• Business Expansion Financing – Your Ultimate Guide

    Category: Business Financing


    If you’re a small-scale entrepreneur who has set up your business and got it off the ground, you have more than your lucky stars to thank. Thank your creditors, and yourself, of course, because all your hard work has paid off.

    Now you are ready to go to the next level – opening a new branch in some other strategic location. After careful assessment, the circumstances point to an important need – fresh capital. For a typical small business expansion, financing may be sourced through family members and friends willing & able to lend some funds to let your business soar.

    The good thing about this is the funds (in most cases) can be handed to you immediately and you can return the loan to kin or friends without interest. Or it may be through cash advances from your credit cards. You may also take out unsecured loans from a bank. A multi-purpose loan granted by a bank is generally structured to allow easy repayment terms. Try not to be late in settling the monthly loan amortizations so as not to accumulate late penalty charges and interests.

    There are also other small business loan lenders who may grant you your business expansion financing after examining your credit history and business plan. Business expansion financing by a lending institution or government agency may be easy to get, especially if they can see how your initial foray in the business arena has succeeded.

    During these tough economic times characterized by tough credit, it is good to note the symbiotic relationship between certain banks (which encourage borrowers to utilize their funds as efficiently as possible and to take into consideration long-range needs) and small entrepreneurs.

    It may be worthwhile to take out new business loans to pay off numerous debts, cover business essentials like an accounting software package to help manage & record expenditures & other financial records, and invest on a vehicle as well as equipment that will be used for business may be worthwhile.

    The main thing to keep in mind is not to overspend, and end up feeling the pinch soon enough. The fact is, many small firms fell by the wayside after only two years of operations because of an overambitious expansion strategy. The stumbling block: accumulated debt and cash flow problems. Retire costly sources of debt (such as bank loans upon maturity) and be open to other good business financing options.

    The alternative business expansion financing is to exchange a certain amount of capital for a piece or share of the business.

    Fast forward several years and additional branches later. If your well-known flourishing chain of branches requires new funding facility to support yet another expansion program and/or buyout decision, you can opt to go public and issue stock. Time this well.

    See if market conditions are ideal at the time of an offering and be sure that your company can measure up to the expectations and close scrutiny of analysts and investors. Experts advise not abandoning core competencies as diversification/expansion plans are actualized.

    Business Financing FAQ:

    Question: Financing the expansion of a insurance agency. I own the equipment and book of business valued at 1.3 million?
    I need to borrow 150,000 for a 10 yr period.

    Answer: If a local bank won’t finance this for you, then either your valuation of the agency isn’t accurate, or your credit is too rotten.

    You could sell half interest in the company to another agent who wants to get into agency ownership to raise the funds.

    Question: Is there anyway that I can get Business Financing to Start my Business?
    I am 14 years old and looking to open my paintballing Business in northern Idaho next year. I have my business plan and Budget setup but the amount of money I need is a bit more than I have (I need about $22,000). Is there anyway I can get Financing or anything? I have decided to have it as a LLC.

    Answer: Wow, what a smart and industrious kid! You should be proud of yourself. I think you have a problem though. You will need to have an adult make all the contracts, as minors cannot sign binding contracts. This goes for loans/financing as well as everything else. So your first step is to find an adult who will act as your agent in this and other business matters.

    Question: Where is the best place to get small business financing?
    I just started a landscaping business about a year ago. I ran into very hard times in the fall and got behind on my payments which really screwed up my credit. Now I am full with jobs for almost this whole summer but I need a loan to combined all my loans into one to make it easier to make the payments but I can’t get a loan with my bad credit.

    Answer: SBA – The SBA provides short- and long-term loans to eligible, credit-worthy start-ups and existing small businesses that cannot obtain financing on reasonable terms through normal lending channels.

    Note, however, that SBA does not provide direct loans. Rather, the agency provides guarantees to loans availed through SBA’s partner lending institutions, which includes many community banks. The applicant must satisfy the lender’s requirements before he or she can ask for a guaranty from the SBA, unless the borrower is deemed prequalified based on the person’s character, credit, reliability and experience (prequalification is for loans $250,000 or less).

    Question: I have bad credit and need financing for my business to expand? Does anyone have any ideas on how to do this?
    I have a small residential and commercial cleaning business that I am looking to expand. I have been shopping around for financing through traditional lenders, but due to my 518 FICO score and millions of charge-offs, I can’t get financing.

    Answer: I think Prosper.com may be your last best chance. Maybe you need to change your writeup. Potential lenders want to know about your past but, most of all, they want to hear your honest description of why and how you think you’ll be successful this time. Potential lenders like to invest in people, not in businesses.

    Just be careful that any solution you decide on is not taken in desperation and quick judgment. The results could make your situation worse than it already is.

    I’m sure you realize it now, but others should learn from your experience that poor financial responsibility has very serious long-term effects that are extremely difficult to overcome.

    Question: What is the best way of financing for a new business when you have no credit and cannot borrow from bank?
    I am just curious as I am trying to find ways of getting my business start it, but so far I am having problems with the financing.

    Answer: You need to save the money or borrow from family or take partners. Financing is the hardest part of most businesses. Unless you have a very simple service business you will have cost. The simple service business is what they call low barrier to entry like cleaning houses, mowing lawns, babysitting, many people can do the labor and the equipment is cheap so most have almost everything they need.

    Question: Starting a small business. How do I get financing? Does anyone know of a good resource for good information?
    I’m looking into starting a small business but apparently banks don’t loan to startups and there aren’t gov’t grants available for startups either. How do i go about getting the financing together? Are there any good resources? I am writing the business plan now.

    Answer: Banks Do lend money to start ups, but it is harder now than normal and you are likely to have to shop banks to get a loan and get decent terms. Try to find on with a designated Small Business Banker. They will likely be able to help you better and have more experience than most branch managers. If you can not get bank financing there are a couple of options: Find outside investors, Home equity loan, Find a partner, start small and work your way up.

    Question: Does anyone know how to get 100% financing to start a business?
    I would like to open a franchise but I have no money down and not really any assets. I am looking for someone who finances 100% to startup a business.

    Answer: Doesn’t exist. What you can do is approach an existing owner that may be getting tired of running the store, growing old, moving, etc… and see if they will let you take over on a lease with option of the existing business. However, 100% financing to start your own business, be it franchise/whatever, just doesn’t exist

    Question: Can One really do business without serious financing?

    Answer: Depends on what you mean by “serious.” Many small businesses have grown without incurring debt.

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