The best loans for small business expansion
The best loans for small business expansion

Is your small business ready for growth? Maybe you can serve more customers if you open a second store or increase your income by expanding your product line.

Whatever your business needs for growth, you need cash flow and capital to make it happen. Finding the right loan is key to the future success of your business.

Is your business ready for expansion?

How do you know if it’s time to expand your business?

Consider the market you are in. Have you saturated what you can do there and is there a new market you want to tap into? Are you finding new customers attracted to your product and do you know that with a little marketing you could be successful in expanding your reach?

Or maybe you’ve considered a new product you could sell. All you need is working capital to buy inventory, flip it, and sell it.

Perhaps you have the opportunity to buy a competing company and take more market share. Or maybe you’re so busy you need to hire more help.

These are all signs that now is a good time to expand your business.

How to finance a business expansion

Opportunities require investment, and not all businesses have the capital to grow. Fortunately, there are several types of loans to help borrowers do just that.

The idea is that by borrowing money to help your business grow, you will bring in more money, which will make it easier to pay down debt. It’s an investment in the future of your business!

In this article, we’ll look at your small business loan options that you can use to hire staff, pay for marketing, make renovations to your space, or even use to refinance old debt.

Small Business Loan Options for Business Expansion

Now let’s look at the options for financing your small business, from working capital loans to credit cards. Keep in mind that there are a variety of options available to you, regardless of your credit profile. Financial institutions such as banks, credit unions, and online lenders all offer a variety of financing options.

Term loans

Established businesses with good credit may qualify for favorable loan terms from a traditional bank or credit union that offers term loans. Generally, these offers some of the lowest interest rates.

SBA Loans

Some lenders are authorized to offer SBA loan programs such as the SBA 7(a) loan and microloans. These loans, backed by the Small Business Administration, may be easier to obtain than traditional loans and also offer low interest rates. SmartBiz is one such lender.

Credit line

If you like the idea of ​​having access to money when you need it (rather than getting it all at once like with a loan), consider getting a business line of credit. You just have to repay what you borrow. On the bridge offers an excellent line of credit option.

Equipment loans

If you are looking to expand by purchasing new equipment, an equipment loan is ideal. The machinery or vehicle you buy serves as collateral for the loan, which can help you get lower rates. To verify LendSpark for affordable terms.

Commercial real estate loans

Maybe expanding is like adding a new location to your business. In this case, a commercial real estate loan can be useful. These have long repayment periods (25 to 30 years, generally) and a low interest rate. SmartBiz is an option worth considering.

Short term loan

Maybe you just need a quick cash injection to buy inventory or supplies and know you could pay it back in a few months. If you don’t have the high credit scores required for a longer-term loan, consider short-term loans like those offered by LendSpark.

Business credit card

If you just want a way to pay for your purchases as you make them, consider a business credit card. Look for one with an introductory APR of 0% and rewards.

Is a business expansion loan right for your business?

Small business owners who have the opportunity to grow their business may not do so if they don’t have the capital on hand. But that shouldn’t limit you, as there are plenty of loan options available.

Ask yourself if the investment you would need to make (hire help, market, buy inventory) would yield enough profit to cover the loan debt. If the answer is yes, a business expansion loan might be a good idea.

What to consider when choosing a small business expansion loan

There are many types of loans you can use for small business expansion, and each of the lenders in this space will have different criteria for qualifying small businesses for financing.

What is your credit situation, including your professional and personal credit scores? If you have excellent credit, you may be able to get low interest rates, which will lower your financing costs and your monthly payments. If your credit isn’t great, the cost of the loan you get may be more than the profit it could help you make.

How long have you been in the industry? A startup that has been running for less than two years may not qualify for an SBA or bank loan and may need to consider a short-term loan instead.

Think carefully about the loan amount you want to apply for. It might be tempting to take out more than you need, but will you be able to afford the repayment terms if your monthly payment is high?

Another thing to know: some loans will require a deposit or a guarantee. Do you have cash or assets available for this?

Also, consider potential fees a loan might have that aren’t obvious. For example, are there prepayment penalties if you want to prepay the loan? Late fees if you miss a payment deadline? These can increase the cost of the loan.

How to Prepare for a Small Business Expansion Loan

Once you know your eligibility, you can narrow down the types of financing you qualify for.

What you will need for the application process will vary depending on the type of loan you are applying for. A traditional loan or SBA loan may require you to provide a business plan and financial statements, while an online application may only want to know your annual income.

Plan to apply well before you really need the funds, as some loans, especially those offered by banks or the SBA, can take weeks to process and fund.

What could a cash injection do for your business? What dreams could you achieve if only you had the capital? A small business expansion loan could make those dreams come true!

This article was originally written on November 19, 2021.

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