Whether you’re expanding your operations, entering new markets, or launching new products, funding can be a critical tool to help you deliver your business growth strategies.
In this article, we’ll talk about two of the main options you can use to grow your business successfully - business loans and equity finance – to help you determine whether these might be the right choice for you. We’ll also provide some examples of Welsh businesses that have recently secured funding for business expansion.
How can funding help you grow?
A business loan or equity investment could provide your business with the resources it needs to take advantage of new opportunities and expand. Here are a few ways in which your business might benefit from a cash injection:
- Opening a new location – business finance could help you purchase or rent a new property and/or equipment and cover the initial operating costs.
- Extending your existing space - if your current office or production facility is reaching capacity, getting funding could allow you to extend the space, enabling you to scale your operations and meet growing demand.
- Launching new products or services - expanding your range of products or services can be another great way of driving growth, but there are often a lot of expenses involved. Funding could cover the costs of research and development, production, marketing, and distribution to successfully bring new products to market.
- Entering new markets – moving into new geographic markets or industry sectors can open up additional revenue streams for your business. You might need to raise funding to help with the expenses associated with market research, marketing campaigns, exporting, or establishing a local presence.
- Recruiting and training staff – building a great team is key to business growth. You might want to use funding to hire more employees or train your existing team up.
How to raise funds for business expansion
When it comes to financing your company’s growth, two of the most common options are business loans and equity finance. Which is right for you depends on the nature of your company and what your goals are. Many companies opt for a mixture of the two.
Business loans
A business loan allows you to borrow a lump sum of money, which you repay with interest over a set period of time, often in monthly instalments. It may be a good option for you if:
- Your business has consistent cash flow to handle repayments
- You want to remain the sole owner of your business
- You need to raise money quickly – getting a business loan generally takes less time than raising equity investment
We discuss the differences between loans and equity finance in more detail in our article, What is the difference between equity and debt?
One company that is using a follow-on loan to drive business growth is professional motorsport business, Blendini Motorsport. The business relocated from Edwards Business Park in Llantrisant to a 135,000 sq.ft site in Llandow, part-funded by a substantial seven figure loan from us. With two aircraft hangers and seven industrial units, the new premises allows room for growth and reduces operational costs with space to service vehicles on site including HGV’s.
Managing Director of Blendini Motorsport, Tom Roche said: “Since my early days of racing, I have always believed that success is a team effort be that on the track or in the boardroom. We’ve got a great team at Blendini and with the continued support of the Development Bank, we now have the right premises to supercharge our growth and reduce operational costs. It’s a win-win as we continue to see increased demand for our experience days and associated services.”
Equity finance
Raising capital by selling shares in your business is known as equity finance. It can be a great way of accelerating your company’s growth and increasing its value.
Many businesses use equity investment to drive expansion, scaling up, and entering new markets. One advantage of equity finance is that you don’t need to make repayments, so more of the capital can be put toward growing your business. Equity investors can also bring valuable expertise, experience, and contacts, so if you think you’d benefit from having a strategic partner in the business, then equity may be the right choice for you.
Businesses using funding for growth
Mallows Bottling is ramping up production with a seven-figure equity investment from us, which will more than treble capacity and create 18 new jobs.
Established in 2021 by Directors Andrew Mallows and his son Rhys, the Tonyrefail-based manufacturing business provides contract bottling for leading retailers in the international spirits and soft drink industry. Their 30,000 sq. ft purpose-built bonded facility is accredited with the British Retail Consortium and can fill up to 90 million bottles a year.
The investment will be used to fund the purchase of a new filler that can produce up to 6,000 bottles per hour, creating five high-speed lines. The company won “Scale-Up of Company the Year” at the Wales Food and Drink Awards in May 2024, as well as winning the “Food and Drink Award” at the Insider Made in Wales awards for 2023.
We have also recently supported Caerphilly-based SPORTTAPE with a follow-on business loan. Established by Directors Kate-Anne Kelly and Carl Austin in 2010, SPORTTAPE offers a range of winning tapes for sport. An initial loan of £250,000 from us in 2022 to fund working capital helped SPORTTAPE to grow turnover from £1 million to over £4 million in just two years. Having recently relocated to a new 10,000 sq.ft unit at Pant Glas Industrial Estate in Bedwas, the company will now use the latest equity and debt investment of £1 million to fund the next stage of growth with the aim of trebling turnover to £12 million.
Directors Kate-Anne Kelly and Carl Austin said: “We self-funded our first 10 years in business but then a loan from the Development Bank in 2022 helped to transform our growth by providing working capital to invest in product development and marketing. Their support has made us realise our potential so this latest investment is a natural next step on our journey. We can’t thank them enough for believing in SPORTTAPE and providing the funding that will now enable us to target a more global customer-base with investment in marketing, product development and stock.”
Business growth funding from the Development Bank of Wales
We can provide loans, equity, or a mixture of the two to create a tailored growth package for your business. If you’re interested in discussing your options, please get in touch with us.
