Financing the Corporate Journey: Balancing Growth and Lender Expectations
Companies follow a predictable path as they mature, and their financing requirements evolve accordingly, writes Sarah Briddon, Head of Digital, Technology & Communications & FinTech for Citi’s UK Commercial Bank.
From early-stage startups to mature corporates, each stage of a company’s development brings distinct objectives, risks, and opportunities. Understanding this journey – and how many lenders assess funding requests – is essential for businesses.
In the early stage, companies are usually unprofitable, with volatile earnings and unproven models. Equity funding dominates; the key objectives are flexibility and establishing operational credibility.
As firms grow and scale operations, a clearer path to profitability emerges. Equity remains central, but companies can start to use specialty debt. The focus shifts to managing dilution while retaining flexibility to scale.
The expansion phase marks a turning point. With greater confidence, companies gain access to a wider range of financing tools, from private credit, convertibles, trade and supplier finance to traditional bank debt. Objectives move toward lowering the cost of capital while limiting dilution.
In the sustain stage, businesses are cash flow generative and can benefit from the tax advantages of debt. Equity, debt, and hybrids coexist as firms prepare for credit ratings and more structured capital planning.Mature companies that have achieved sustained profitability and stability have access to the full spectrum of capital markets available to it – from bank loans to bonds and term loans. The focus turns to optimising the weighted average cost of capital, returning value to shareholders, and enabling efficient access to liquidity.
What Lenders Look For
While companies focus on growth, lenders take a complementary but distinct view. When assessing funding requests, they primarily focus on four areas:
- Business and Strategy: Lenders want clarity on industry outlook, growth drivers, and resilience. They pay close attention to customer or supplier concentration risks, evolving consumer trends, and investment in marketing, technology, and data.
- Financial Profile: Beyond revenue and margin forecasts, lenders examine capital expenditure, working capital, liquidity, leverage, and distribution policies.
- Debt Structure: Facility type and size should align with company objectives. Lenders will review pricing, covenants, baskets for acquisitions or disposals, and security.
- Relationship: Companies that treat lenders as long-term partners are more likely to benefit from support. Many firms tier their banking relationships to reflect this, reinforcing the value of alignment.
For lenders, every decision rests on the question of how money will be repaid - through collateral or asset conversion, future capital raising or refinancing, or, most sustainably and importantly, ‘cash flow generation’. With higher interest rates increasing the cost of capital, lenders are placing greater emphasis on cash flow and profitability as the decisive test of viability.
Building a Balanced Future
As companies move from entrepreneurial beginnings to established players, the financing conversation evolves. Businesses must weigh flexibility against the discipline of debt, while lenders focus on repayment through sustainable growth.
The right bank can make a critical difference. Beyond providing capital, global banks such as Citi offer advice, infrastructure, and connectivity that can enable firms to scale. Treasury management solutions streamline payments, collections, and cash flow across markets and currencies, while integrated risk and FX management capabilities allow companies to expand internationally with confidence.
For businesses preparing for their next stage – whether securing a credit rating, accessing deeper markets, or returning capital to shareholders – working with a bank that combines global reach with local insight is invaluable. Citi’s Commercial Bank business brings both perspectives, helping firms anticipate challenges, develop long-term strategies, and optimise operations.
By aligning financing tools with objectives and drawing on the expertise of a global bank like Citi, companies can build capital structures that balance today’s needs with tomorrow’s ambitions – positioning themselves for sustainable, long-term success.
