{"id":13682,"date":"2021-11-17T15:55:20","date_gmt":"2021-11-17T19:55:20","guid":{"rendered":"https:\/\/www.cofinia.ca\/?p=13682"},"modified":"2023-04-26T15:53:01","modified_gmt":"2023-04-26T19:53:01","slug":"growth-stages-of-a-business-and-type-of-financing-2","status":"publish","type":"post","link":"https:\/\/www.cofinia.ca\/en\/blogue\/non-classifiee\/growth-stages-of-a-business-and-type-of-financing-2\/","title":{"rendered":"Growth stages of a business and type of financing"},"content":{"rendered":"<p><span data-contrast=\"auto\">For each stage of its development, a company needs a means of financing adapted to its growth.\u00a0Whether it&#8217;s equity to launch a project, credit to support its business development or propel new products to market, entrepreneurs must establish a financing strategy to ensure the sustainability and expansion of their long-term businesses.\u00a0\u00a0<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<h2 aria-level=\"2\"><span data-contrast=\"auto\">What are the stages of business growth?<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/h2>\n<p><span data-contrast=\"auto\">Identifying business life cycles allows managers and investors alike to:<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<ul>\n<li>\n<ul>\n<li>\n<ul>\n<li>\n<ul>\n<li>\n<ul>\n<li data-leveltext=\"\u25cf\" data-font=\"\" data-listid=\"1\" aria-setsize=\"-1\" data-aria-posinset=\"1\" data-aria-level=\"1\"><span data-contrast=\"auto\">Prepare adequate measures to face different\u00a0\u00a0<\/span><a href=\"https:\/\/translate.google.com\/website?sl=fr&amp;tl=en&amp;hl=fr&amp;client=webapp&amp;u=https:\/\/cofiniatestdev.wpengine.com\/la-gestion-des-risques-financiers-en-entreprise-2\/\" target=\"_blank\" rel=\"noopener\"><span>challenges and risks<\/span><\/a><span data-ccp-props=\"{\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\u25cf\" data-font=\"\" data-listid=\"1\" aria-setsize=\"-1\" data-aria-posinset=\"2\" data-aria-level=\"1\"><span data-contrast=\"auto\">Take advantage of potential economic opportunities<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\u25cf\" data-font=\"\" data-listid=\"1\" aria-setsize=\"-1\" data-aria-posinset=\"3\" data-aria-level=\"1\"><span data-contrast=\"auto\">Choose appropriate funding sources\u00a0<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h3 aria-level=\"3\"><span>.<\/span><\/h3>\n<h3><span>.<\/span><\/h3>\n<h3 aria-level=\"3\"><span data-contrast=\"none\">Business life cycle<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/h3>\n<p><img decoding=\"async\" class=\"alignnone size-large wp-image-10824 entered lazyloaded\" src=\"https:\/\/www.cofinia.ca\/wp-content\/uploads\/PDFtoJPG.me-1-2.jpg\" alt=\"\" width=\"1024\" height=\"576\" data-lazy-src=\"https:\/\/www.cofinia.ca\/wp-content\/uploads\/PDFtoJPG.me-1-2.jpg\" data-ll-status=\"loaded\" \/>\u00a0<span>(\u00a0<\/span><a href=\"https:\/\/translate.google.com\/website?sl=fr&amp;tl=en&amp;hl=fr&amp;client=webapp&amp;u=https:\/\/courses.corporatefinanceinstitute.com\/courses\/introduction-to-corporate-finance\" target=\"_blank\" rel=\"noopener\"><span>Source\u00a0<\/span><\/a><span data-contrast=\"auto\">)\u00a0<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<h3><span data-contrast=\"none\">1. Getting Started<\/span><\/h3>\n<p><span data-ccp-props=\"{\">\u00a0<\/span><span data-contrast=\"auto\">After validating the project study and identifying the target market, the start of production and sales of products or services begin.\u00a0Based on\u00a0<\/span><b><span data-contrast=\"auto\">own funds<\/span><\/b><span data-contrast=\"auto\">\u00a0for the acquisition of equipment, premises and personnel if necessary, it is important in this phase to invest in marketing by remaining attentive to customer feedback in order to refine the products according to their expectations.\u00a0Since revenues are low and initial start-up costs high, businesses are likely to incur losses during this stage.<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<h3><span data-contrast=\"none\">2. Growth<\/span><\/h3>\n<p><span data-contrast=\"auto\">In this phase, companies generate rapid sales growth allowing them to break even and earn a profit.\u00a0During this phase, entrepreneurs need a well-established\u00a0<\/span><span><a href=\"https:\/\/translate.google.com\/website?sl=fr&amp;tl=en&amp;hl=fr&amp;client=webapp&amp;u=https:\/\/cofiniatestdev.wpengine.com\/service-de-gestion-financiere-pour-les-pme-cofinia\/\" target=\"_blank\" rel=\"noopener\">financial plan<\/a>\u00a0to \u201cboost\u201d their sales and the implementation of a marketing strategy to overcome the challenges and threats coming from the competition.<\/span><a href=\"https:\/\/translate.google.com\/website?sl=fr&amp;tl=en&amp;hl=fr&amp;client=webapp&amp;u=https:\/\/cofiniatestdev.wpengine.com\/service-de-gestion-financiere-pour-les-pme-cofinia\/\" target=\"_blank\" rel=\"noopener\"><span data-contrast=\"auto\">\u00a0<\/span><\/a>\u00a0<span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<h3><span data-contrast=\"none\">3. Consolidation<\/span><\/h3>\n<p><span data-contrast=\"auto\">The consolidation phase is characterized by a continuous increase in sales, but at a slower pace due to market saturation or the entry of new competitors.\u00a0It is necessary to explore new markets by relying for example on the innovation of products or services.<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<p><a href=\"https:\/\/translate.google.com\/website?sl=fr&amp;tl=en&amp;hl=fr&amp;client=webapp&amp;u=https:\/\/cofiniatestdev.wpengine.com\/tranche-de-vie-dentrepreneur-les-ventes\/\" target=\"_blank\" rel=\"noopener\"><span>Optimize your sales with an intelligent CRM<\/span><\/a><\/p>\n<h3><span data-contrast=\"none\">4. Maturity<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/h3>\n<p><span data-contrast=\"auto\">When the business reaches the mature stage, sales begin to slowly decline.\u00a0Thus, profit margins are shrinking, while cash flow remains relatively stagnant.<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">However, it is important to note that many companies extend their life cycle during this phase by reinventing themselves and investing in new technologies to gain segments in emerging markets.\u00a0This allows entrepreneurs to reposition themselves in their sectors and\u00a0<\/span><b><span data-contrast=\"auto\">renew their growth<\/span><\/b><span data-contrast=\"auto\">\u00a0.<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<h3><span data-contrast=\"none\">5. Decline<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/h3>\n<p><span data-contrast=\"auto\">In the absence of the implementation of a new marketing and financial strategy, sales, profits and cash flow all decrease.\u00a0During this phase, companies come to terms with their failure to extend their life cycle by adapting to the changing business environment.\u00a0They end up losing their competitive advantages and leaving the market.\u00a0<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<h2 aria-level=\"2\"><span data-contrast=\"auto\">What are the preferred sources of financing depending on the growth stage of your business?<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/h2>\n<p><span data-contrast=\"auto\">The accessibility to financing and its cost are determined throughout the life cycle of the company according to the level of risk envisaged by each phase.\u00a0The company&#8217;s risk decreases as it makes sales involving the growth of liquidity and profitability.<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<h3 aria-level=\"3\"><span data-contrast=\"none\">Funding for the start-up phase<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/h3>\n<p><span data-contrast=\"auto\">At this stage, the company has a large operational risk.\u00a0Thus, the agents interested in financing are the entrepreneur who wants to invest in his idea, his relatives who wish to support him and the investors ready to invest their capital in a risky idea, but which presents a strong potential return.<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">The first source of financing for the company is the down payment by the associates, their friends and their relatives.\u00a0As the company makes sales, it strengthens its power to convince outside investors of the potential of its business.<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">At the start-up stage, angel investors can also offer financing.\u00a0They are often business people with a high risk tolerance, extensive management experience and an objective to grow their investment in the medium and long term before selling their shares.\u00a0Government loans are also\u00a0<\/span><a href=\"https:\/\/translate.google.com\/website?sl=fr&amp;tl=en&amp;hl=fr&amp;client=webapp&amp;u=https:\/\/cofiniatestdev.wpengine.com\/des-programmes-pour-aider-financierement-les-entreprises-du-quebec\/\" target=\"_blank\" rel=\"noopener\"><span>interesting financing tools<\/span><\/a><span data-contrast=\"auto\">\u00a0\u00a0for SMEs.<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<p><a href=\"https:\/\/translate.google.com\/website?sl=fr&amp;tl=en&amp;hl=fr&amp;client=webapp&amp;u=https:\/\/cofiniatestdev.wpengine.com\/financement-des-entreprises-guide-des-subventions-startups\/\" target=\"_blank\" rel=\"noopener\"><span>Guide to Startup Grants<\/span><\/a><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<h3 aria-level=\"3\"><span data-contrast=\"none\">Funding for the growth phase<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/h3>\n<p><span data-contrast=\"auto\">At this stage, the company still presents risks at the operational level, but its sales increase significantly and its liquidities become positive, as does its profitability threshold.\u00a0Thus, new investors are ready to finance the company, because the risk of having a negative return on investment becomes increasingly low.\u00a0Unlike the start-up stage, these\u00a0<\/span><b><span data-contrast=\"auto\">investors are now institutional and not just individual.<\/span><\/b><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Venture capital companies are companies made up of different partners specializing in the private investment of young companies with high potential.\u00a0The investment comes from the various partners.\u00a0Generally, these partners require a significant return and therefore, this means of financing is relatively expensive.<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">In addition, the venture capital company is interested in active participation in the governance of the company and will therefore own significant shares in it, in addition to occupying a place on the board of directors.\u00a0These companies are expert in management and have a large network of contacts, making them important allies in the growth of a business.<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Institutional and corporate investors can invest directly in the company or by becoming partners in a venture capital company.\u00a0Their interests are financial and strategic.\u00a0These are usually pension funds, insurance companies or foundations.<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<p><a href=\"https:\/\/translate.google.com\/website?sl=fr&amp;tl=en&amp;hl=fr&amp;client=webapp&amp;u=https:\/\/cofiniatestdev.wpengine.com\/comment-gerer-ses-liquidites\/\" target=\"_blank\" rel=\"noopener\"><span>Financial guide for SMEs<\/span><\/a><\/p>\n<h3 aria-level=\"3\"><span data-contrast=\"none\">Financing of the consolidation phase<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/h3>\n<p><span data-contrast=\"auto\">Funding at the level of the consolidation phase is a continuation of the previous stages.\u00a0<\/span><span data-contrast=\"auto\">Angel\u00a0<\/span><b><span data-contrast=\"auto\">investors<\/span><\/b><span data-contrast=\"auto\">\u00a0probably want to get out of their position and sell their shares to another angel or to the company directly.<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<h3><span data-contrast=\"none\">Funding for the maturity phase<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/h3>\n<p><span data-contrast=\"auto\">Financing at this stage opens at the level of indebtedness, the issuance of long-term debt and the public issuance of shares.\u00a0Banks are interested in lending money to the company if the latter is now able to demonstrate sufficient financial health to repay the loan.<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Banks will always be willing to finance, but as the company matures and becomes profitable, the terms are more attractive to the business as it carries less risk in the eyes of lenders.\u00a0<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Banks will then analyze working capital, interest coverage and debt ratios.\u00a0<\/span><span><a href=\"https:\/\/translate.google.com\/website?sl=fr&amp;tl=en&amp;hl=fr&amp;client=webapp&amp;u=https:\/\/cofiniatestdev.wpengine.com\/service-de-gestion-financiere-pour-les-pme-cofinia\/\" target=\"_blank\" rel=\"noopener\">Forecast financial statements<\/a>\u00a0are\u00a0\u00a0also requested to support the financial health of the company.<\/span><a href=\"https:\/\/translate.google.com\/website?sl=fr&amp;tl=en&amp;hl=fr&amp;client=webapp&amp;u=https:\/\/cofiniatestdev.wpengine.com\/service-de-gestion-financiere-pour-les-pme-cofinia\/\" target=\"_blank\" rel=\"noopener\">\u00a0<\/a><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Adequate use of debt is very important for companies, because interest payments are tax deductible, which allows a reduction in the cost of financing the firm.\u00a0The company can itself issue debt via commercial bonds.\u00a0It will therefore obtain direct financing from its creditors in exchange for fixed payments.<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">The public issuance of shares is done on public stock exchanges.\u00a0The company pays a fee to a subscriber (usually a broker from a large bank) who will ensure the sale of the new shares issued to the various investors, whether private, institutional or individual.<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<h3 aria-level=\"3\"><span data-contrast=\"none\">Financing of the consolidation phase<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/h3>\n<p><span data-contrast=\"auto\">This stage is not characterized by a particular financing method.\u00a0Generally, existing funding at that time may stagnate, as the company has less need for liquidity resulting from operational decline.<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">It is important to know that the financing methods above are not exclusive to each stage of growth.\u00a0The idea here is to show when the company can obtain a type of financing depending on its stage of development.\u00a0Of course, as a business evolves in its life cycle, the previous means of financing are still available to it<\/span><span>.<\/span><\/p>\n<h2 aria-level=\"2\"><span data-contrast=\"auto\">Would you like to consult an expert in financial management?<\/span><span data-ccp-props=\"{\">\u00a0<\/span><\/h2>\n<p><span data-contrast=\"auto\">The\u00a0\u00a0<\/span><b><span data-contrast=\"auto\">financial management<\/span><\/b><span data-contrast=\"auto\">\u00a0of a company is not a task to be taken lightly, especially in an increasingly uncertain economic environment.\u00a0With its expertise in\u00a0<\/span><span><a href=\"https:\/\/translate.google.com\/website?sl=fr&amp;tl=en&amp;hl=fr&amp;client=webapp&amp;u=https:\/\/cofiniatestdev.wpengine.com\/service-de-gestion-financiere-pour-les-pme-cofinia\/\" target=\"_blank\" rel=\"noopener\">accounting\u00a0<\/a>,\u00a0<a href=\"https:\/\/translate.google.com\/website?sl=fr&amp;tl=en&amp;hl=fr&amp;client=webapp&amp;u=https:\/\/cofiniatestdev.wpengine.com\/service-de-gestion-financiere-pour-les-pme-cofinia\/\" target=\"_blank\" rel=\"noopener\">financial modeling<\/a>\u00a0and\u00a0\u00a0business\u00a0<a href=\"https:\/\/translate.google.com\/website?sl=fr&amp;tl=en&amp;hl=fr&amp;client=webapp&amp;u=https:\/\/cofiniatestdev.wpengine.com\/service-conseil-en-intelligence-daffaires-cofinia\/\" target=\"_blank\" rel=\"noopener\">intelligence<\/a>\u00a0, Cofinia is able to support you throughout the life cycle of your business by offering you personalized solutions allowing financial stability, whatever the challenge encountered.<\/span><a href=\"https:\/\/translate.google.com\/website?sl=fr&amp;tl=en&amp;hl=fr&amp;client=webapp&amp;u=https:\/\/cofiniatestdev.wpengine.com\/service-de-gestion-financiere-pour-les-pme-cofinia\/\" target=\"_blank\" rel=\"noopener\"><span data-contrast=\"auto\">\u00a0<\/span><\/a><a href=\"https:\/\/translate.google.com\/website?sl=fr&amp;tl=en&amp;hl=fr&amp;client=webapp&amp;u=https:\/\/cofiniatestdev.wpengine.com\/service-de-gestion-financiere-pour-les-pme-cofinia\/\" target=\"_blank\" rel=\"noopener\"><span data-contrast=\"auto\">\u00a0<\/span><\/a><span data-ccp-props=\"{\">\u00a0<\/span><\/p>\n<p><span>Get a consultation<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>For each stage of its development, a company needs a means of financing adapted to its growth.\u00a0Whether it&#8217;s equity to launch a project, credit to support its business development or propel new products to market, entrepreneurs must establish a financing strategy to ensure the sustainability and expansion of their long-term businesses.\u00a0\u00a0\u00a0 What are the stages [&hellip;]<\/p>\n","protected":false},"author":9,"featured_media":13683,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[1,3],"tags":[],"class_list":["post-13682","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-non-classifiee","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.cofinia.ca\/en\/wp-json\/wp\/v2\/posts\/13682","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.cofinia.ca\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.cofinia.ca\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.cofinia.ca\/en\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/www.cofinia.ca\/en\/wp-json\/wp\/v2\/comments?post=13682"}],"version-history":[{"count":0,"href":"https:\/\/www.cofinia.ca\/en\/wp-json\/wp\/v2\/posts\/13682\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.cofinia.ca\/en\/wp-json\/wp\/v2\/media\/13683"}],"wp:attachment":[{"href":"https:\/\/www.cofinia.ca\/en\/wp-json\/wp\/v2\/media?parent=13682"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.cofinia.ca\/en\/wp-json\/wp\/v2\/categories?post=13682"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.cofinia.ca\/en\/wp-json\/wp\/v2\/tags?post=13682"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}