Business expansion loans

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Page written by Chris Godfrey. Last reviewed on March 14, 2025. Next review due October 1, 2026.

Expansion loans can help small businesses grow without putting strain on cash flow or selling equity to investors. If your finances are stable and you have a solid plan for growth, an expansion loan may be your best option for investing in the future of your business.

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What is a business expansion loan?

A business expansion loan is a type of commercial financing that helps US businesses grow by providing capital for scaling operations, such as opening a new location, or building in a new production line. These types of loans may have fixed or variable interest rates, with repayment terms as long as 25 years. Business expansion loans may be secured (requiring collateral from the borrower), or unsecured (no collateral required).

What can I use a business expansion loan for?

Open new business locations
Expand your current business location
Add new production or assembly lines
Create and launch new products
Expand your workforce
Buy plant and machinery
Purchase commercial property
Etc.

Is a business expansion loan the same as a business acquisition loan?

No. Although these loans share some features, a business acquisition loan is specifically designed to fund the purchase of an existing business or franchise.

What are the types of business expansion loan?

Business expansion loans come in a variety of flavors:

SBA Loans

US Small Business Administration (SBA) loans are partially backed by the US government, which means they may come with lower interest rates and fees than many commercial loans.

SBA loans: (Collateral or a personal guarantee may be required).

SBA 7(a) Loans: The most common type of SBA loan, providing up to $5 million in funding with repayment terms of up to 25 years. These loans are 85% backed by the US government, which reduces the risk for lenders. However, strict eligibility criteria apply, and the approval process could take several months.
SBA Express Loans: Designed for faster approval, offering up to $500,000 with an approval decision typically made within 36 hours. Express loans are 50% backed by the U.S. government, which increases the risk for lenders and may result in higher interest rates and fees. The same eligibility criteria usually applies.
SBA Microloans: Available through nonprofit and community-based lenders, offering up to $50,000 with more relaxed eligibility requirements. This type of loan may be ideal for businesses that need smaller amounts of funding or who may struggle to qualify for traditional commercial financing

Term Loans

Term loans are the most popular type of commercial loan. Offered by traditional banks, credit unions and online lenders, these loans are typically used for one-off investments where borrowers know exactly how much cash they need. You receive a single, lump-sum cash injection and then pay it back in regular instalments over a fixed period of up to 25 years. Borrow up to $5 million. Collateral may be required.

Business Line of Credit

Also known as a revolving line of credit, this is a business loan that functions like a high-value credit card but comes with lower interest rates and fees. Borrowers can withdraw as much as they want when they want from a loan facility up to the limit of their borrowing. Collateral may be required.

Equipment Financing

With equipment financing, you use the asset you’re purchasing (such as plant or machinery) as collateral for the loan. This type of borrowing is ideal for businesses with erratic cash flow or low working capital. Use the asset as you pay for it. Spread the cost over time. The machinery acts as security for the loan. In most cases, no added collateral is required.

Commercial mortgage

Commercial mortgages can be used to buy properties that have a business function, such as factories, offices, stores, restaurants, gas stations, gyms, theatres, sporting venues, etc. Although commercial real estate loans are similar to the residential mortgages used to buy homes, they differ in some key areas:

Differences between commercial and residential real estate loans
	Commercial	Residential
Primary borrower	Business entity	Private individual
Type of property	Commercial property	Private residence
Loan repayment period	10 to 25 years	15 to 35 years
Maximum loan to value (LTV)	65% to 85% LTV	95% LTV
Interest rates	Higher than residential	Lower than commercial
Fees	Higher than residential	Lower than commercial
Pre-payment penalties	Common	Rare
Minimum FICO score	Usually 600+	Can be as low as 500

How does an expansion loan work?

Although there are differences between the types of expansion loans available, the basic structure for all business loans remains very much the same:

Ensure you have the right paperwork and credentials (good credit score, solid business plan) to obtain a business loan
Apply for loans – either direct to lenders or via a marketplace that can introduce you to a wide range of lenders from a single source
Get approved and receive offers from lenders
Review the various deals available
Select your loan
Receive the funds into your bank account – sometimes in less than 24 hours

Where can I get an expansion loan?

Expansion loans are available from banks, credit unions, online lenders and some non-profits (business grants). Every lender will have their own loan criteria, which means interest rates and fees can vary significantly. Borrowers are advised to shop around and compare deals before settling on a loan.

What are the pros and cons of an expansion loan?

Business expansion loans have their advantages and disadvantages:

Pros:

Can boost revenue and add value to your business.
Get the cash you need without selling equity in your business to investors – you keep control.
Borrow up to $5 million over as long as 25 years.

Cons:

Some expansion loans may have high interest rates and fees.
If your cash flow is patchy, taking on new debt may create financial difficulties in the future.

How do I apply for an expansion loan?

Eligibility criteria for expansion loans varies by lender. However, common factors that influence qualification include:

Length of time in business: Most lenders prefer to work with businesses that have been in operation for at least two or three years. Start-ups may find it harder to qualify for an expansion loan, but microloans and grants may offer opportunities for new businesses.
Annual revenues: The financial performance of your organization plays a significant role in the loan approval process. Higher revenues generally indicate a lower risk for lenders, increasing your chances of success.
Credit score: Both personal and business credit scores are crucial. A higher credit score will result in better loan terms and interest rates. If your credit score is weak, you may do better by applying for loan programs designed for those with less-than-perfect credit.

What documents do you need to get an expansion loan?

Typical documentation requirements include:

Business details: Basic information about your organization, including business licenses, permits and articles of incorporation.
Business plan: A detailed plan showing how the loan will help grow or sustain your business.
Financial statements: Documents such as income statements, balance sheets, and cash flow statements.
Tax returns: Several years of personal and business tax returns.
Collateral information: If the loan is secured, full details of the collateral being used to support the loan (such as equipment or property) is essential.

Get started with Swoop

Working with business finance experts can make all the difference when applying for an expansion loan. Contact Swoop to discuss your borrowing needs and to compare high-quality business loans from a choice of lenders. Help your business grow without putting strain on cash flow. Register with Swoop today.

Written by

Chris Godfrey

Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Wells Fargo Bank, Visa, Experian, Ebay, Flywire, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of US consumer and business finance.

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