Most of the businesses, whether big, medium or small require funding at some point of time to meet their daily working capital requirements. The funding is also required to match with the fast growing market and to generate more profit and revenue. If any growing small businesses see any opportunities to expand their business, they require sufficient finance to help them with their business expansion.
Business owners or enterprises require loans for various purposes, such as business expansion, buying equipment, purchasing machinery or plant, paying-off salaries or rent, hiring new staff, buying new office space, purchasing raw materials, etc. To facilitate budding businesses, there are some business loans available, which the business owner should chose carefully before applying for.
Loans for Business Expansion
To cater the needs of growing businesses, there are several loans offered by banks and NBFCs for business expansion purposes. Here are the 5 absolute best loans for business expansion.
1. Term Loans
Traditional term loan is very much common and popular business loan criteria in every aspect. In term loans, the lenders provide a lump sum amount of cash for a fixed period. Borrowers are expected to repay the money with interest and fees within the given period of time. Term loans are used for general working capital needs, inventory investment, workforce, renovation and so on. Therefore, traditional term loans are considered as most usable business expansion loan.
2. Equipment Financing
Like term loan, the lenders give equipment financing to help the business to purchase new equipment for their business expansion. Under equipment financing, borrowers have to pay back the total amount lent along with fees and interest within a decided time frame. This is a good facility to avail, if the business is in need of new equipment. Under this scheme, loan is easy to obtain as the borrower can show the equipment as collateral.
3. Line of Credit
Line of credit or credit line allows the borrowers to access to a fixed amount of cash which will help to cover everyday business expanses. Therefore, it is a good loan option to support any business expansion. Similar to a credit card, the borrower just has to pay the interest on the funds they use with a business line of credit. In business line of credit loan, it can be revolving, where it goes back to the original limit after repayment, or non-revolving, where it is just allowing the borrowers to use the selected amount over a fixed period of time. Line of credit offers flexible payment options along with flexible use of funds and access to cash on demand.
4. Short-Term Loans
Under this scheme, a borrower can have short-term small business loan, where they are provided with fixed amount of credit over a short period of time. The loan amount would be lower in this case and interest rate will be slightly higher. These types of loans are not usually financed by any banks, but alternative financial body who have more lenient requirements for securing financing.
5. Invoice Financing
Invoice financing works in a way where the borrower has to sell their invoices to the lenders against the majority amount of invoice money. The lenders will take the rest amount which is of 20%, until the full payment of the invoices. Once, the invoice is paid, the remaining funds will be released, excluding any applicable fees.
Factors that Influence Business Expansion
There are many factors that influence a business to expand. Most common reasons are staff shortage, unfilled orders, inventory gaps or edging out the competition or changes in the respective industry. Financing a business expansion at right time can prevent any kind risk coming to the business. Other common factors that make businesses to expand are as follows:
- To support the need of outgrowing operating facility and networks
- Need of purchasing modern and fully-functioning equipment or machinery to help keep up with growing orders
- To grow a business, one needs to take care of existing employees and hire more employees to support in their supply demand
- While reinvesting in any business, quality working capital financing is needed
- To grow any business, marketing is needed to promote the business, therefore, financial assistance is needed accordingly
- To purchase more inventory to pace up with the growing business, credit is required
FAQs on loan for business expansion
Ques.1: Is going for business expansion loan will be best for my business future?
Ans: Yes, if you are sure of expanding your business and see it in the apex in long term, business expansion loan would be a right option to fulfil the purposes.
Ques.2: How much time it takes to disburse the loan amount under Loans for business expansion?
Ans: It takes usually 2 working days to 2 weeks to disburse the loan amount from the date of application submission.
Ques.3: What is the interest rate charged under this business expansion loan schemes?
Ans: The interest rate varies from banks to banks what is ranging from minimum 9% to maximum 30% of the loan amount.