significant group of businesses who are ready to finance growth. Nearly four in ten (38 percent of businesses in the $2 - $150 million annual revenue range) acknowledge an increased need for credit and are looking for a plan to put those funds to work. These businesses have a consistent outlook characterized by confident planning and expectations of good outcomes. Looking further into the opinions and plans of this group, three themes emerge among those who expect to put credit to work in 2014 and beyond:

  • Positive thinking about business, industry and the economy
  • Confidence built on business fundamentals
  • Proactive action and belief in success

For growth-oriented businesses feeling more positive about their prospects and looking for validation about how other peer companies are looking to put credit to work, this research offers information that can help in anticipating barriers and developing a comprehensive action plan for moving forward.

Positive thinking about business, industry and the economy

Business managers and owners who are making plans to put credit to work are more confident in general and specifically about the U.S. economy, their industry and their company. They have assessed the business cycle and feel poised to begin new initiatives to strengthen their market position. Looking at the current state of the economy in the chart below, across the board, they are more confident than their peers.

This confidence is projected forward.  They have positive feelings about their future financial well-being. In particular, confidence in their respective businesses is even more pronounced among this group that is planning to put credit to work with a 15 percentage point difference between these companies and everyone else.

Confidence Built on Business Fundamentals 

What is it that makes these business owners more confident? Those poised to put credit to work note specific strengths in their businesses that anchor their confidence. Their positive ratings are multi-dimensional and include financial as well as customer and operational metrics. From cash flow to sales growth, they are more likely to report positive feelings about specific business fundamentals.

Companies looking to put credit to work count sales growth as a key strength.  With a 23 percentage point positive difference in response versus the rest of the market (51 percent versus 28 percent), business owners planning to finance are bolstered by the sales growth in their companies.  They also recognize a unique strength in their abilities to manage timely collects and accounts receivables.

Their confidence is hardly based solely on sales growth, but is rooted in greater control as well.  They demonstrate unique confidence in managing to their annual budget and in managing within their regulatory environment.  They believe they have an ability to generate consistent business results by managing to budget and by preparing for externalities that affect their business.

Proactive Action and Belief in Success 

The positive mindset of the “putting credit to work” businesses is reflected in their specific plans to take action. When asked about their likelihood to move forward with a variety of actions in 2014, they are more likely than their counterparts to indicate a decisive plan of action.

For larger companies with revenues between $10 and $150 million, global expansion tops the list.  Given the continuing growth of international trade overall and of direct foreign investment, this is hardly a surprise.  Domestic market expansion and acquisitions follow as the next priorities distinctly pursued by companies willing to finance growth.  Consistent with their strengths, these companies are looking to maintain sales growth as the recovery unfolds while exploring acquisitions before valuations become too frothy as is typical in at a more mature phase of the business cycle.

Interestingly, smaller businesses (revenues $2 to $10 million) have a slightly different set of priorities.  Smaller companies are more likely to be investing in new technologies as a top priority and expanding into new domestic markets as a secondary priority.  While the focus on easier-to-reach domestic growth is not surprising given their smaller scale, the technology investment bodes well for reaping productivity and innovation benefits as the business cycle develops.

When asked about their “likelihood to meet goals”, executives who are putting credit to work are much more likely to report a likelihood of success in achieving goals for 2014.  Noteworthy was their confidence in their abilities to grow revenues, increase customer satisfaction, reduce expenses and increase financial efficiencies.  In all of these core business management areas, they displayed markedly higher confidence in their ability to perform than the rest of the market.   Today’s businesses seeking credit are doing so of a belief that they can be good management stewards of the funds they seek and are well equipped to take the management steps needed to generate returns for their businesses.

From confidence to next steps

As you read about other growth oriented businesses that either already are or are looking to finance their next actions, you may well be asking yourself a number of questions:  Am I one of these businesses willing to put credit to work to grow? Is my profile consistent with my peers? Am I ready to move forward with financing?

Using credit is once again a positive sign of a healthy business that is investing in and building its future.  As you consider what is best for your business, reach out to other key internal company members, external stakeholders (investors or business partners) and advisors like your CPA, banker or other financial advisor about your business’s readiness to invest in growth. All can help you determine the best path forward for your company.

No matter how you decide to move forward, your SunTrust Relationship Manager is ready to discuss your financial situation and help you make plans to meet your short and long-term goals.

About the Research: SunTrust conducts a quarterly nationwide survey on business topics relevant to its small and mid-sized clients. This research was conducted in March 2014 and surveyed 249 small businesses ($2mn to $9.99mn in annual revenue) and 251 mid-sized businesses ($10mn to $150mn in annual revenue.)

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.


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