If you’re interested in growing your company with a small business expansion project, having access to financing options can can give you the opportunity to improve your business’s future. That’s why many business owners are turning to small business loans during this uncertain time.
In this blog post, we’ll explain the most notable benefits of using a term loan or business line of credit to afford your next business expansion project.
4 Reasons to Use a Business Loan for Expansion
1. Have more space to serve your customers
If your current space is cramped and you’re struggling to keep up with customer demand, utilizing financing for an expansion project might be the right choice. This is especially imperative during current times, in which social distancing is paramount to ensuring your staff and customers’ safety.
If your business is succeeding, you should take the opportunity to use your business loan to expand your space. This will give you more space to serve customers, which will hopefully increase your sales.
Using your funding for business expansion can help you pay for an addition to your existing location, or you can open an entirely new space. Regardless, your customers will appreciate this improvement to your service.
2. Offer new products or services
By expanding your business, you can develop your business’s product or service options. Many small business owners use funding for business expansion to add products or services, allowing them to reach a wider range of customers.
Paying for additional inventory or tools can add up, but with your financing you can invest in your new offerings. Before you spend your loan in this area, ensure that your new products or services will be useful to your customer base.
We suggest sending out a customer satisfaction survey to see what your customers are currently interested in. It could also be beneficial to review which existing products or services are best sellers, so that you can add relevant options.
3. Open a location in a different geographical area
Another expansion strategy to consider is to open a business location in a new area. You’ll be able to reach customers in a town, city, or state that you currently aren’t serving.
Before you start this project, make sure that this geographic location is a good fit for your business. Expanding to a new location can be expensive, but with access to viable loan options, you’ll be able to afford this transition.
4. Hire more employees
If you’re planning to expand your business in any way, you’ll likely need to hire at least a few more employees. Having the money to invest in hiring and payroll costs will lead to business success, as you can’t run your business without a strong team.
Because of COVID-19, many talented professionals are seeking job opportunities, so it’s a great time to hire new employees and meet increased demands.
5. Merge with or acquire another business
If you’d like to see your business grow, you might want to consider merging with another company, or acquiring it. This can help you keep your existing customers, while gaining a new client base. Of course, you should conduct financial planning to ensure that merging or acquiring a business is going to be a lucrative move.
How to Qualify for and Receive a Business Expansion Loan
Now that you understand the many benefits of receiving a business expansion loan, it’s time to consider your funding options. There are many reputable online lenders that offer funding for business expansion projects, but you’ll need to select a loan that offers and meets your needs.
Typically, here is what business lenders look for when evaluating potential business loan recipients:
- Your credit score
- Cash flow projections
- Annual revenue
- Existing debt and outstanding loans
- Time in business
It’s crucial that you’re aware of these components prior to applying, because they will affect your repayment terms (whether you’ll be approved for a long term or short term loan), interest rate, and loan amount.
Conclusion: Pursue a Small Business Expansion Loan to Ensure Growth
Starting a business expansion project can be intimidating, especially amidst a global pandemic. However, it may be a great time to take advantage of new business opportunities.
Using funding for business expansion will enable you to pay for construction costs, new inventory, hiring new employees, and other necessary expenses. If you’ve successfully paid for a business expansion after receiving additional financing, let us know in the comment section below.
Editor’s Note: This post was updated for accuracy and comprehensiveness in August 2021.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
