Aligning Your Capital Structure with Growing Your Business

Published in Complex Rehab on December 13, 2024

Aligning Your Capital Structure with Growing Your Business By Huntington National Bank

As we navigate uncertain economic times, it’s not uncommon for a business owner to be hesitant about investing in their business. It’s a natural reaction to protect what you have built. In fact, 57% of surveyed small business owners agree, or strongly agree, that uncertainty in the economy has prevented them from making investments in their businesses that they would ordinarily make.

However, what you may not realize is that your competitors are investing in their businesses to take advantage of growth opportunities during this time. According to the National Federation of Independent Businesses, 53% of those surveyed made recent capital outlays, and of those, 77% were for new equipment, vehicles, or improving and expanding their facilitiesⁱ. Additionally, 27% were planning capital purchases in the near futureⁱⁱ.

Though it may be easier to maximize your capital structure during good economic times, it is still valuable to look at what you can do in all stages of the economic cycle. By addressing your business’s overall debt picture now, you can take steps to help optimize your business credit to remain financially stable and be positioned to leverage growth opportunities if they arise.

By preparing and adapting now for the economic twists and turns that may lie ahead, you will be working toward the goal most business owners strive for: maintaining strong working capital and positive cash flow to facilitate stability and growth. As you review your current capital structure, consider these questions:

Should you restructure your current debt to create better cash flow?

How can you invest in your business to remain strong and outgrow your competition?

Should you secure access to additional capital—even if you don’t need it today?

The risk tolerance of a business owner will largely determine how they will fund their business and structure their debt. Huntington has helped small business owners examine their company’s capital structure to find a solution that is right for them. We can work with you to understand your goals, your finances, and the specific nuances of your business. Then, we’ll recommend a plan that can help make your company stronger in today’s evolving economic climate.

Capital Investments: Thinking Toward the Future

Capital investment decisions can be challenging under the best of circumstances and are often complicated by overarching economic conditions. A range of headwinds – from inflation to labor challenges to fluctuating interest rates and more – can create concern and uncertainty.

When faced with concerns about the business climate, it’s natural for business owners to postpone new projects and reduce capital investments. What many business owners may not realize is that history suggests that companies that consistently invest in innovation may emerge stronger for their efforts.

Planning for Growth

Developing a robust capital investment strategy requires a long-term mindset that focuses not only on addressing short-term challenges, but also on planting the seeds for opportunities that may pay off down the road. In addition, timing can be a crucial factor. When competitors are cutting back, it may be a good time to acquire resources to support growth and expansion.

During the 2007-2008 global financial crisis, innovators who were studied outperformed non-innovators by 10% and also outperformed the market by upwards of 30% in post-crisis years^†.

Looking Beyond the Traditional

Looking at the unique challenges you anticipate facing as you grow your business can help to determine where to make investments that matter. For example, labor challenges are an area where many small business owners are looking to automation as a solution. This may signal a shift in capital expenditures away from traditional areas such as equipment to investments in automation and artificial intelligence that may help address productivity and efficiency without adding labor costs.

COVID-19 changed how businesses invest. ‘Plant and equipment’ is becoming more ‘equipment’—especially IT equipment—and less ‘plant’^‡.

Taking a Strategic Approach

There are many decisions to make when considering capital investments. Along with performing a short and long-term analysis of benefits and risks, it may be prudent to think through other impactful considerations such as cash flow factors, liquidity implications, budgeting, tax incentives, and more. The consistent payment terms associated with debt allow business owners to know up front how an investment will impact cash flow^§.

Huntington can help you address many facets of your business by bringing forward key insights, new ideas, and thoughtful solutions. Connect with the business banking team at Huntington to discover the many ways we can help you grow and strengthen your business.

i McKinsey & Company. Back to Business–Small Business Sentiment. August 17, 2020.

ii William Dunkelberg & Holly Wade. NFIB Small Business Economic Trends. October 2020.

The information provided in this document is intended solely for general informational purposes and is provided with the understanding that neither Huntington, its affiliates nor any other party is engaging in rendering financial, legal, technical or other professional advice or services, or endorsing any third-party product or service. Any use of this information should be done only in consultation with a qualified and licensed professional who can take into account all relevant factors and desired outcomes in the context of the facts surrounding your particular circumstances. The information in this document was developed with reasonable care and attention. However, it is possible that some of the information is incomplete, incorrect, or inapplicable to particular circumstances or conditions. NEITHER HUNTINGTON NOR ITS AFFILIATES SHALL HAVE LIABILITY FOR ANY DAMAGES, LOSSES, COSTS OR EXPENSES (DIRECT, CONSEQUENTIAL, SPECIAL, INDIRECT OR OTHERWISE) RESULTING FROM USING, RELYING ON OR ACTING UPON INFORMATION IN THIS DOCUMENT EVEN IF HUNTINGTON AND/OR ITS AFFILIATES HAVE BEEN ADVISED OF OR FORESEEN THE POSSIBILITY OF SUCH DAMAGES, LOSSES, COSTS OR EXPENSES.

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† Furstenthal, Laura, Erik Roth, and Sean Brown. 2021. Innovation - The Launchpad Out of the Crisis. September. Accessed January 11, 2022.

‡ Bachman, Daniel. 2022. “Is the writing on the wall for buildings? Business investment since COVID-19.” Deloitte Insights , January 28. Accessed January 11, 2022.

§ McCullah, Susan. 2022. “Debt financing vs. equity financing: Do you want to take out a loan or take on investors?” Insider, March 10. Accessed January 13, 2023.

Third-party product, service and business names are trademarks/service marks of their respective owners.

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