Use case

Expansion funding: how to size it and what to watch.

Growth costs money before it pays back: more stock, more staff, more space.

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What this looks like

Growth costs money before it pays back: more stock, more staff, more space.

Expansion can mean a second shift, a larger kitchen, a new product line or an extra vehicle. The common thread is that costs start before revenue does.

How to size it

Fund the part of the expansion that is directly tied to revenue and keep the rest in the budget. A request sized at one to two months of the added capacity is easier to carry.

Illustrative arithmetic

A bakery depositing about $44,000 a month asks for $22,000 for a second production line. At a 1.24 factor the payback is $27,280, a cost of $5,280. Over roughly 6 months that is about $217 per business day, or close to 10% of monthly deposits.

Total payback: $27,280.
Cost: $5,280.
Payment: about $217 per business day, close to 10% of monthly deposits.

Every figure on this page is illustrative arithmetic in Canadian dollars. It is not an offer, a quote or a promise of approval.

Which structure tends to fit

Revenue-based financing fits growth because the payment scales with the new revenue. A merchant cash advance fits a defined purchase.

Where it goes wrong

Expanding faster than demand
Fixed costs that arrive before sales
Stretching management attention across too many things

Before you apply

Model revenue at half of the plan
Separate one-off costs from recurring costs
Plan the payment against current deposits, not forecasts

Typical starting points

Monthly revenueTypically from around $20,000 a month in deposits for Canadian files. The exact line varies by funder and by file.

Time in businessTypically about 12 months. Newer businesses can be reviewed, but the options narrow.

Account healthLimited low-balance or negative days. Funders read the last few months of bank statements for this.

CreditScores from 500 are considered. A score of 600 or higher opens more options and better offers.

DocumentsA signed application and recent business bank statements, typically the last four months.

Existing advancesFiles with an existing advance can be reviewed, including second position.

Common questions

How much should I ask for?

Ask for the amount you can name in dollars and tie to a quote, invoice or schedule. A smaller, specific request is easier to approve and cheaper to repay.

Which structure is best?

It depends on whether the need is a one-time purchase or a recurring gap. See the comparison pages for the trade-offs.

How fast can I get it?

Decisions are often the same day on a complete file, and funding can follow the next business day.

Keep reading

Funding use casesPayroll, inventory, expansion and more Merchant cash advance CanadaHow an advance against future card sales works Revenue-based financing CanadaRepay a fixed multiple as a share of revenue Cash-flow affordability calculatorCan the month carry the payment?Underwriting situationsCredit, NSFs, time in business and more

Educational information only. It is not legal, tax or accounting advice.

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