5 Ways to Use a Business Expansion Loan

How to apply for a business expansion loan

Business loans can be used to help your business in many ways. The most popular way small business owners utilize business loans, though, is for business expansion. 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, for the purpose of business expansion, we are going to discuss the SBA loan, multi-year term loan, line of credit, invoice factoring, and equipment financing.

SBA Loan for Business Expansion

SBA loans are long-term loans where the government guarantees a portion of the money that the banks lend, to give banks incentive 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 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 is no restriction 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 goes up and down based on amount spent and amount paid. As you pay toward the amount owed, the amount available goes 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 to leverage secured money and take advantage of expansion opportunities.

Instead of waiting for your clients to follow through with payment, invoice factoring allows you to utilize capital quickly to act fast if growth opportunities come up.

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 for a purchase of used or new equipment. Equipment leasing is essentially an equipment rental. At the end of the lease term, a business owner can buy the equipment out from the lender, extend the term of the lease, or end the lease and return the equipment.

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

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

About the Author Jake

Jake is the Chief Marketing & Strategy Officer at SMB Compass. Jake is also the President of Reach Digital, an internet marketing company.