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

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

Is Your Business Ready for Expansion?

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

Consider the market you’re in. Have you saturated what you can do there, and is there a new market you want to conquer? Are you finding a new customer base that is drawn to your product and know that, with a little marketing, you could successfully expand your reach?

Or maybe you’ve been considering a new product you could sell. All you need is the working capital to purchase inventory and turn around and sell it.

Maybe you have the opportunity to buy a competing business and take more market share. Or maybe you’ve gotten so busy you need to hire more help.

These are all signs that it’s a good time to expand your business. 

How to Fund Business Expansion

Opportunities require investment, and not every business has the capital on hand to expand. 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’ll bring in more money, which will make paying off the debt easy. It’s an investment in your business’ future!

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

Small Business Loan Options for Business Expansion

Now let’s look at your small business financing options, from working capital loans to credit cards. Keep in mind there are a variety of options available to you, no matter what your credit profile. Financial institutions like banks, credit unions, and online lenders all offer a variety of financing options.

Term Loans

Established businesses with good credit may qualify for great loan terms with a traditional bank or credit union that offers term loans. Typically these offer among the lowest interest rates.

SBA Loans

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

Line of Credit

If you like the idea of having access to cash when you need it (rather than getting it all at once like with a loan), consider taking out a business line of credit. You only have to pay back what you borrow. OnDeck offers a great line of credit option.

Equipment Loans

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

Commercial Real Estate Loans

Maybe expansion looks like adding a new location to your business. In that case, a commercial real estate loan can be helpful. These have long repayment terms (25-30 years, usually) and low interest. SmartBiz is an option worth looking into.

Short-Term Loans

Maybe you just need a quick injection of cash to purchase inventory or supplies and know you could pay it back within a few months. If you don’t have the high credit scores required to get 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 purchases when you make them, consider a business credit card. Look for one with an introductory 0% APR and rewards.

Is a Business Expansion Loan Right for Your Business?

Small business owners that have the opportunity to expand their businesses may not do so if they don’t have the capital on hand. But that shouldn’t limit you, since there are so many loan options available.

Ask yourself whether the investment you’d need to make (hiring help, marketing, buying inventory) would bring in enough profit to cover the loan debt. If the answer is yes, a business expansion loan could be a smart 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’s your credit situation, including both your business and personal credit scores? If you have stellar credit, you may be able to get low interest rates, which will keep your cost of financing and monthly payments down. If your credit isn’t great, the cost of the loan you get may be higher than the profit it could help you realize.

How long have you been in business? A startup that’s been operating for less than two years may not qualify for an SBA or bank loan and may need to instead look at a short-term loan.

Carefully consider the loan amount you want to apply for. It could 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?

Something else to be aware of: some loans will require a down payment or collateral. Do you have cash or assets available for this?

Also, look into any potential fees a loan might have that aren’t obvious. For example, are there prepayment penalties if you want to pay off the loan early? Late fees if you miss a payment deadline? These can add to 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’ll need for the application process will vary, depending on the type of loan you’re applying for. A traditional loan or SBA loan may require you to provide a business plan and financials, while an online application may only want to know what your annual revenue is.

Plan to apply long before you really need the funds, since some loans—particularly those offered by banks or the SBA—may take weeks to process and fund.

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