Small-business owners require access to capital to help finance future endeavors. Acquiring accessible and affordable funding helps ensure the success of their business growth.

Growth Capital

Owners borrow money called growth capital to increase their business’s operations. There are many loan options available to fund expansion. Most lending sources for this purpose have long-term financing.

Bank Loans

Bank lenders have low rates, low fees and long terms for growth financing. Businesses commonly use these loans to purchase real estate, buy equipment, refinance existing debt or access working capital.

Asset-Based Loans

Businesses need both collateral and cash-flow to get approved for this kind of loan. Companies might use real estate, inventory, equipment or machinery as a guarantee to obtain funding. Asset-based lending rates are typically higher with shorter terms than bank rates.

Cash Advances

A cash advance is a lump sum paid upfront to a business. The operation then promises a portion of future credit card sales as repayment. Merchant cash advances are expensive forms of financing and only make sense as business growth funding if the expected revenue is more than the advance cost.

SBA Loans

This type of financing is a traditional bank loan that is backed by the government. Owners use SBA loans to cover startup costs, expansion, acquisitions, construction and more. If the borrower defaults, the lender recovers lost costs from the SBA.

Alternative Loans

Banks do not approve most growth capital loans. Companies also have alternative lending options, such as marketplace lenders and private lenders.

Qualifying

A business’s financial state determines whether a lender will fund its growth plan. An owner must review assets, debts, cash flow and projected sales before applying for a growth loan. A company needs to ensure enough future money to cover the cost of financing plus operation expenses.

Lenders check the company’s profitability when they apply for a business growth loan. The lending financial institution wants to ensure that the business model is proven and efficient before providing growth financing. Organizations that can show sufficient existing cash-flow have a better chance of securing funding.

Goals

Owners need to consider their growth goals and plans, determine the most vital aspects and detail the finances involved. Businesses must have an estimated cost and a projected return on investment. Doing so helps both the company and the bank decide if expansion is worth the effort.

Timeframe

The timeline for a business growth plan determines the type of financing that is best for a company.