Business expansion loans are a kind of small business loan that assists the small businesses finance growth as well as the expansion initiatives. Some of these loans can assist the companies that require novel equipment, open a novel location, hire supplementary staff or launch an ideal marketing campaign. Business loans in Mumbai are available to accentuate the growth of business.
How one Can Utilize Business Expansion Loans
Some of the most generic ways to utilize the business expansion loans involve the following:
- To buy a pre-existing business
- To hire new employees
- Expansion to a novel market or opening a novel location
- To Fund the purchase of appropriate equipment or inventory
- Expansion of a product line or developing novel products
- Remodel or purchase a commercial real estate
Different types of Business Expansion Loans
Numerous types of business expansion loans are easily available, each with its own pros and cons. The accurate option for the business ultimately depends on the industry, how much they require and how effectively and quickly they need to access such funds. These are a few of the most popular kinds of business expansion loans:
1. Traditional Loans
Conventional bank loans are a simple way to finance business expansion quickly and effectively with initiatives. Borrowers can utilize such types of small business loans in Mumbai for various purposes, to include equipment purchases, real estate acquisitions as well as working capital needs.
- Maximum loan amount: $500,000
- Loan term: One to 10 years
- Interest rate: Around 7% to 30%
- Funding speed: 48 hours to 14 business days
This would be a smart option if the business has a beneficial relationship with a bank that offers competitive loan options. Relying on the bank and its qualifications, rates of interest may be highly competitive than other financing types. Conventional business loans in Mumbai may also provide longer terms of repayment that make them effortless to manage from a flow of capital perspective.
2. SBA Loans
U.S. Small Business Administration popularly called as SBA Loans are some of the most sought-post financing products for small scaled businesses. They provide important benefits over other options, to include low rates of interest as well as extended terms of repayment.
There are numerous SBA loans, each of which can be utilized for various purposes. The most generic kind of SBA loan utilized for business expansion is the 7(a) loan. Business owners can utilize these for everything from equipment purchases as well as working capital requirements to real estate acquisitions.
- Maximum loan amount: $25 million
- Loan term: Five to 25 years
- Interest rate: Maximum of Prime + 4.75%
- Funding speed: Three weeks or more
3. Equipment Financing
It generally assists businesses finance the cost of appropriate machinery, vehicles as well as various kinds of business-related equipment. If one requires to finance the buying of accurate equipment to grow the business, equipment financing may be the accurate option.
- Maximum loan amount: 100% of the equipment value
- Loan term: Life expectancy of equipment
- Interest rate: Around 8% to 30%
- Speed of Financing: As certain as two business days
One of the advantages of equipment financing is that it can offer businesses with much-required capital without needing supplementary collateral. The equipment itself secures the loan. Thus, equipment financing may need a personal guarantee from the business owner. This often means that if the business defaults, a person is individually responsible for debt repaying.
4. Business Lines of Credit
A business credit line is a kind of revolving credit facility utilized to finance a greater range of business expenses. This kind of financing provides flexibility and quick access to cash as required. For the same reason, business owners generally utilize credit lines for everything from new inventory purchases to working capital requirements.
- Maximum loan amount: $1 million
- Loan term: Six months to five years
- Interest rate: 7% to 25%
- Speed of Funding: As little as one business day
Ensure to undertake financing the expansion of the business with a credit line if one wants ongoing access to cash that can be easily repaid along with accessing on a revolving basis.
5. Short-term Loans
Short-term loans are the conventional term loans however come with much shorter terms of repayment—frequently varying between almost three and 18 months. Borrowers necessarily utilize such loans for working capital requirements or short-term expansion initiatives.
Nonetheless, the short terms of repayment can be a hurdle on the business’ capital flow. Adding further to this, if one doesn’t repay the loan on time, one might be subjected to late fees as well as the penalties.
- Maximum loan amount: $250,000
- Loan term: Three to 18 months
- Interest rate: 10% and up
- Funding speed: As little as one business day
6. Merchant Cash Advances
For a merchant, capital advance provides a business with an incorporation of capital in exchange for a portion of sales of the future. A lender overextends a loan as well as then automatically deducts a portion of each future sale as long as the personal loan in Mumbai is repaid. These loans frequently finance to work with capital requirements, for instance inventory purchases or campaigns for marketing.
- Maximum loan amount: $250,000
- Loan term: Deducted from sales receipts
- Rate of interest: fees for a factor ranges from 1.14 to 1.18
- Funding speed: Around one week
7. Invoice Financing
Invoice financing offers businesses to easily access funds that are usually tied up in outstanding invoices. Such a process involves selling invoices to a third-party invoice financing company that advances the borrower ranges from 50% to 90% of the amounts of invoice.
Post the invoices are accessible and paid, the borrower tends to receive the left funds, less a fee of around 3% of the amount of loan. This can be an assisted option for businesses that are waiting on payment from customers.
- Maximum loan amount: 50% to 90% of the invoice amount
- Loan term: Repaid when the invoice is paid
- Interest rate: Factor fee of around 3%
- Speed of funding: As little as a single day of business
As merchant capital advances, invoice financing can effectively offer businesses with much-required capital—as well as with less rigorous qualification needed than other kinds of financing products. Nonetheless, some of these loans often have increased rates of interest as well as the fees. Adding further to this, terms of repayment are actually shorter than numerous kinds of loans, which can be challenging from a flow of capital perspective.
