Business Expansion Loans:

Did you know waiting too long to expand your business can hurt the profitability of the venture? Business owners often wait until they have accumulated sufficient working capital or have reached a particular milestone to expand their enterprise.

They thus often miss out on growth opportunities or even fail to cope with the rising demand. Business entities can seek every possible growth opportunity and expand their venture when the demand is at a peak with the help of funding options like business expansion loans.

What Is a Business Expansion Loan? 

Business expansion loans are financing options that provide capital to businesses to help meet expenses related to an expansion of their scale of production. 

Generally, a business considers expansion under situations when - 

  • It outgrows its existing operating capacity and production network
  • The production fails to keep up with increased demand due to the business’s old machinery or backdated production technology
  • The business suffers from a staff shortage
  • Significant inventory gap
  • The total liabilities exceed income, and the current working capital runs low
  • There are several unfilled orders and untapped market segments

It can thus be said that small business expansion loans help entrepreneurs to meet growing demand and help maximise their potential. It comes in handy to manage a firm’s overall growth and sustainability. Depending on the type of business and capital requirement, business owners can select a suitable loan option for expansion.

Business can raise working capital with much ease via KredX to quickly meet their expansion-related requirements. KredX provides invoice discounting services that do not require a business to pledge any assets to access funds. Repayment of the advance is convenient too. 

Types Of Business Expansion Loans:

The primary types of business expansion loans are as follow –

  • Term Loan:

A term loan is considered suitable for meeting several business-related requirements, including expansion. For instance, a term loan is used to meet –

  • Working capital requirements
  • Restocking inventory
  • Renovation cost
  • Talent hiring cost

Through this lending option, businesses can avail a lump sum amount which they need to repay along with interest and additional charges over a predefined tenure. Based on the repayment period, a term loan can be a short-term, mid-term or a long-term loan.

  • Equipment Financing:

With the help of this business expansion loan, business owners receive funds to buy equipment that can help support the increased production requirements during or after expansion. Equipment financing is a secured loan as the purchased equipment is kept as collateral until the borrowed amount along with interest, is completely repaid. Through this financing option, individuals can also get their existing equipment repaired or upgraded to boost expansion. 

  • Line Of Credit:

This lending option provides access to funds as and when needed. Through this option, businesses can withdraw funds from a predefined credit limit and repay the same along with interest. It must be noted that interest is charged only on the amount of money that is withdrawn and not the total sanctioned amount.

Borrowers have an option to select either revolving credit line or non-revolving credit line under this funding option and access capital as per their requirement. It usually comes with a term ranging between 6 and 60 months. 

  • Government Loan Schemes:

Several government-backed schemes help small businesses to expand their scale of operations. Some of the most popular government-backed credit schemes include – 

  • MUDRA loan
  • MSME Business Loans
  • Credit Link Capital Subsidy Scheme for Technology Upgradation 
  • Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE)

Eligible businesses can benefit from these loans and expand their venture accordingly. 

  • Merchant Cash Advance:

Though it is not a typical small business expansion loan, the cash advance can help business owners fund their expansion needs easily. Under the Merchant Cash Advance, individuals sell a significant share of their future credit card sales to raise capital.

It must be noted that the advance value depends on the credit card sales and the creditworthiness of applicants. Generally, MCA comes with strict terms of repayment and accompany hefty interest rates. As a result, most business entities treat it as a last resort. 

  • Invoice Discounting:

This large and small business expansion loan option provides businesses immediate access to capital to fund their expansion needs adequately. Under this lending option, companies use their unpaid invoices to raise working capital. 

Based on the value of the invoice and the eligibility of businesses, KredX extends up to 90% of the unpaid bills’ value as loan.

The funding option provides quick access to working capital and comes with attractive terms of repayment for you to adapt business operations as per emerging growth opportunities.

You can access funds through invoice discounting services from KredX within 24-72 hours*. All you need to do is follow the digital application process and unlock the capital tied up in the accounts receivable. 

How To Qualify For A Business Expansion Loan?

Typically, businesses with the following characteristics often qualify for this loan option –

        • A good credit score (The minimum threshold varies from one financial institution to another)
        • A business vintage of at least 2 years
        • Ability to repay the loan easily
        • A clean credit history
        • Substantial cash flow
        • Robust annual turnover
        • Market Goodwill
        • Possessing all the required documents like – KYC, proof of income, business vintage, ITR, etc.

It must be noted that the type of business and the purpose of availing funds also influence business expansion loan approval and disbursal.

KredX lays down easy to meet eligibility criteria and simple requirements to help businesses access funds quickly. As one of India’s leading integrated cash flow solutions provider, we ensure timely assistance and quick working capital solutions through our services. Get in touch with us now to learn more about our services!

FAQs on Business Expansion Loan:

A. Businesses that wish to expand their scale of production or operation can apply for such loans. In most cases, companies in their growth stage opt for such a loan option.