How To Get a Business Expansion Loan: The Definitive Guide
Every business owner needs capital to expand their business or startup and achieve greater success. An expansion loan is geared to give you the cash needed to hire more employees, open new locations to reach a new market, buy commercial real estate, launch new products, or purchase equipment.
This business expansion loans guide will explore the ins of outs of these loans, including:
- 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. 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 the right loan program that aligns with your business goals and key performance indicators (KPI). Compared to traditional banks and credit unions, which can have slow financing options and strict eligibility requirements, we work with online lenders to get small business owners the funding they need quickly.
Here are five loan types best suited to help borrowers grow.
1. Term Loans
Best suited for entrepreneurs who want fast approval and funding without putting up any collateral.
Term loans — both short-term and long-term — are the predominant way to pay for growth opportunities that arise. A business lender provides you with a lump sum loan amount with a fixed annual percentage rate (APR). You pay the lender back over a given time frame. Short-term loan lengths are usually up to two years. There is no collateral or personal guarantee needed.
Our streamlined application and underwriting process has the highest approval rates in the United States. The entire process, from application to funds in your business bank 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 operating 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, but the interest rates are far lower with a business line of credit than with a traditional credit card.
Use your credit line for any business expense: pay rent for a new location, purchase equipment, increase 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 upfront. 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 ratings.
Advantages of invoice factoring for expansion:
- No credit score requirements
- High approval rates
- Frees up cash flow without taking on new debt
- Invoices serve as 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 new equipment, 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 U.S. Small Business Administration (SBA) offers loans for expansion with its SBA 7(a) program. The actual funding is provided by SBA lenders, not by the federal agency. While interest rates are some of the lowest you’ll find for small business loans, the paperwork and time needed to get approved make it one of the lesser-used small business financing options. SBA loans are more common among established businesses, as things like tax returns are scrutinized during the application process.
Advantages of SBA 7(a) loans 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
Business 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. Compared to a bank loan, 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. You are assigned a dedicated adviser to walk 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; traditional financial institutions like banks can take weeks. Our staff works hard to get you approved for financing, even if your credit score is less than perfect. We focus on monthly and annual revenue over creditworthiness.
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 growth opportunities to advance your business.
4. Lowest APRs
As one of the largest marketplaces 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
We offer flexible repayment plans with repayment term lengths of up to two years. 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 to help you make better financing decisions.
7. We do all the paperwork for you
The only paperwork you need is bank statements for the last three months. We do all the legwork for you so 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 of acquiring working capital is the largest factor for growth. So we created a new way of getting funded — in under two 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 of how much financing you need to apply for.
Step 2: Fill out our easy online application
Our online application is as easy as it gets — three quick steps, and you’re done. Business owners love the speed at which they get approved on Clarify Capital.
Step 3: Submit three months of recent bank statements
After you submit your application, one of our advisers will reach out to you within the hour. The adviser 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 one day. With the capital you needed now available, it’s time for the rubber to meet the road. As a true partner, we’ll always be here for future working capital needs.
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. The following are the general requirements to qualify for an expansion loan.
1. Monthly cash flow above $10,000
Your average monthly revenue helps us calculate the amount of capital you can raise. The maximum amount you can borrow goes up if revenues are higher. Your business should be earning at least $10,000 per month on average.
2. Been in business for six months or more
The longer your business has been operational, the more confidently lenders can provide you capital for expansion. We recommend that your company be in business for at least six months before applying for a business expansion loan.
3. Personal credit score of 550 or more
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.
Prequalification will not affect your credit score. See all available funding options.
How To Use Financing From an Expansion Loan To Grow Your Business
There is a myriad of ways to utilize your funding from an expansion loan. Our advice is to focus on things that you know will bring in a positive 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 Cover unanticipated business expenses
- check Invest in digital marketing and advertising
- check Open up a new location
- check Cover operational expenses
- check Manage gaps in cash flow
- check Pay for emergency repairs
- check Buy or rent real estate
- check Refinance existing debt
- check Contract store renovations and improvements
- check Pay taxes and payroll
- check Cover expenses related to COVID-19
- check Pandemic aid
FAQ about Business Expansion Loans
The following are frequently asked questions our lending experts receive from business owners seeking capital to expand their businesses.
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 just one to two days. The online application to get started takes two minutes. Our loan advisers handle all your paperwork and manage 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?
Term loans on Clarify have the highest approval rate in the industry. Our network of 75+ lenders competes to get you funded using the following requirements:
- Credit score of at least 550
- Been in business for at least six months
- At least $10,000 in average monthly revenue
Do I need to put money down to get an expansion loan?
No, there is no down payment needed to get a loan from 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.