A guide to business expansion loans

Got big growth plans? 

If so, you might be considering taking out a growth expansion loan. 

It’s not uncommon for businesses to need significant funding to be able to fuel growth initiatives. Depending on your business model, you may need to onboard new staff, including new sales associates, you might need to invest in further marketing strategies, and you may even need to buy new equipment, inventory, or materials. 

However, securing funding for growth isn’t always an easy task, and with gross lending down by 16% year on year, knowing what’s available is more important than ever if you want to get the most suitable expansion support available.  

What is expansion finance? 

Expansion finance isn’t a specific type of loan – it refers to a range of possible loan types that can be used to fuel expansion activities. Using expansion finance can be a helpful way of preventing cash flow shortages that may occur as a result of using your working capital for growth activities. 

Growth opportunities can sometimes pop up unexpectedly, and if you’re not prepared financially for the possible implications of chasing after an opportunity, it may pass you by. Expansion finance can be used to fund those opportunities that could have the biggest impact on growth, without taking away from your working capital cash reserves. 

What can I use a business expansion loan on? 

Different funding types can be used for different purposes. If you think it would help facilitate growth, you can probably use financing on it.

Marketing initiatives 

Paying for a marketing agency, funding a content strategy, or running paid advertising campaigns are all popular ways to leverage growth finance. 

Develop new product lines

Expansion finance can be used to fund the research, strategy, and development of creating new product lines. Let’s say you run a small clothing store. You’ve been very successful with the line you have, but you see an opportunity to develop a new line of clothing that fits an up-and-coming niche trend. To develop the line, you’d have to hire a designer, pay for fabrics, and much more. All these activities could be funded by a business expansion loan. 

Onboarding staff 

Growth often requires onboarding new staff. Let’s say you run a small services business. You’ve got enough staff to deliver successfully for your current clients, but they’d be overstretched and overworked if you were to onboard even a single new customer. In this case, onboarding staff either to keep on the bench, ready and prepared for new business, or to assign to new clients, could be essential to reach the next stage of growth. 

Expanding into a new geography 

If you’ve got dreams of building an international or nationwide business, business expansion finance could be used to purchase or rent new company premises in new locations, hire new local employees, and fund local marketing campaigns. 

Fulfilling contract requirements 

It’s not uncommon for a life changing contract to come with the unfortunate side effect of requiring significant funds to fulfil – to the point that you would have to turn the contract down. 

That’s what happened when one of our clients, The Gluten Free Bakery, needed to fulfil a large contract with one of the biggest supermarket suppliers in the UK. As excited as they were for the opportunity, they needed expensive equipment to be able to produce the required products. We helped them get up and running within weeks with an equipment lease. They were able to fulfil the contract and the new customer even went on to increase their order volume even further.  

Prospecting costs 

The cost of onboarding new clients can spiral. From identifying potential customers to running outreach campaigns, a growth loan can be used to help fund the cost of prospecting and closing new deals. 

What types of loans can be used to fund business expansion? 

Beyond the classic business loan, which is a lump sum that is repaid over a specific period on an instalment basis, there are many other types of finance that can be used to fuel growth.  

Revolving credit facility 

A revolving credit facility is similar to a company credit card, but rather than being entirely card based, you can draw cash or transfer funds. This can make it a helpful way to pay suppliers and rent, or buy inventory while waiting for payments from clients. 

Asset finance 

As demonstrated by The Gluten Free Bakery’s exciting growth journey, asset finance can be a helpful way to fund business growth, particularly if you work with vehicles, expensive equipment, and specialised machinery, such as farming equipment. 

Merchant cash advance 

A merchant cash advance can be used to purchase new inventory, develop a new product line, purchase equipment, invest in marketing, and a range of other growth activities. Rather than paying the funding back in regular monthly instalments, a merchant cash advance is repaid as a percentage of future revenue, so it can be particularly suited to enabling growth without straining cash flow. 

Commercial mortgage 

If you work in property development or manage buy-to-lets, property finance in the form of a commercial mortgage, bridging loan, or auction finance can be used to expand your portfolio and fuel growth. 

On the other hand, if you run a brick and mortar shop, for instance, a real estate agency or a beauty salon, you could use a commercial mortgage or semi residential mortgage to expand to a new location, or even change to a larger premises in the same area to service more customers. 

Fund your expansion goals with Funding Options by Tide

Have you got big dreams? So have we – we care deeply about helping eligible UK-based business owners find and secure the most suitable funding to support their goals. 

If you would like to find out if you’re eligible for business finance ranging between £1,000 and £20 million, just click the link below and submit your information. One of our experts will get in touch to discuss possible options. 

Find a business expansion loan.

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.