Wee Scones Nursery, which is based in Tranent, East Lothian, is buying a neighbouring property after seeing strong demand from parents, especially for care for very young children and babies.
Candy Inglis started the company in 2003 by setting up a nursery in her home on Haddington Road.
The next house along became available earlier this year giving her the opportunity to increase the space available without having to relocate the entire business to new premises.
A number of additional staff will be needed to maintain children to employee ratios.
Ms Inglis, previously a teacher at Tranent infant school, said: "The new property will allow us to increase the number of spaces we offer, especially to babies."
Santander said the money was provided through the European Investment Bank (EIB) funding scheme for growth.