Financing 4 ways to finance business growth

3. Equipment term loan

This loan is used to buy the necessary equipment to run your business, including trucks and other vehicles, construction equipment, manufacturing lines, robotics, medical equipment, computers, and more.

Growth objectives: Adding equipment to increase output or support new product lines, or updating obsolete equipment to keep pace with technology

Financing terms to know: Equipment term loans typically allow you to finance your purchase for up to five or even seven years. Alternatively, an equipment line of credit provides the flexibility to buy more often. You may be offered 100% financing on new equipment and 70% or 80% on used equipment.

Considerations: How do you determine whether a loan or a line of credit is the right move for your equipment needs? An equipment term loan may be the smartest option if your company doesn’t need to purchase equipment frequently. But if you’re heavily reliant on equipment that needs to be updated regularly—such as trucks, trailers, or forklifts—you may want to consider an equipment line of credit.

“The line of credit gives you readily available cash for equipment purchases,” says Belk. “Then, as you buy equipment every quarter, we can bundle those purchases into one term loan. So, you have the ability to make quick purchases combined with the lower, fixed rates of a term loan. As the debt is paid down, you receive more availability back on your line of credit.”

Belk says if your company typically purchases equipment with cash, moving to a loan or line of credit can help optimize cash flow. You’ll be able to keep more money in the business to invest in growth initiatives.

4. Acquisition loan

This loan can be used to acquire another business.

Growth objectives: Inorganic growth through acquisition to expand your reach into new markets, add new capabilities, or diversify product offerings

Financing terms to know: Acquisition loans come with shorter terms, typically three to five years. They’re most often used by larger businesses, either at the top end of the commercial segment or into the middle market range, because those companies have a higher capacity to take on additional debt.

Considerations: Belk says when clients come to Truist looking to acquire a particular business, their relationship manager can bring in a team of experts, including industry specialists, to review the target company’s financials and advise on the purchase price.

“We also have clients that are very acquisitive, purchasing businesses every year or two,” says Belk. “We can add a stipulation to their loan agreement that if the target business meets predetermined thresholds, we’ll finance it. Those agreements can be tailored to the individual business based on their industry and how often they purchase.”

A similar acquisition financing method Belk says he sees often is a seller note. Under this arrangement, Company A agrees to pay Company B a certain amount over a set period of time—without taking out a bank loan. In this case, Truist relationship managers can advise on how to structure these agreements and bring in industry specialists to help with valuations. 

Finding financing that fits

With so many unique solutions to fit a company’s needs, communication is key when it comes to funding your growth. Your Truist relationship manager will not only explain your options at the time, but stay in contact as your needs evolve and connect you with the resources to help you thrive.

“It comes down to surrounding our customers with all the tools we have at Truist,” says Belk. “Our team does a really good job of having the client in the center of the relationship and then getting the right people in the room to help meet their needs.”