Expanding to a second location is exciting but capital-intensive. Here's how to fund it:
Typical Expansion Costs:
- ●Build-out: $100,000 - $500,000
- ●Equipment: $50,000 - $200,000
- ●Initial inventory: $10,000 - $30,000
- ●Permits/licenses: $5,000 - $20,000
- ●Marketing launch: $10,000 - $50,000
- ●Working capital buffer: $50,000 - $100,000
Total: $225,000 - $900,000+
Best Funding Options for Expansion:
1. SBA 7(a) Loan
- ●Up to $5 million
- ●Rates: Prime + 2.25-4.75%
- ●Terms: Up to 25 years (real estate)
- ●Best for: Full expansion funding
2. SBA 504 Loan
- ●For real estate and fixed assets
- ●Low down payment (10%)
- ●Fixed rates
- ●Best for: Buying the building
3. Equipment Financing
- ●Fund equipment separately
- ●Preserve SBA for real estate
- ●Faster approval than SBA
- ●Best for: Kitchen buildout
4. Business Term Loan
- ●Faster than SBA
- ●Higher rates but less paperwork
- ●Good for proven operators
- ●Best for: Mid-size expansions
Expansion Funding Strategy:
- ●Start SBA application early (takes 60-90 days)
- ●Use equipment financing for immediate needs
- ●Line of credit for working capital buffer
- ●Don't underfund—include 3-6 month reserve
What Lenders Want to See:
- ●Profitable first location
- ●Strong management team
- ●Detailed business plan
- ●Market research for new location
- ●Clear path to profitability