Corporate leaders today sit at a crossroads. Continued economicprosperity has led to favorable business conditions, which havemany companies poised for growth. On the other hand, speculationthat the business cycle may have hit its peak—coupled with talk ofan economic downturn on the horizon and political uncertainty overthe course of this election year—has even the most optimistic CEOsand CFOs carefully weighing any expansion plans.

The number-one question many business leaders are facing: Is nowthe time to take on debt to finance growth? My answer: Given thecost of capital and the still-strong U.S. economy, there has rarelybeen a better time to implement a well-thought-out strategic growthplan.

In today's market environment, interest rates and the cost ofdebt are near all-time lows for companies looking to borrow to fundoperational expansion or to make a strategic acquisition. Themarket is awash in cash and looking for places where it can beinvested. Corporate valuations are still at record levels fororganizations looking to sell or divest part of the business.Despite slowing global growth and trade uncertainty, overalleconomic activity remains strong, except in some parts of themanufacturing sector.

The bottom line is that there's a window of opportunity, overthe next 6 to 12 months, for businesses to lock in an attractivelong-term capital structure while rates are still low and bothcredit and the broader capital markets are accessible to mostorganizations.

When planning for the future, company leaders should assesstheir strategic growth plans and ask some tough questions:

• Where do we, as a company, want to be in 5 or 10 years?
• How can we get from here to there in terms of future revenuegrowth? Should we focus on organic growth, inorganic growth, orsome combination of both?
• What are the competitive threats to the business?
• What are the implications of this plan on gross margins?
• Do we need to upgrade equipment and technology? Increaseresearch and development (R&D) spending and staffing?
• And the biggest question: How will we finance this growthstrategy?

For corporate leaders who are currently developing new strategicgrowth plans funded by debt and/or equity, here are threesuggestions for how to make a well-informed decision.

1. Review your current cash flow realistically andthoughtfully.

Cash flow is the first factor that commercial and investmentbankers, private equity firms, and other financiers will look atwhen assessing the growth potential of a company moving forward.Among other things, potential financial partners will be examiningthe predictability of cash flow over time, the ups and downs, andwhether strategic growth is both realistic and sustainable. Thecash flow review should go back at least through the last downturnto demonstrate the company's resiliency.

2. In evaluating cash flow, differentiate betweenmaintenance expenses and future growth expenses.

Maintenance expenses deal with how much the company is currentlyspending just to maintain the status quo. Growth expenses are allabout how new capital spending will specifically lead to revenuegrowth (or margin expansion) via new equipment purchases,technology upgrades, R&D growth, and possible staffing andreal-estate investments. Corporate leaders need to clearly identifythese cash flows, which will most likely be scrutinized bypotential financial partners.

Planning for future growth becomes trickier when the expansionis reliant on merger and acquisition (M&A) strategies. Forinstance, in assessing the pluses and minuses of an acquisition,one needs to differentiate between expense (or cost) synergies andrevenue synergies.

Expense synergies reflect the opportunity, as a result of anacquisition, to reduce costs tied to the new operational structureof the combined company—whether it is overlapping equipment,staffing, real estate holdings, or other costs that can be cut toachieve efficiencies while not undermining growth. Companies needto be very careful not to overestimate the potentialexpense-synergy savings; that's a common mistake when mapping outan M&A growth strategy.

Revenue synergies are the opportunity for a combined company togenerate more revenue through non-overlapping operations andproduct lines, leading to higher overall revenue than if the twocompanies had remained separate.

3. Recognize the strengths—and weaknesses—inherent inyour industry.

The more predictable a company's cash flow is, the moreattractive that business becomes to potential financial partners,who will want to know the true peaks and valleys that a firm mightendure during a downturn. In this regard, industries are not allcreated equal. Some sectors can sail through downturns withrelative ease, while others tend to face strong headwinds andchoppy waters whenever the global economy slows.

For companies whose industries fit in this latter category,diversifying revenue streams can help stabilize cash flows during adownturn. One of the best ways to diversify revenue streams isthrough mergers and acquisitions. Look for a target that will serveas an effective hedge if your market is disrupted.

It is also important for executives to think like disruptors. Asmarkets change, the organization might face competition that comesfrom unusual places. It is important to think about how newtechnologies, for example, could be changing the game.

The Question Remains

So, is now the time to take on debt to finance growth?

An organization can really address that question only aftergoing through a careful review of its own cash flows and those ofits industry. After doing that analysis or enlisting an investmentbanker to advise them, decision-makers may find that the businessis in an excellent position to pursue a new strategic growthplan.

Moreover, given the current economic climate and the relativelylow cost of debt capital, there may be no better time than thepresent to put your plan into action.

Steve Woods isexecutive vice president and head of the Corporate Banking divisionat Citizens Bank, which is the 15^th largest bank in thenation. Corporate Banking is the largest division within theCommercial Banking Group, holding approximately $65 billion in loancommitments.