Own a B2B e-commerce business? Click here to learn more about Tabit, a NEW B2B Buy Now, Pay Later financing option! Learn More

How Business Expansion Financing Works

Hanging arrows facing upwards on wooden wall

Expansion financing is defined as any capital that helps a company grow. Generally speaking, there are only three ways for a company to raise capital:

  1. By issuing equity capital to investors
  2. By using existing capital earned from operations
  3. By borrowing

While options one and two above are certainly possibilities, small businesses and larger organizations traditionally acquire expansion capital through some form of small business loan or line of credit from a bank or another lending institution. Today, alternative financiers, such as Merchant Growth, offer flex financing solutions that leverage future cash flows into immediate working capital that they can use to finance expansion.

What Can Expansion Financing Be Used For?

Since the term “expansion” can be defined in many ways, so can “expansion financing.”

Both small businesses and larger, more established businesses can use funds to expand into new markets, to fund an online advertising campaign, for equipment financing, to buy inventory, to hire or train employees, to acquire competitors, to rent new space, and much more.

The type of expansion capital you choose will vary based on the nature of your business, and the amount of money you need. However, it’s important to note that timing is crucial when it comes to expansion plans. Wait too long, and you may miss growth opportunities.

Is It a Mistake for a Small Business to Use Working Capital (Cash Reserves) Instead of a Bank Loan?

Many small business owners know how hard it is to create and sustain a successful business. They also know that even healthy businesses with plenty of cash to spend can run into unexpected market forces that reduce their available liquidity.

For example, what happens if an emergency issue dries up your available working capital? Banks are quite risk-averse, and may not be comfortable lending to a company that appears to be in financial trouble. Indeed, even if you are eventually approved for your small business loan, your company may not have the luxury of waiting a couple of months for the bank’s financing to come through.

When you need cash quickly but can’t access it, your small business (and all those people that depend on it) could be in quite a bit of trouble. That’s why when it comes to growing your business, expansion financing is usually the most prudent course of action. Sure, you’ll pay interest on the short term loan, but debt-based financing is also the safer option.

What Type of Financing Should I Use for My Business Expansion?

When it comes to business growth, every business owner has a unique set of challenges, and therefore needs to consider the options available in order to find the solution that makes sense for their specific needs.

Bank loans with strict repayment terms are the right choice for some companies, and small business loans from flexible online lenders are the best choice for others. If your priority is to get access to the cash you need quickly without the hassle of a lumbering institution slowing you down, many options exist that can connect you with the money in 24 hours or less.

Line of Credit

You might choose a line of credit option for financing of between $7,500 and $125,000 from a company like Merchant Growth. The advantage of taking that route, besides it being convenient, flexible and fast, is that businesses who use lines of credit have the freedom to access the capital when they need it, pay it off, and borrow again.

Many businesses find that it’s a better option than using business credit cards, which often have an interest rate that’s higher than necessary. With a line of credit, you only pay the interest on the actual amount advanced, and the rate is lower.

Using a line of credit can be a useful financial tool for a business, but it is better suited to purchase things like inventory or for paying operating costs, and less well-suited for larger purchases such as real estate or equipment.

Flex Financing

Or a business might find that flex financing is more to their liking when expanding their business. Also available through Merchant Growth (but designed for larger amounts of up to $500,000), flex financing turns your company’s future profits into a source of immediate working capital.

A benefit of this approach is that repayment is designed to adjust to each business’ specific cycle, meaning you can pay more when you’re busier, and less when you’re not! Thankfully there are no hidden fees and no collateral needed with flex financing from Merchant Growth. Also, you can also get the money quickly, most often in just 24 hours!

How Do You Choose Your Financing Source?

There are a number of financing options to choose from, and your choice will often be dictated by your specific business, the amount of money you need, and what you need it for.

One of the reasons so many Canadian businesses trust Merchant Growth to provide financing is their unique blend of customer care, complete transparency and their use of the latest technology, which helps them connect businesses with the cash they need quickly – much faster than it would be with banks.

Not only do they have a track record of success, but they also have a great leadership team with a ton of experience in the banking sector under their collective belts. However, when it comes to recommendations, there really is no substitute for doing your own research.

The best way to find out if Merchant Growth is the type of alternative financier that you can trust to get your business the money it needs to grow is to get in touch with them. The application form is simple, and all you need to do is enter some basic contact information to get started.

Reach out today and start growing your business!

Share This Story, Choose Your Platform!

Share on facebook
Share on twitter
Share on linkedin
Share on email
Share on reddit

Get started today

Complete our online application and we’ll contact you to present financing options tailored to your business needs.