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Best Small Business Expansion Loans: Requirements & Terms

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Best Small Business Expansion Loans: Requirements & Terms

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What is a business expansion loan?

Starting a business is one thing, but growing and developing it is another. Growth and expansion can come in the form of stocking more inventory to grow sales, investing more into marketing, opening a new location, acquiring another company, and so forth. To finance these growth initiatives a business expansion loan can be a viable option. There are several variances of a business expansion loan so you’ll need to consider your circumstances and goals. Before getting started, you’ll want to make sure your business is able to qualify for a business expansion loan. 

At mySMBscore you can unlock your SMB (small to medium sized business) credit score and view it through the eyes of a lender. This perspective, along with valuable insights, can help you identify actions you can take to increase your chance of approval. We can also help you connect with reputable lenders. For business owners that want to prosper, we’ve built a platform designed to help bring your dreams and goals to life. 

What are the typical interest rates for a business expansion loan?

Interest rates can vary depending on what your business can qualify for. While the lender you work with can also play a role in the interest rate, other factors can too. Since interest rates can heavily influence payments and total loan costs, it’s smart to try to qualify for a low rate (or as low as possible). To identify ways to qualify for a more competitive loan offer, unlock your SMB score today. At mySMBscore you can also gain the power to understand what you should qualify for or what is typical based on your business credit score visit mySMBscore. 

What is the maximum amount I can borrow for a business expansion loan?

Similar to interest rates, the maximum amount you can qualify for depends on several factors. If you’re pursuing a business expansion loan you probably already have an established business with a promising future. This can help you in the lending world. When you apply for a business expansion loan, be prepared with a detailed business plan that demonstrates how the loan could take your business to the next level. To capture a better idea of what you might be able to qualify for, check your SMBscore today and view analytics through the eyes of a lender. 

How long does it take to get approved for a business expansion loan?

When getting a business expansion loan, you should be mindful that there are a few parts of the equation. Getting prequalified and getting preapproved are different.

Getting prequalified means you’ve received an offer. Oftentimes the offer has contingencies you’ll need to satisfy before being approved. 

Getting approved means you’ve accepted the offer, satisfied the contingencies, and completed any documents the lender needs. Once approved, you can receive funding. 

From start to finish, the time it takes to get a business expansion loan can vary from a few days to several months. Consult the lender of your choice to understand timelines and how you can expedite them if needed. 

What documentation is required to apply for a business expansion loan?

Documentation for a business expansion loan can vary. Documentation that’s commonly requested can include:

  • Tax returns (most recent 3 years)
  • Identification
  • Accounts receivable 
  • Business plan
  • Legal documents
  • Licensing (articles of incorporation, business license, etc)

Can I get a business expansion loan with bad credit?

Qualifying for a business expansion loan with bad credit may not be the most desirable situation. As a business owner you may have taken risks in the past that have not worked out in your favor. For whatever reason you have bad credit, start by understanding ways to improve your chance of qualifying for a business loan. While you should evaluate your personal credit score, your business credit score should be evaluated too. Visit mySMBscore today to unlock valuable insights that can help you improve your business credit score and receive personalized business loan offers. 

What are the repayment terms for a business expansion loan?

Repayment terms can vary depending on several factors. Ranging anywhere from a few months to 20-30 years, you’ll need to narrow down the type of loan you want and the amount and shop offers to determine what repayment periods are available. 

What happens if I can't repay a business expansion loan?

The consequences of failing to repay a business expansion loan can vary depending on the type of loan and of course the initial agreement. With secured loans, you can lose the collateral you put up as well as damage your personal and or business credit score. With unsecured loans, you can jeopardize your personal and or business credit score. In either case, there may be legal implications as well.

Are there any fees associated with a business expansion loan?

When it comes to borrowing money, you can expect to pay fees and or interest to do so. Lenders take a risk when lending money and therefore they will seek a return. Fees can vary and can be sometime you consider as part of the loan shopping process. To check personalized business loan offers and compare them side-by-side, visit mySMBscore.

Can I use the loan for any business expenses?

What you can and can’t use a business loan for will vary depending on the agreement. Check with the lender before proceeding. If you need funds for general expenses, you may want to look into a traditional business loan. Check offers online now.

How will the loan affect my credit score?

Loans can affect your personal and business credit score. Initially the impact can be negative, but over time  it can be positive. After pulling credit and taking on debt, credit scores can drop. With on time payments and paying down debt, credit scores can rise. We encourage you to monitor your business and personal credit score on a regular basis. 

What are the alternatives to a business expansion loan?

Two alternatives to a business expansion loan include the following:

  1. Business line of credit: A business line of credit can usually be used for any business expenses. With the ability to help business owners manage cash flow, this can be a way to afford expansion. 
  2. Inventory loan: Inventory can tie up cash which can restrict the funds you have to grow your business. By using financing for inventory you can free up capital and reallocate it towards growth.

Can I get a business expansion loan from a traditional bank?

Traditional banks can offer business loans. As you shop your local area, make sure the bank offers business banking services and products. From there, you can inquire about the types of loans available. 

What happens if I don't use the loan for the purpose stated in my application?

The consequence of this will depend on the loan agreement. If a loan is intended for a specific use, you should do as you said you would. When you obtain a loan you enter a legal agreement so it’s important to comply. 

Can I pay off a business expansion loan early?

It will depend on the loan. Some loans do not have prepayment penalties, therefore, they can be repaid early with no penalty. Some loans may have prepayment penalties, so you may be able to pay them early but it can result in fees. Some loans simply state you cannot repay the loan early. Understand the requirements surrounding your loan before committing. 

How will a business expansion loan impact my taxes?

You may be able to deduct the interest paid on a business loan, but that’s about the only impact it can have on your taxes. Consult a tax professional to determine if there are any impacts pertaining to a business loan. 

Can I get a business expansion loan if I already have other outstanding loans?

It’s not unusual for a business to have several loans or lines of credit at once. The key here will be ensuring you are not carrying more debt than you can afford. Lenders will likely  want a business to demonstrate they are still turning a profit and can afford another loan.

How do you get funding for a business expansion?

To get funding for a business expansion loan you’ll need to meet the requirements set forth by the lender. The trick here is that requirements can vary, and not just by lender, but also by what you’re asking for. Requirements can consist of. . .

  1. Collateral: Business loans are often backed by collateral. 
  2. Personal guarantee: In some cases, business owners will be required to agree to a personal guarantee on the loan. 
  3. Minimum time in business: Lenders prefer a more established business. A common requirement in this category is a minimum of two years in business.
  4. Revenue: Lenders want to see your business has revenue flowing. 
  5. Personal and business credit score: Business loans can consider the personal and business credit score. 

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