Business loans are readily available through banks, credit unions, and online lenders. Loan amounts vary, and you could be eligible for funding if you have good or excellent credit, a year or more of industry experience, and consistent annual revenues that meet the lender’s minimum threshold. But if you want to borrow a large sum of money, you may have fewer options and face more scrutiny from lenders.
Here’s what to know about large business loans and what you’ll need to qualify.
What Are Considered Large Business Loans?
Large business loans are commercial debt products in the amount of $500,000 or more. They work like other loan products and often come with extended loan terms. In most instances, you’ll repay the loan in equal monthly installments for the duration of the loan term.
What is the Biggest Loan a Business Can Get?
It depends on the lender. The U.S. Small Business Administration (SBA) features business loans and lines of credit of up to $5 million. But if you’re seeking funding to acquire or expand your commercial real estate portfolio, loan amounts of up to $10 million are available.
What Do Businesses Use Large Business Loans For?
Large business loans are commonly used to acquire commercial real estate, expand product and service offerings or purchase additional inventory to fulfill large orders. Some business owners also buy upgraded equipment or other assets with the loan proceeds.
Funding Options for Large Business Loans
There are several funding options to choose from if you’re seeking a large business loan.
SBA Loans
The SBA 7(a) Loan Program caters to small businesses who are looking to purchase real estate, refinance current business debt, or secure fixtures, furniture, and supplies. It’s also an option if you simply need a sizable amount of short- or long-term working capital. Loans are capped at $5 million, and the lender will evaluate your location, annual revenue, and credit history to determine if you qualify.
Commercial Real Estate Loans
These loan products are reserved for business owners looking to acquire a commercial property. Private lenders offer commercial real estate financing with flexible loan terms. Another option is an SBA 504 loan, which features an extended loan term and fixed interest rate if you plan to acquire major fixed assets.
Secured Business Loans
A secured business loan is far riskier because it’s backed by collateral. Still, it’s worth considering if you need to borrow a large sum of money and can’t meet the lender’s eligibility requirements due to inadequate income or a low credit score. Since the lender has rights to your collateral, you’re more likely to get approved for a higher amount and secure a more competitive interest rate than you would with other forms of funding.
Accounts Receivable Financing
Unpaid invoices can be a nuisance and cause significant cash flow problems in your business. With accounts receivable financing, you can trade in your invoices for cash, minus the lender fee, so you can get paid sooner and spend less time chasing clients for payments.
Business Lines of Credit
A business line of credit is similar to an installment loan. You won’t get a lump sum of cash disbursed to you upon approval, though. Instead, you’ll have access to a pool of funds you can pull from at any time (up to the amount you’re approved for). Borrowers also have the ability to pay back and reuse the funds at any time during the draw period.
How Do You Qualify for Large Business Loans?
Not all lenders have the same qualification criteria for large business loans. However, many will consider four key factors – annual revenue, credit scores, time in business, and collateral (if you’re seeking a secured loan).
Annual Revenue
What are your annual earnings? Are they sufficient enough to cover the monthly payments on a large business loan? Your company should earn between $350,000 and $500,000 to be a good candidate for funding. Also, be prepared to provide financial records to the lender to verify your income.
Credit Score
A personal credit score of 680 or higher is generally good enough to be eligible for a large business loan with competitive terms. A lower score doesn’t mean you’ll be denied funding, but the cost of borrowing could be much higher.
Time in Business
How long has it been since you opened the doors to your business? Ideally, it should be three or more years before you apply for a large loan. Otherwise, lenders may deem you as risky and either deny your request for your large loan or offer to lend you a much smaller amount.
Collateral
Some larger business loan products require collateral to be approved. By using collateral, your approval odds may be higher, particularly if you have past credit issues or unstable income. However, you may also risk losing your asset(s) if you fail to make timely loan payments.
