Business Loans

When Your New Product Idea Needs Cash

Jun 06, 2022 • 7 min read
new product launch financing
Table of Contents

      You’ve decided your small business is ready launch a new product. But how are you going to pay for it? Hellooooo financing! 

      But should you borrow money to launch something when you’re not 100% certain that it’s going to pay off?

      Is It the Right Time to Finance a New Product?

      Time is of the essence. Time is money. Ain’t no time like the present. Time is on your side. There’s a reason why so many idioms focus on the word “time.” Because time really does matter when you’re staring down a competitive market. The longer you wait to get started, the more time you’re giving others to beat you to the punch. And seeing someone else succeed with your concept … ain’t no one got time for that.

      Moving fast is especially important in businesses that require only the skill of negotiating, like brand licensing. Being first to find the next big superhero to slap onto phone cases and lunch boxes only works if you have the money to close the deal before your competitor does. But it’s also important when you’re developing a product from scratch. Depending on the financing type, for example an SBA loan, you may be waiting for the cash for a few weeks or months, which can also delay your launch.

      How Much Money Do You Need to Finance a New Product?

      One piece of the financing puzzle — how much do you need? Suggestion: don’t guess. Price out the development and crunch real numbers. If you owned a pasta joint and wanted to add a stone pizza oven, you may not need a lot of money. If you’re adding stone pizza ovens to 23 locations across 11 states, you’d need more money. 

      While every business will do their calculations their own way, it follows the same general pattern:

      • Do a deeper dive into the ballpark costing numbers you generated during your “expand or not” phase. Contact vendors to get quotes (and shop around). Estimate manpower and other expenses, too.
      • Review your cash flow needs to determine how much you can afford to pay per month.
      • Calculate the return on investment of the financing to determine how much you’re willing to pay per month.
      • Find a lender with an offer in your sweet spot.

      If you can’t secure the total amount upfront, don’t scrap your dream. Financing across various stages of development and launch may work, or there may be options such as developing a product with fewer features or using a grassroots marketing approach at launch time.

      Types of Financing for Creating a New Product

      Financing isn’t a one-size-fits-all scenario, so remaining open to different types of financing options can help, too, since some types of financing will be a better fit for you than others. 

      For example, equipment financing may fit the bill when purchasing a new ice cream machine for your restaurant, whereas a merchant cash advance could be better for flying a kimono dragon in as the newest attraction at your petting zoo. Do your due diligence before you make your choice, including reviewing time to funds, qualification requirements (e.g., credit score or time in business), loan amount, and an estimated cost of financing. You can quickly find out what your business is eligible for using Lendio’s 15-minute, online application.

      What You Need to Pitch a Lender

      You’ll simplify the application and borrowing process by getting your books in order beforehand. Depending on the type of financing, lenders may request:

      • Business plan, including how the expansion fits into it
      • Business credit score
      • Income statement
      • Debt-to-income ratio
      • Balance sheet

      The good news is that you gathered a lot of that information during your initial go/no-go decision. At this stage, you can just freshen it up and organize it. Some financers may ask for additional documents, including as tax returns, bank statements, and legal agreements and contracts. Your accounting and bookkeeping software will simplify the process.

      How To Use The Financing

      Once you receive your funds, where and when do you allocate them? That depends, in part, on the terms of the financing.

      Some financing, including SBA loans, have specific use cases for the proceeds. But if the terms of use are flexible, there are options for using the funds—it’s your choice to hire a design consultant or buy supplies to create a prototype.

      If you have leftover funds (excellent budgeting job, by the way!) and flexible financing terms, consider preparing for the next product. For example, if you struggled this time to identify your long-term loyal customers, you could use the extra funds to implement CRM software and smooth the way for your next growth spurt.


      Once I apply for financing, how quickly can I get funds?

      How quickly your financing will fund after approval depends on both your lender and the type of funding you decide to take. While Lendio offer options that can fund in as little as 24 hours after approval, you’ll see in this chart that the time can vary.

      loan turnaround funding financing

      Click the image to see turnaround times for funding facilitated through Lendio.

      How much should I apply for?

      When you’re developing a new product, apply for as much as you need and can afford to ensure your success. You don’t want to fund an amazing prototype but fail at product launch due to a lack of funds. Depending on the expansion, it could be more than one financing round (e.g., a commercial mortgage to buy property for your 2nd restaurant location and equipment financing to purchase a new oven).

      Can I spend the money however I see fit?

      Financing terms may dictate what you can do with the money you borrow. Check the terms carefully. If you have access to a financing manager (approved applicants using Lendio are paired with a personal financing manager to simplify the process), ensure this question is covered before you say “yes.”

      Are there other ways to fund the creation of a new product without seeking out financing?

      There are a number of ways to fund the creation of a new product without seeking out financing. You could try self-funding, borrowing from friends and family, crowd-sourcing, applying for grants, seek angel investors, or even apply for something like SharkTank — but all those can limit your growth by taking too long or creating too much unnecessary drama in your personal life.


      The information provided in this post does not, and is not intended to, constitute business, legal, tax, or accounting advice and is provided for general informational purposes only. Readers should contact their attorney, business advisor, or tax advisor to obtain advice on any particular matter. The views and opinions expressed in this blog are those of the author and do not necessarily reflect the official policy or position of Lendio. Any content provided by our bloggers or authors are of their opinion and are not intended to malign any religion, ethnic group, club, organization, company, individual or anyone or anything.
      About the author
      Katherine O'Malley

      Katherine O'Malley is a contributor to the Lendio blog. A technology geek at heart, she splits her time between traveling, freelance writing, database administration work, and implementing SEO on her travel blog. In her free time, she loves to research the challenges small-to-midsize tourist suppliers face and find ways that technology can help them out.

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