Expanding a Business?
March 25th, 2011
There’s a loan that’s just for you
These days, there’s no shortage of reasons why businesses need to obtain financing. Some may require it to launch a new enterprise. Others might need working capital to manage seasonal cash flow. There are some businesses, however, that need financing for an entirely different reason – to manage growth and capitalize on new opportunities. They may, for example, be looking to expand to a larger space, open additional locations or offices, or purchase new inventory or equipment.
While growth is something that every business owner strives to achieve, it is not without its challenges. That’s particularly true when it comes to obtaining the funds required to expand. For example, does the business owner have his or her own capital to spend on expansion, or will partial or full financing from a financial institution be needed?
Today, many businesses fall into the latter category. The good news is that there are loan programs designed just for the purpose of growing and developing existing businesses. These loans are known as expansion loans.
Start with a plan – a business plan
Before you hit the pavement looking for expansion financing, you’ll need to do some homework; namely, you’ll need to work on your business plan. If you already have a business plan, you simply need to update it to reflect your planned expansion. If, however, you never created one, you’ll need to start from scratch. Your business plan is a guide that will help you set goals and a clear path for achieving them. Your business plan should detail the expansion you’d like to make, including the costs involved, the amount of money you need to borrow to cover those costs and the income the expansion will generate.
If you need assistance writing a business plan, free resources are available from the Small Business Administration (SBA). Visit www.sba.gov for more information.
Types of expansion loans
In general, there are two types of business expansion loans available from lenders – secured and unsecured loans. With a secured loan, you are asked to put up collateral. Because secured loans are less risky to the financial institution, the interest rates are lower. An unsecured loan, in contrast, does not require collateral but charges a higher interest rate and borrowing costs over the life of the loan.
For these reasons, it’s wise to consider a secured loan first. You’ll show lenders that you have “skin in the game” and are willing to risk your collateral for the loan.
What to look for in a lender
As with any type of loan, it’s important that you shop around for the best rates and terms. You’ll also want to consider lenders that offer the following:
- Expertise in your industry
- SBA loans – the SBA offers government-guaranteed loan programs that can help you expand your business
- Sound financials
If you have a business you’re looking to expand, talk to us. We offer a wealth of loan programs for businesses. For more information, stop by your nearest branch or call us.
