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Updated: Mar 3, 2020
There comes a time in every successful business owner’s career when an expansion is an option. Maybe you’re running out of office space or can’t keep up with increasing customer demand. Or, perhaps you have an opportunity to buy the business next door to yours.
Expanding operations can be costly, but prioritizing growth is crucial to sustaining your business long-term. Investing in a growth project can help you attract more customers, increase revenue, and stay competitive.
Keep in mind though: business growth isn’t always linear. Growth can involve hiring or a move to a bigger office. Still, it can also mean adapting to your market, fine-tuning backend processes, improving customer relationships, or increasing employee satisfaction. Here are some examples of growth initiatives you might consider:
Whether your growth project is time-intensive and complicated or quick and straightforward, you’ll need at least some cash to execute it. That’s where a business loan can come in handy.
A loan can give you more money upfront to enact your plans, maintain operations, and stay covered in case of a crisis. Here are the three most common types of business loans to consider a growth project.
A business line of credit gives you access to a specific amount of money that you can dip into on an ongoing basis. Similar to a credit card, you can use your funds over and over as long as you pay them off.
For example, if you use your entire $20,000 line of credit then bring your balance back down to zero, you’ll be able to reaccess the $20,000 again. The average interest rate for a business line of credit ranges from 8% to 80%, depending on the lender. However, if you miss a payment or exceed your credit limit, your rate can spike.
Business lines of credit are great options for business owners who need funding for cash flow shortages, ongoing operational expenses, or short-term financing needs. However, lines of credit aren’t the best solution for growth projects that require a big chunk of money at once.
Say, for example, that you want to steadily increase the amount of inventory you stock each month for the next quarter. A business line of credit can give you the flexibility and cash cushion to temporarily supplement those extra costs. However, if you want to buy your inventory in bulk because it’s more cost-effective, then you may need a more significant sum of money upfront instead of a line of credit.
Equipment financing allows you to finance up to 100% of the cost of buying equipment or machinery for your business. You might need a car to add delivery options to your floral shop, for example. Or, maybe you want to upgrade your hair salon’s point of sale system or replace your construction company’s excavator ahead of a year-long project.
Equipment financing gives you money upfront to purchase the items you need. This financing doesn’t just include heavy-duty machinery, either — you can also purchase office furniture, tech equipment, and software. Much like a term loan, you make regular repayments on a schedule. Once you pay off the cost of your equipment plus interest, you own your equipment outright.
Unlike a term loan, though, equipment financing is generally a more straightforward qualification process. Most lenders base the amount of money they provide on the type of equipment you need, rather than looking solely at your business credit score and financials. The average APR for equipment loans is between 8% and 30%.
If you need to upgrade, replace, or buy new equipment for a growth project, then equipment financing is a great solution. However, if you need money for something other than machinery or tech purchases, you may want to consider a term loan.
A business term loan gives you a set amount of money that you pay off over a set period. Depending on your lender, you’ll either have a fixed interest rate or a variable one, which means the rate is subject to change based on the market.
The benefit of term loans compared to other forms of financing is that they give you the financial security to take on big projects or make major purchases, while still offering you the structure of a payment schedule.
Unfortunately, not all term loans are created equal. Term loans with traditional lenders like big banks and the Small Business Administration offer more affordable interest rates — between 3-6% — but they’re also notoriously more difficult to meet the qualifications. What’s more, you usually have to gather a lot of paperwork to apply and wait at least a few months before receiving a response. Alternative lenders, on the other hand, tend to be faster and more affordable.
If you need an efficient, easy option for financing your growth project, look to Funding Circle. Our term loans are designed to help business owners like you take operations to the next level. Here’s what you can expect when you apply for a term loan with us:
Business expansion doesn’t produce results overnight. When you’re embarking on a growth project, you need time to transition into a new phase of business, see a return on your investment, and become profitable.
We know how important it is to have flexibility over your schedule and cash flow. When you’re approved for a Funding Circle loan, you’ll have the choice to customize your term from six months to five years to pay off your loan. Your business, your choice.
The best part? If your business takes off after expanding, you can pay off your loan early with no prepayment penalties.
When you’re taking on a growth project, you need considerable funds. Despite your best efforts to save and invest, you may not have enough cash on hand to remodel your store or hire a project manager at a competitive salary.
That’s why we offer more substantial amounts of capital. With a Funding Circle term loan, you can borrow between $25,000 and $500,000, so you can take on a growth project without scrambling to shuffle your cash flow or redo your budget.
Expanding your business requires embracing change. Not only do you have to adapt to potential structural and market changes in the wake of a growth project, but you also have to pay closer attention to your finances to ensure you’re not going into the red.
Growing a business takes a village — and we want to be part of yours. After you submit your loan application with us, one of our loan specialists will reach call you to walk you through the process and answer any questions you might have.
We’re here to support you in your goals before, during, and after the loan process. On our website, you can find tips and guides on topics like improving operations, choosing the right financing for you, and figuring out how to manage debt.
When you’re ready to begin a growth project, you don’t want to be held back by logistics. After all, sometimes you only have a small window of opportunity to make your move.
At Funding Circle, we want to clear your path by making the loan process as swift as possible. Applying is simple. You don’t have to gather piles of paperwork — you will need just a few key documents and five minutes in front of your computer. Then, once you submit your application, you can hear back in as little as 24 hours and receive funding in as few as five business days.
Paige Smith is a Content Marketing Writer and Senior Contributing Writer at Funding Circle. She has a bachelor's degree in English Literature from Cal Poly San Luis Obispo, and specializes in writing about the intersection of business, finance, and tech. Paige has written for a number of B2B industry leaders, including fintech companies, small business lenders, and business credit resource sites.