Using bank debt to fuel business growth

Business Finance Week started on 30 September and continues until 9 October.  Organised by the Bank of England, the purpose of this week is to help businesses learn about the different financial options to help support and grow their business. 

Over the next few days we will share several articles that will also help businesses access finance to grow their businesses. Here, we explore the role bank debt can play.

For many business owners, debt carries negative connotations. However, when used strategically, bank debt can be a powerful tool for driving growth without sacrificing ownership or control of your company.

Understanding ‘good debt’

Not all borrowing is created equal. The distinction between survival debt and growth debt is crucial. While emergency borrowing might help weather difficult trading conditions, it does little to move your business forward. Growth-focused debt, by contrast, is borrowed capital invested in future expansion, whether that’s new premises, equipment, technology or to invest in people and talent.

The key advantage of debt financing over equity investment is straightforward: you retain full ownership of your business. This makes it particularly attractive for family-owned enterprises planning generational succession, or for founders who wish to maintain decision-making authority. Once the loan is repaid, the lender’s involvement ends entirely.

What lenders look for

Banks are more willing to lend to growing businesses than many owners realise, but they need to see a compelling case. Successful applications typically demonstrate several key elements: a clear understanding of existing borrowing and how new debt fits into the overall financial picture, detailed plans showing how the funding will generate growth, and realistic cash flow forecasts proving repayment capacity.

Timing matters too. Rather than requesting a large lump sum, consider phased borrowing aligned with specific milestones. For instance, if you’re expanding into new premises, you might initially borrow for the property acquisition, then explore alternative funding sources for fit-out and equipment once the first phase is complete.

Beyond traditional bank lending

Personal guarantees remain standard practice with most bank lending, which understandably makes many business owners uncomfortable. This is where blended financing strategies become valuable. Exploring multiple funding sources can help minimise personal exposure.

Alternative options worth investigating include government-backed schemes, regional development grants, invoice financing and asset-based lending. Many local authorities offer interest-free or low-interest facilities for capital investment projects, particularly those creating jobs. These often require match-funding but can significantly reduce your reliance on traditional bank debt.

Making your application successful

The relationship between borrower and lender shouldn’t be underestimated. While it may sound outdated, personal chemistry matters. Different lenders have different risk appetites and sector specialisms, so finding the right fit for your business is worthwhile. Challenger banks, for instance, may be more flexible than traditional institutions in certain circumstances.

Preparation is paramount. Before approaching any lender, ensure your financial records are current and comprehensive. Have detailed financial forecasts ready, and be prepared to explain not just how much you need, but precisely why you need it and how it will drive returns.

The bottom line

Debt financing represents a transaction that must work for both parties. Not every application will succeed, and that’s acceptable – rejection often reflects a mismatch rather than fundamental business weakness. The most successful borrowers approach debt strategically, viewing it as one component of a broader growth strategy rather than a last resort.

For businesses with solid growth plans and the capacity to service repayments, bank debt offers a pragmatic path to expansion while maintaining the ownership and independence that many entrepreneurs value most. With proper planning and professional advice, it can provide the catalyst that transforms ambition into achievement.

How we can help

We have a dedicated Funding team that can help businesses like you to use debt to fuel business growth. Please do get in touch with the team here.