Business is good, but it could be better if you had a bigger space, a larger advertising
budget or more employees. It is time to explore the idea of an expansion loan.
Expansion loans differ from start-up loans because, instead of starting a
business, you are improving an already established one. This narrows the loan
possibility pool; but once you have the tools you need, there are still plenty of
programs available to help make your expansion dreams a reality .
Loan Application Necessities
Step 1
Decide what you need to expand your business and make a list of the items.
If you want to increase the number of employees, determine how many workers you
would like to hire. If you want to expand your office space, determine how
big a space you will need. Be as thorough as possible.
Step 2
Determine the cost of the items on your list. Calculate the wages or salaries
you want to pay any new employees. Price office space that would suit your
needs for expansion. Get an average cost for all equipment and supplies.
The sum of your list will be your loan amount.
Step 3
Write your business plan or, if you already have one, update it to reflect your
needs for expansion. A business plan is required to apply for most small business
loans, plus it is a good road map for your business. If you do not have time
or the know-how to write a business plan, hire someone to write it for you.
Step 4
Locate a small business expansion loan that suits your needs. The Small Business
Administration (SBA) website (http://www.sba.gov)
has a listing of loans specifically for expansion. You can also check out your local
Small Business Development Center (SBDC), which is usually housed on local college
campuses. The SBA also provides a locator for your nearest SBDC. Financial
assistance can range from grants (money you do not have to pay back), to more traditional
loans (monthly payments), to deferred loans (the loans have a predetermined grace
period in which no payments are due).
Step 5
Follow the application instructions to the letter. Failing to meet the application
guidelines could result in your application being rejected.
Tips & Warnings
* Try getting a loan through a private lender such as a bank or finance company
first. If you are turned down, it makes your application through the SBA more
credible. Also, many SBA loan programs require you to apply for traditional
loans first.
* Be patient. It can take weeks or months for a loan application to be approved,
and several weeks after approval to receive funding.
* Do not include frivolous items in your expansion loan application or business
plan. "Replacement office furniture" is fine. "Italian leather wingback chair and
Old English oak desk" could be considered a misallocation of funds.
* If you hire someone to write your business plan, ask to see samples of their work
and inquire about their funding success rate. Get references as well if possible.
* Keep in mind that the loan payments will come out of your current revenues (depending
on the type of loan) before any revenues from the expansion begin to trickle in.
Ask for what you need and what you can afford to pay back. Some borrowers
add a cushion into their loan request for the repayment of the loan, but this can
be a dangerous practice since all it does is increase the amount of the loan and
the size of the payment.