Financing and Capital Markets

Beyond Reserves: Lining up Growth Capital

Man and woman in front of computer collaborating for "Beyond Reserves: Lining up Growth Capital"

Business owners are renowned for going "all in" on their businesses, with both energy and financial resources. That commitment can leave few reserves to cover cash flow variability or downturns. Owners often turn to financing sources to maintain cash flow and provide capital for growth.

According to SunTrust Research1, one in four business owners plan to use bank financing for operations. The majority of owners feel confident that they have access to credit, and 18 percent of those owners plan to use a line of credit or loan. Finding the best funding sources to match your business situation and financing needs and can keep your business operations running smoothly and your plans on track.

Keep it separate

While many business owners draw on personal resources to support their businesses as they get started, counting on personal funds to support ongoing growth could leave the business short of growth funds and the owners over-concentrated in a single business. Owners with large ownership stakes often identify closely with their businesses. When there is a need for capital, it's easy to let personal finances supplement business finances. However, investing additional funds in your business could add risk to your personal asset portfolio with a high concentration in a single, small business, even if it is one that you tightly control. Beyond the risks poor diversification brings to personal assets, owners actively securing funds for growth need to develop several sources of growth capital to ensure the business can take advantage of outside opportunities or weather unexpected challenges.

Maintaining cash flow

Business leaders cite cash flow as a top factor that drives business strength. Being prepared to effectively manage cash flow volatility, whether predictable, like seasonality, or unpredictable, like unexpected repairs, loss of a major customer or a new competitor taking market share, means having capital reserves or access to new capital sources. It can be the difference between having to go through layoffs or having the agility to absorb changes in the business landscape. There are many capital sources that are available to help you strengthen your business cash flow.

Primary Sources of Financing

When looking to find capital sources, start with a basic understanding of financing options and how each matches your business need. Consider financing terms, making sure they match your business plans, your cash flow and your anticipated needs for capital. The most common types of financings and their uses for your business growth plans include:

Line of credit

A line of credit, or "revolving credit" as it is also known, supports immediate short-term cash needs. Your business will be approved for a pre-determined amount of credit, and then you can borrow against the line in increments up to your credit limit. This type of a credit line provides the flexibility to repay the debt and to re-borrow the funds as the business and cash flow needs change. It is not uncommon for a business to borrow and repay the line amount two to three times during a year. A line of credit is an excellent tool to cover payroll, pay bills and rent, or even purchase inventory when the business becomes a little short of cash.

Business credit card

A business credit cards can help cover cash flow needs by extending payment of expenses with monthly billing. Cards provide an additional source of readily-available credit to bridge revenue shortfalls or handle higher expenses. In addition to providing float and a source of credit, you can add a robust card management system and extend card usage to your employees, allowing you to manage their spending limits and track their card usage.


A lease is typically used to acquire equipment necessary for your business. The advantage of leasing versus purchasing equipment outright is twofold: 1) a lease strengthens your financial position by keeping the debt off your balance sheet, and 2) leasing frees up cash that would otherwise be invested in purchasing the equipment outright. Leasing also protects against obsolescence with equipment that can be turned over or upgraded easily if useful for only a few years.

Term loan

A term loan is secured with collateral from your business, such as equipment, and have predictable monthly payments for easy budgeting. Fixed length term loans are commonly used for fixed asset acquisition or can provide longer-term capital for expansion items such as purchasing equipment, business acquisition or working capital needed for growth.

Commercial real estate mortgage loan

A commercial real estate mortgage loan is a popular source of capital in today's environment. Structured based on use of the property — owner occupied or investor property — mortgage loans have terms up to 25 years and can be used to purchase, refinance or improve existing buildings. Mortgaging property (whether new or improving for expansion) can free up large amounts of working capital and help improve your company's cash flow.

Vendor trade lines

Vendor trade lines can be used to smooth cash flow by changing the timing of payments for materials or services. Trade lines are effectively credit provided by your vendor and typically have terms that indicate when payments are due dates. By strategically planning when your payments are due, you can use a trade line as a source of capital.

Maximizing the Right Mix of Capital

Each type of financing performs a different role as a capital resource. Many businesses find that having more than one type of available capital increases the flexibility of their financing sources. Having both a short-term capital resource — like a line of credit — combined with a long-term capital resource — like a real estate mortgage — allows you to have an answer to most questions of how to make cash flow stronger and support your plans. Your specific needs will be determined based on a combination of past history, future goals and current cash needs.

Let’s talk about putting the best capital sources to work for your business. Contact your SunTrust Relationship Manager or visit

1 SunTrust Research with 255 businesses (annual revenue between $2 million and $9.99 million) conducted in Q1 2017.

This content 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.