There’s an old saying sometimes attributed to Mark Twain about bankers only lending umbrellas when the sun is shining. In some ways, this applies to financing and the capital market in general, and right now the sun is shining brightly. Smart businesses are taking advantage now.
The current low-interest rate environment offers lots of opportunity, but it won’t last forever. Most Fed watchers believe interest rates will begin climbing by the middle of next year, so acting soon is important.
Low rates are great fuel to expand your business. If you’ve been thinking about making capital expenditures by adding equipment, expanding your product range or making other improvements, money will never be cheaper to borrow than it is today. Even if you’re not improving your business, your competitors will be expanding theirs.
Time to take advantage
Here are some ways to use today’s friendly financing market to increase the scale of your company
- Expand or improve production capabilities.
- Grow your distribution footprint.
- Boost your sales and marketing efforts. In many industries, customers are in a buying mood and great salespeople pay for themselves.
- Acquire competitors. Acquisitions add customers and could take your business into a new region, expand capabilities or gain other efficiencies.
Taking on debt can feel risky for some entrepreneurs, particularly ones who think their business is holding steady. There is risk, however, in staying put. If you’re not growing, you’re likely falling behind. You may be too close to the matter to see it, but consistent (read: flat) numbers are probably declining in terms of market share.
Change in appetite?
If you have achieved your personal goals with your company and have lost the appetite for the added risk that comes with growth strategies, now is a great time to diversify your personal wealth because it’s a great time to sell. Low interest rates and a hypercompetitive market for mergers and acquisitions have resulted in all-time high valuations.
In this growth-oriented and growth-friendly environment, selling might be your best bet, whether you prefer to sell to a competitor or to a financial buyer like a private equity firm.
The great thing about this seller’s market is that you have so many choices. You could sell your whole company, or just “take some chips off the table” by selling a small percentage and retain control of your business. This partial liquidity scenario may provide the personal safety net that gives you comfort in adding the risk associated with a more aggressive growth plan for the business. Whatever your preference, now is an excellent time to evaluate your options.
Your proceeds from a liquidity event can fuel your passion for growth. It might be your current company. It might be a garden. Perhaps it’s your philanthropic efforts or the number of stamps on your passport. Maybe it’s just your golf game. Whatever it is, seize the day before the rain clouds appear — and the capital markets ask for their umbrella!
