What is an Expansion?
Using capital for corporate expansion is among the most common forms of capital uses. Expansion can include new product development, equipment and facilities for increased production or expanding the work force for a greater volume of sales and increased market penetration. The sources for financing an expansion will have similar characteristics to financing at start-up. The difference is that the corporation now has a track-record and backing financials which helps increase investor confidence.
For a corporation to remain competitive and stable, it must constantly consider how it can grow and expand by offering new products, improving the efficiency of its processes, adapting its business systems, and increasing capacity. Any time a corporation decides to expand, funding will be required. If the corporation does not have the necessary cash flow to finance these expansions from its existing revenue stream, then external financing will be necessary.
Expansions require some additional risk and financial burden for the corporation as a whole. However, the long term growth potential is considered to out-weigh the negative drawbacks of additional senior debt, mezzanine debt or equity financing.