Launching a business requires capital, whether you’re funding the construction of a new facility, bringing in equipment to support production, or extending your cash runway until revenue increases. But raising capital in the early stage isn’t easy.

With a limited record of previous performance to analyze, convincing a lender or investor of your potential for success in the marketplace can be challenging. That’s why having a financial partner that fully understands the needs and nuances of early-stage businesses is critical.

“One of the tools we use to help clients think about their business in a way that operationalizes it and creates a higher probability of success is Truist Business Lifecycle Advisory,” says Travis Rhodes, Pennsylvania & New Jersey regional president at Truist. “Because we’ve walked this path from early to growth to established to transition with our clients, we can fully address a company’s unique needs at each lifecycle stage.”

Here are some insights that can help young businesses build the foundation they need to grow.

Make your case for business credit

When seeking a commercial loan or line of credit, Rhodes says, “It’s all about de-risking the business.” Your lender will want assurance that you can generate enough cash flow to pay down debt, manage costs, and maintain profitability. Your bank may consider several factors—both qualitative and quantitative—when evaluating your company’s creditworthiness. Your relationship with your bank is critical during this time because the knowledge they have of your company beyond just the numbers may weigh into their decision.

Strength of the business plan: Your bank will want to see how you’ve built your business plan and how you’re executing on that strategy. “What’s your liquidity? Are you pricing the right way for the market and building enough gross margin to cover expenses?” asks Rhodes. “These are foundational elements of your business strategy that your lender will want to look at.”

Be sure your business plan is packed with as much specific detail as possible, outlining your goals, products or services, marketing plan and sales strategies, and financial projections. You want your business plan to convey the value your company will bring to the market and what will make it stand out.

Market/industry potential: Is there a demonstrated need in your market or industry that your business will fulfill? Whether you’re meeting changing customer preferences with a new product or catering to an underserved customer segment, your bank will want to know if there’s a big enough market to support your business plan.

Your Truist relationship manager can help you access market research to identify trends you can capitalize on—and know who your competition will be. They can also connect you with an industry specialist who can provide even more in-depth insights.

“Every industry has its nuances,” says Rhodes. “Our industry specialists help identify trends so business owners can make informed decisions—which lets us know as a lender that the owner is factoring all the industry variables into their strategy.”

Management team experience: Previous success in getting a business through the early stage and into the established stage can go a long way in convincing a lender you can do it again. If it’s your first time launching a business, consider bringing in a more experienced co-founder or other leadership team members who can add their credentials to the endeavor.

Personal financial strength: When your business is newer and doesn’t yet have extensive financial records, your lender may look closely at the founders’ personal finances. This documentation will help demonstrate financial stability, experience managing financial ups and downs, and the ability to put your own money into the company if necessary. Be sure to include a balance sheet of assets and liabilities and statements on income and cash flow.

Passion for the business: Financial data and market research will go a long way in making your case to a lender—but demonstrating a passion for your product or service can also play a role. As your relationship manager gets to know your business, they’ll also get to know you. And that’s often just as important in the early stage as analyzing financial performance.

“I have never come across an entrepreneur who’s not passionate about their business,” says Rhodes. “Make sure that passion shines through in your pitch.”

Because we’ve walked this path from early to growth to established to transition with our clients, we can fully address a company’s unique needs at each lifecycle stage.
-Travis Rhodes, Pennsylvania & New Jersey Regional President, Truist

Think beyond commercial loans for funding alternatives

If traditional debt financing is proving challenging for your early-stage business, there are other capital-raising methods to consider. Your Truist relationship manager can talk you through the pros and cons of each funding type.

Equity financing

With equity financing, you sell a share of your business to infuse capital into it. You can do that through a single investor—often called an angel investor—who buys a stake in your company or through a venture capital group that invests in businesses they believe have high growth potential. Rhodes says the key with equity financing is ensuring the opportunity is worth the cost.

“When the value that you’ll create through the opportunity outweighs the cost of selling off a piece of your business,” says Rhodes, “that’s when to consider equity. You won’t have debt to pay back, but you’ll share profits, ownership, and some control over strategic planning.”

Much of the value of equity funding, he says, could come from the professionalism and experience that an institutional or angel investor could bring to your company. Or it could be the backing that an equity investor could provide to help operationalize and grow your company.

“Partnering with an equity investor could open you up to new customers or markets that you might not have been able to reach on your own,” says Rhodes.

Small Business Administration (SBA) loans

If you meet the eligibility requirements, SBA loans can be an invaluable source of funding in the early stage. They offer a wide range of credit options, competitive fees and rates, extended repayment terms, and smaller down payments than traditional commercial loans.

“Because the SBA provides a guarantee or a portion of the capital, that allows the bank to lean into higher loan values,” says Rhodes. “Lower down payments mean companies can keep more cash on the balance sheet for working capital.”

Even if you believe your business is too large for an SBA loan, it’s an option worth exploring with your relationship manager. The size standards for SBA qualification revolve around either revenue or employee count, depending on your industry.

> Read how Truist client Willow Designs leveraged the benefits of an SBA loan to triple its workspace and increase revenue.

Equipment financing

Equipment can be a major expense in the early stage, whether you need vehicles, machines, or computer hardware. Equipment financing options include leasing or buying—and each has advantages. For example, owning your equipment means you can count the machines as assets that can increase your enterprise value. However, leasing reduces upfront cash requirements, preserves working capital, and makes upgrading equipment easier in the long run.

“It’s important to find a balance between meeting short-term objectives while keeping long-term goals in sight,” says Rhodes. “For example, consider a lease if you only have short-term needs for the equipment and it won’t be used again. Buying may make more sense if you have long-term needs where the equipment will be used again and again.”

Building a foundation for growth

The early stage of business is an exciting time. You’re turning what was once just a dream into a reality. And the moves you make now are helping you build a solid foundation for whatever comes next.

Rhodes emphasizes the importance of working with your relationship manager to develop a strategy for long-term, sustainable growth that allows your business to self-fund and avoid becoming over-leveraged.

“You want to build your balance sheet to take advantage of the opportunities that are presented to you,” says Rhodes. “And that work is best done now, in the early stage, with a financial partner that understands every step of the business lifecycle.”

What business lifecycle advice can benefit you right now?

Contact your Truist relationship manager to see how we can work together to find custom solutions to meet your evolving needs.

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Related resources

Strategic Advice

4 equity financing strategies for early-stage businesses

Financing

Finding your long-term credit delivery solution

Strategic advice

How to manage costs while growing your business

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Connect with a Relationship Manager

Work with a partner who sees your vision and has the resources to help you achieve it. We’re ready to focus on the specific needs of your company—and where you are in your business lifecycle.

*This form is for prospects. Truist clients should contact their relationship manager with inquiries related to commercial products and services.

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