Expansion Financing

Expansion Financing is defined as capital used to enlarge the size of a corporation through a variety of means. Expansion financing can be used for internal growth through organic measures such as launch of new products or the acquisition of new customers. Expansion financing can also be used for external growth through execution of mergers and acquisition. In its most simple application, expansion financing is money used by a corporation to increase its working capital or productive capacity to facilitate growth. While not directly related to any one form of capital, expansion financing can be a loan, an equity investment of a combination thereof.  Expansion financing is commonly structured through a cash flow-based loan that provides capital over a long-term horizon, allowing the company to make strategic growth investments.  The repayment profile of the expansion financing loan should be matched to the expected profit growth from the investment.  The most common form of expansion financing is an acquisition which provides immediate scaling in terms of capacity, talent and revenue.  All expansion financings should be shaped to the capital needs of the company and can be customized to fund several growth initiatives simultaneously.  A Company is well served to have an investment banker raise their expansion financing.  They will design the structure, source the lenders and support the capital raising process.  Capital planning is critical for your expansion financing as businesses frequently overlook the extra capital needed for growth or working capital after completing an acquisition.  Due to integration process delays, working capital availability is important to ensure sufficient liquidity.