Growing cash reserves present strong opportunity to fund expansion

TORONTO, Oct. 14, 2014 /CNW/ - While 84 per cent of Canadian business owners are optimistic about the future, most are not thinking about trying to get bigger or tap into new markets with barely a third having expansion plans, finds a new CIBC (TSX: CM) (NYSE: CM) poll. It doesn't appear recent performance is the drag on growth plans as nearly half of all business owners say their financial success is better now than it was last year.

Key findings of the poll include:

• 84 per cent of business owners are optimistic about the future
• 44 per cent rate their financial success as better now than compared to a year ago - up from 32 per cent last year
• 37 per cent plan to expand over the next three years

"While more business owners are feeling better about their financial health this year and are optimistic about the future, this optimism is not translating into growth or expansion plans for their businesses," says Shelley Swanlund, Vice President, Business Banking and Head of Small Business, CIBC. "They are not making plans to expand, or effectively using tools such as borrowing or investing to successfully grow their operations."

Despite having cash reserves, many business owners still rely on personal finances to fund expansion

More than 60 per cent of business owners noted that if they were planning to expand, the funds would likely come from sources other than banks or loans against their business - mostly from credit cards, their own pocket or borrowing in their name.

That's despite 79 per cent saying they have a cash reserve set aside to support their business. Ms. Swanlund says that tapping into personal savings for business expansion is leading some business owners to be more cautious with their expansion plans.

"While many businesses do have cash on hand, most tend to see it as a rainy day fund they can access in the event they have a slower month with their cash flow or have an unforeseen emergency," notes Ms. Swanlund. "But this effectively leaves these funds on the sidelines rather than supporting the business. As a result, many business owners turn to their personal finances to fund expansion plans, which may limit the capital they have available."

Cash reserves not being used effectively

Although nearly 80 per cent of businesses are sitting on a cash reserve, many are not driving much in the way of a return on these funds with 4 in 10 owners (39 per cent) saying they are not earning any interest on their cash reserve.

"Holding cash reserves in your business is a smart move to ensure you can withstand operating changes or deal with a shortfall in your cash flow, however business owners should be more active in looking at investment or savings opportunities to help grow those funds over time," says Ms. Swanlund.

CIBC offers these tips for business owners:

• Build a financial plan
  A good financial plan can help entrepreneurs assess the financial health of their business and the opportunities for growth. There are many tools available to help build a good financial and business plan. For example, CIBC provides online business planning tools, and CIBC advisors work with businesses to help ensure they have the right financial solutions.
   
• Understand your borrowing options
  Some business owners may not be aware of the options they have to borrow for expansion within their business, rather than drawing on personal savings or borrowing on their personal credit cards or lines of credit. Talk to a CIBC advisor to learn more about which borrowing options make sense for your business.
   
• Create a cash reserve
  A cash reserve can act as a buffer to help businesses better weather the ups and downs they may encounter. CIBC offers tips on creating a cash reserve and an interactive guide at cibc.com/cashreserves.
   
• Make your cash work harder
  Business owners can make their surplus funds work harder by shopping around and finding a savings account that earns interest, and provides flexible access to their funds. For example, CIBC has a Business Investment Growth Account with a very competitive interest rate and anytime access to the funds.

KEY POLL FINDINGS

Percentage of Canadian business owners who rate their organizations' financial success as better now, compared to a year ago, by region:

Percentage of Canadian business owners who are optimistic about the future success of their business, by region:

The poll was conducted by Leger through a Web survey conducted from September 15 to 19, 2014 among a representative sample of 800 owners / C-level managers of businesses, of all sizes, located in Canada, excluding the public sector and NGOs. Using data from Statistics Canada, the results were weighted according to business size (number of employees) and region, to ensure a sample representative of the entire population under review. The associated margin of error for a probabilistic sample of the same size is +/-3.47%, 19 times out of 20.

CIBC Small Business Services

For more than 140 years, CIBC has been providing small business owners with the advice, services, and support they need to thrive and grow. CIBC recognizes that the business and personal finances of small business owners are often intertwined, which can present both opportunities and challenges. We believe that the best advice comes from someone who understands your needs as a business owner and as an individual.

CIBC provides small business owners with the services of a dedicated CIBC Small Business Advisor, who acts as a single point of contact for all small business owner needs. This experienced professional is committed to understanding the business and the industry in which small business owners operate, as well as their personal financial goals. CIBC business advisors work with small business owners to find integrated solutions to help them achieve their vision for their business and their life.

About CIBC

CIBC is a leading Canadian-based global financial institution with nearly 11 million personal banking and business clients. Through our three major business units - Retail and Business Banking, Wealth Management and Wholesale Banking - CIBC offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada with offices in the United States and around the world. You can find other news releases and information about CIBC in our Media Centre on our corporate website at www.cibc.com. 

SOURCE CIBC