Business Financing, Small Business, Working Capital

Best Small Business Loans to Finance Business Expansion

Ezra Cabrera

Updated: November 30, 2018
business expansion loan
Business loans can be used to help your business in many ways. The most popular way a small business owner can utilize a business loan is for the expansion of their business. In this article, we are going to discuss five great ways to use a business expansion loan for your small business.

There are many funding options available for small business owners, and a smart owner utilizes multiple sources. In this article, we are going to discuss the benefits of an SBA loan, multi-year term loan, line of credit, invoice factoring, and equipment financing, and do it with an eye on business expansion.

SBA Loan for Business Expansion

SBA loans are long-term loans where the government guarantees a portion of the money that the banks lend, which motivates banks to lend money to small business owners. There are 10-year working capital term lengths or 25-year real estate term lengths. Both term options are great business expansion opportunities for small business owners. The only difference is that if real estate is involved, you must use the 25-year term.

The biggest benefit of an SBA loan for a small business owner is the extended-term length. By stretching the length of the term, monthly expenses go down, freeing up working capital for business expansion.

Multi-Year Term Loan for Business Expansion

A multi-year term loan is a short-term loan, often with a term of two to five years. Multi-year term loans are similar to SBA Loans, but there are no restrictions on purchases. Because of the flexibility, multi-year term loans can be used for anything from business expansion to refinancing debt.

Business Line of Credit for Business Expansion 

A business line of credit is like a credit card, but with cash, your small business can withdraw. There are no restrictions on purchases, making a line of credit a great option to capitalize on expansion opportunities.

A line of credit is revolving, which means the amount available fluctuates up and down based on the amount spent and the amount repaid. As you pay down the amount owed, the amount available rises back up. The line of credit gives a business owner flexibility to pursue new avenues for growth.

Invoice Factoring for Business Expansion 

Invoice factoring is the process of selling accounts receivables for immediate capital. When your small business works with contracts or invoices, you can sell the accounts receivable to a factor and acquire secured money, giving you the ability to take advantage of expansion opportunities. Instead of waiting for your clients to follow through with payment, invoice factoring allows you to utilize capital quickly.

Equipment Financing for Business Expansion

Equipment financing refers to either an equipment loan or equipment leasing. Equipment loans are a lump sum borrowed from a lender to purchase used or new equipment. On the other hand, equipment leasing is essentially an equipment rental. At the end of the lease term, a business owner can buy the equipment outright from the lender, extend the term of the lease, or end the lease and return the equipment.

Equipment financing also provides a great business expansion opportunity because it allows business owners to obtain a new, state of the art equipment without the burden of a large purchase. That means you can get that new piece of machinery or the new vehicle you need to increase performance.

By taking advantage of equipment financing, you can make a positive change to your small business. You can also use equipment financing and business expansion loans to expand your business and capitalize on growth opportunities.

How You Can Use a Business Expansion Loan

How you use the loan depends on the type of loan you qualify for. Here are some of the ways you can use a business expansion loan:

  • Hire additional staff
  • Remodel and/or expand your physical space
  • Establish a strong online presence
  • Expand to new markets
  • Produce new products
  • Acquire new business
  • Franchising
  • Moving to another location

Growing Your Business with Expansion Business Loans

It can be overwhelming to choose which type of loan program works best for your business. To help you get started, research on the five types of loans mentioned above.

If you want to expand your options, there are several alternatives to these loans as well. For example, you can substitute invoice factoring with merchant cash advances if you need immediate funding. Both of these loans are a great option if you need short-term funding.

If your business is in good financial standing and you’ve been thorough during the application, it’s likely that lenders will grant favorable rates and terms. When choosing a loan, always be persistent and don’t rush. The best business expansion loan can surely help in boosting the growth of your company.

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Ezra Cabrera
Ezra Neiel Cabrera has a bachelor’s degree in Business Administration with a major in Entrepreneurial Marketing. Over the last 3 years, she has been writing business-centric articles to help small business owners grow and expand. Ezra mainly writes for SMB Compass, but you can find some of her work in All Business, Small Biz Daily, LaunchHouse, Marketing2Business, and Clutch, among others. When she’s not writing, you’ll find her in bed eating cookies and binge-watching Netflix.
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