How to Get a Business Expansion Loan: The Definitive Guide
Every founder needs capital to expand their business to new heights. An expansion loan is geared to give you the cash needed to hire more employees, open new locations, or purchase equipment.
In this guide to business expansion loans, we'll show you the ins and outs of:
- The best loan options to grow your business
- What you need to be eligible for an expansion loan
- How to get approved and have money in your account within 48 hours
- How to get the lowest interest rate on a business expansion loan
- Answers from lending experts to frequently asked funding questions
So if you’re fundraising to grow your business, you'll love this guide we’ve put together.
Let's jump right in...
The Best Business Expansion Loan Options
As an owner with a track record of running a successful business, the next level up is to explore growth opportunities. In order to that, you’ll need access to working capital for expansion. That’s where we come in.
Having provided financing to over 10,000 founders, we can help you choose a funding option that aligns with your business goals and KPIs (key performance indicators). Here are five types of business loans that best suited to help you grow:
1. Term Loans
Best suited for entrepreneurs who want fast approval and funding without any collateral needed.
Term loans (both short-term and long-term) are the predominant way to pay for growth opportunities that arise. A lender provides you a lump sum of capital with a fixed APR (annual percentage rate). You pay the lender back over a given time frame. Short-term loans lengths are usually up to 2 years. There is no collateral or personal guarantee needed.
Our streamlined application and underwriting process has the highest approval rates in the United States. From application to funds in the account takes as little as 24 hours. APRs start at 7% for owners with good personal credit, but bad credit scores can get approved as well.
Advantages of term loans for expansion:
- All business types are qualified for approval
- Fixed interest rates (not variable)
- Credit score of 550+ needed
- Incentives for early payoff payments
- No collateral needed
- High approval rates
2. Business Line of Credit
Best suited for entrepreneurs who need working capital for operational expenses.
When you apply for a business line of credit, a lender approves your company for a maximum credit limit. You can withdraw from this credit limit anytime to pay for expenses. Similar to a credit card, you only pay interest on the amount of capital you utilize. Except the interest rates are far lower with a business line of credit than a traditional credit card.
Use your credit line for any business expense. You can pay to rent a new location, purchase equipment, inventory, or hire new staff.
Advantages of business lines of credit for expansion:
- You only pay interest on the amounts you draw from the credit line
- Capital is always available to use when needs arise
- Improves your personal credit score over time
- No penalty for prepayment
- Interest rates as low as 6%
3. Invoice Factoring
Best suited for entrepreneurs who want to get paid instantly for outstanding customer invoices.
Invoice factoring, also known as invoice financing, lets you borrow money based on invoices that have yet to be paid by customers. Lenders on our marketplace give you up to 100% of the invoice value up front. The key benefit of factoring is that your credit score is not a factor in getting approved, making it the perfect option for owners with less than stellar credit rating.
Advantages of invoice factoring for expansion:
- No credit score requirements
- Very high approval rates
- Free up cashflow without taking on new debt
- Invoices serve as the collateral
- No personal guarantee needed
4. Equipment Financing
Best suited for entrepreneurs who want to purchase new or pre-owned equipment.
Cover up to 100% of costs associated with purchasing vehicles, technology, and machinery with an equipment loan. The funding process is quick and the capital can be used for a wide variety of purchases. The equipment itself serves as collateral, so there is no personal guarantee needed.
Advantages of equipment loans for expansion:
- Competitive interest rates from lenders
- Owners with bad personal credit scores can get approved
- Low documentation requirements
- Equipment is the only collateral needed
5. SBA 7(a) Loans
Best suited for entrepreneurs who have excellent credit and are willing to go through a lengthy approval process for a low interest rate.
The federal Small Business Administration offers loans for expansion with their 7(a) program. The actual funding is provided by SBA-approved lenders, not by the federal agency themselves. While interest rates are some of the lowest you’ll find, the paperwork and time needed to get approved makes it one of lesser used fundraising options.
Advantages of SBA 7(a) loan for expansion:
- Good option if you are willing to jump through a few hoops in terms of paperwork and time needed to get approved
- Lowest APRs if you have excellent credit and a solid business plan
Benefits of Getting a Business Expansion Loan From Clarify Capital
The economy is booming. That has led to growth opportunities for businesses of all types. But expansion requires capital investments to acquire real estate, hire staff, and buy equipment. Running a business is complicated enough, financing shouldn’t be. We offer lending solutions for every step in your journey.
1. Quick approval process
As a business leader, you know that time is your most valuable asset. So we have streamlined our process to get money in your account in as little as 24 hours. The online application is easy and only takes two minutes to complete. A dedicated advisor gets assigned to you who then walks you through the loan options available.
2. Get approved with any credit score
With the highest approval rate in the industry, Clarify is the fastest way to get working capital. We provide instant approvals online, while traditional financial institutions such as banks can take weeks. Our staff works hard to get you approved for financing, even if your credit score is less than perfect.
3. No collateral or guarantee needed
You don't need to offer any collateral or personal guarantee to secure funding. This lowers the risk of executing on growth opportunities to advance your business.
4. Lowest APRs
As one of the largest marketplace for growth loans, we provide the most competitive rates through our network of 75+ alternative lenders. We started Clarify to help founders achieve success in their business endeavors.
5. Payment schedule is tailored to your current cashflow
With term lengths up to 2 years, we offer flexible re-payment plans. This allows you to pick a schedule that aligns with your company’s expansion goals.
6. Completely transparent, zero hidden fees
There are never any hidden fees or complex terminology that you need to figure out. We take pride in having crystal clear terms so you can made better financing decisions.
7. We do all the paperwork for you
All you need is bank statements for the last three months. That's all! We do all the legwork on your behalf. That means you can concentrate on running your company.
8. Tax deductible interest payments
The IRS permits you to deduct interest payments on business expansion loans. You may deduct any interest paid at the year's end, further reducing your cost of fundraising.
How to Apply for a Business Expansion Loan
The speed to acquire working capital is the largest factor for growth. So we created a new way of getting funded — in under 2 minutes. You fill out our quick application online, and we handle the rest.
Here is a bird’s-eye view of how the entire expansion loan process works:
Step 1: Figure out the amount of capital you want to borrow
We recommend making a list of everything you need to expand. That includes real estate, equipment, employee salaries, etc. Tally up the expenses on this list to get a rough estimate on how much financing you need to apply for.
Step 2: Fill out our easy online application
It’s as easy as it gets — three quick steps and you’re done with the application! Business owners love the speed at which they get approved on Clarify Capital.
Step 3: Get 3 months of recent bank statements
After you submit your application, one of our advisors will reach out to you within the hour. The advisor will answer any questions you have and learn more about your specific business needs. We’ll take care of all the paperwork.
Step 4: Execute on expanding your business
You’ll have money in your account in as little as 1 day. With the capital you needed now available, now it’s time for the rubber to meet the road. As a true partner, we’ll always be here for any future needs for working capital.
Qualification Requirements for Business Expansion Loans
While your credit rating is a factor in securing financing, it should not be the sole deciding factor. Clarify understands that your credit score does not define you or your company. So here are the general requirements to qualify for an expansion loan:
1. Monthly cashflow above $10K
Your average monthly revenue helps us calculate the amount of capital you can raise. The maximum amount you can borrow goes up if you revenues are higher. Your business should be earning at least $10K per month on average.
2. Been in business for at least a few months
The longer your business has been operational, the more confidently lenders can provide you capital for expansion. So we suggest that your company has existed for at least six months.
3. Personal credit score of at least 550
While you can get approved for a business loan with bad credit, we recommend your credit score be at least 550. The better your credit, the lower the interest rate offers you will get from alternative lenders.
Prequalifying will not affect your credit score. See all available funding options.
How to Use Financing From an Expansion Loan to Grow Your Business
There are a myriad of ways to utilize your funding from an expansion loan. Our advice is to focus first on things that you know will bring in a positive ROI (return on investment). Here are some ways other business owners have used working capital from Clarify to expand:
- check Acquire another business
- check Purchase materials in bulk
- check Purchase or repair aging equipment
- check Explore growth opportunities
- check Hire more employees
- check Pay for employee training
- check Unanticipated business expenses
- check Digital marketing & advertising
- check Open up a new location
- check Operational expenses
- check Manage gaps in cashflow
- check Pay for emergency repairs
- check Buy or rent real estate
- check Refinance existing debt
- check Store renovations & improvements
- check Taxes & payroll
- check Expenses related to COVID-19
- check Pandemic aid
FAQ on Business Expansion Loans
Here are the questions our lending experts get asked from business owners seeking capital to expand their business:
What credit score do I need for an expansion loan?
You need a credit score of 550 or higher. The better your credit rating, the better the interest rates you get from lenders and financial institutions.
How long is the financing process?
The entire process takes 1-2 days. The online application to get started takes only 2 minutes. Our loan advisors handle all your paperwork and mange the underwriting process. So you can focus on running your business. We walk you through all your available options to help you make an informed decision.
What are the qualification requirements?
Credit score of 550+, been in business for at least 6 months, and $10,000+ in average monthly revenue. Term loans on Clarify have the highest approval rate in the industry. Our network of 75+ lenders compete to get you funded.
Do I need to put money down to get an expansion loan?
No, there is no downpayment needed to get a loan on Clarify Capital.
What’s the maximum amount I can borrow?
We provide expansion loans up to $750,000. The total amount of capital your business qualifies for depends on your average monthly revenue.
Is collateral needed for an expansion loan?
No, there are no collateral or personal guarantee requirements to get approved on our funding marketplace.
Are business expansion loan payments tax deductible?
Yes! The Internal Revenue Service (IRS) lets your business deduct any interest paid on expansion loans when you file taxes at the end of the year.