How to Get a Business Expansion Loan and Where to Get One

by Kieran Daly
October 24, 2023
How to Get a Business Expansion Loan and Where to Get One

Growing a business can be a tough but rewarding process. Sometimes you might need a little extra help to get your business to the next level, whether that’s opening a new location, buying new equipment, or expanding into a new market.

A business expansion loan can be a great way to get the funding you need to grow your business. Here is our guide on the different financing options available, how to apply, and things to consider before you apply for a loan to expand your growing company. 

What Are Business Expansion Loans? 

Business expansion loans are a type of loan that small business borrowers can use to support their growth. Business owners can use these types of loans to get the necessary capital to invest in new products or machinery, increase production, open new locations, hire more staff, enter a new market, or otherwise scale up. 

In other words, these types of loans are intended to fund activities that will expand your business. 

Types of Business Expansion Loans and Financing

Some of the loan options you can get for a business expansion loan include:

  • Traditional loans: You can get a traditional loan from a bank or credit union that can be used to finance your expansion activities. You can generally use a small business loan for real estate, equipment purchases, and other types of expansion needs. Depending on the bank and your eligibility, you can sometimes get competitive interest rates and longer repayment terms. However, bank loans tend to be harder to qualify for, and you will likely need to provide collateral and possibly a personal guarantee. 

  • SBA loans: The U.S. Small Business Administration offers several loan programs for small businesses, such as the SBA 7(a) loan, the 504 loan, and microloans. These loans tend to offer competitive interest rates and favorable repayment terms. However, it takes a while to apply for them and requires a lot of paperwork.

  • Business line of credit: A business line of credit is a revolving form of funding, similar to a credit card, that can be used to finance just about any of your business needs. That means it can be used as working capital, to support day-to-day operations, or just to expand your business. A line of credit is flexible and gives businesses fast access to capital. You won’t need collateral, but you may need a good credit score to get a line of credit for your small business.

  • Working capital advance: A working capital advance is a type of funding that can be used for general day-to-day expenses and to help cover expanding operating costs. This financing option is not meant to be used for longer-term investments, like real estate, as working capital advances generally have shorter repayment terms. They are usually easy to apply for and often don't require collateral or a personal guarantee. 

  • Equipment financing: This type of loan can help both entrepreneurs and business owners cover the cost of new machinery, vehicles, or other related equipment. You can get a loan to cover the entire cost of the equipment. In many cases, you won’t need to put up collateral, as the item itself is secured against the loan. Some lenders may require a personal guarantee. 

  • Merchant cash advance: This type of financing is when you get a lump sum of capital in exchange for a portion of future sales of your company. The lender will give you the money and then a portion of future sales are automatically deducted until the loan is repaid.

Where to Get a Business Expansion Loan 

There are several places where you can get an expansion loan for your business. Some of the most common places to get loans include the following. 

Traditional Banks and Credit Unions

Banks and credit unions often offer a number of loan products, including those for businesses. They tend to have stricter eligibility requirements, such as requiring a good credit history or score, asking for collateral, and needing a personal guarantee. It can also take a long time to get approved for a loan. 

For small business owners who need cash quickly and haven’t been in business for a long time, getting a loan from a traditional lender can be difficult. In many cases, traditional loans are best for more established businesses that already have a relationship with their bank. 

Alternative Lenders

An easier way to get funding for expansion is through alternative lenders like Backd, which offer competitive loan terms. These tend to be online lenders that offer specialized business financing options.

In many cases, you can find out if you qualify for a loan in just 24 hours. Plus, the eligibility requirements are generally less strict than more traditional lenders. 

For example, Backd only requires that you:

  • Have been in business for one year for a working capital advance and two years for a business line of credit

  • Are U.S.-based with a brick-and-mortar address

  • Have established business credit

  • Earn a minimum monthly revenue of $100,000

  • Have a FICO Score of 625 or higher

SBA Lenders

The application process for getting loans with SBA lenders can be long and cumbersome. You also need to prove that you can’t get a loan from traditional lenders. However, because the SBA guarantees the loan, these lenders offer some of the best terms for loans with set interest rates and long repayment terms. 

You can find one of these lenders by using the Lender Match tool on the SBA’s website.

How to Get a Business Expansion Loan in 5 Steps

Getting approved for a business loan depends on several factors, including your individual profile and where you apply. In general, however, there are several steps you can follow. 

1. Figure Out Your Needs

Before you apply for a loan, determine why you are applying. Are you ready to expand your business? Figure out exactly what you want to do with the money. Are you looking to buy equipment or hire more staff? 

Do you have a steady cash flow? You’ll need to prove to the lender why you need the loan and that you’ll be able to pay it back. Figuring that out before you apply can help increase your chances of getting approved. 

2. Determine if You Qualify 

The next step is to figure out your qualifications to know which type of business loan or financing will work best. Lenders may look at your personal credit score as well as how long you’ve been in business and your annual revenue. Since each lender has different requirements, you’ll want to do some research.

3. Gather Your Documents 

Many lenders will want to see documents and lots of them. Before you start the application process, gather all of the paperwork you might need, such as financial statements, tax returns, your business plan, as well as a detailed outline of your expansion plans.

4. Compare Lenders 

Make sure to explore your options. There are several ways to get a business expansion loan, so shop around for the best lender for your needs. Consider the interest rates, repayment terms, collateral requirements, and funding speed before you decide who to apply with. You can also check out reviews online to get opinions from others. 

5. Submit Your Application 

Once you’ve determined where you want to apply and have gathered all of your paperwork, it’s time to submit your application. The application process will vary by lender so check to make sure you have everything you need. This step in the process will often take more time to fill out for a traditional or SBA loan. But it can take as few as three minutes with an alternative lender, like Backd.

Next, you’ll wait for an approval decision. Depending on the type of lender, it can take anywhere from one business day to a few weeks (or even months) to hear back and receive funding. The lender may reach out if they need more information. If they do, provide the documents they request right away to help speed up the process. 

Find the Right Business Expansion Loan

If your business is growing and you need some extra funds to get more equipment and supplies or hire more staff, then a business expansion loan might make sense for you. 

Carefully consider your loan options before you apply. Ideally, you should apply for a loan with the lowest interest rates and most favorable loan terms. Know that each lender has different eligibility requirements, so shop around and compare lenders to find one that matches your small business needs. 

If you’re looking for a working capital advance or business line of credit, Backd offers competitive rates with flexible repayment terms. Plus, you can find out if you qualify for funding in just 24 hours. 

Apply today to fund your business expansion needs.

What would you do with the right amount of capital?

Working Capital Advance

Easy payment structures offer amounts with fast turnaround, Simple and easy process to access working capital.

  • Flexible - no collateral required
  • $10K - $2M
  • Terms up to 16 months
  • Automatic daily or weekly, or semi-monthly payments

Business Line of Credit

Get instant access to revolving credit with unlimited terms, and the best rates for your business.

  • Draw funds anytime
  • $10K - $750K
  • Unlimited terms, incredible rates
  • Soft credit pull that doesn't affect your credit score