How To Get a $200,000 Business Loan

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How hard is it to get a $200k business loan?

Are you ready to take that next big step in your business? Often, these big steps toward success require a lot of money upfront – money we don’t have (or want to have) to hand. You may need a $200K business loan to have enough working capital to reach your goals, to buy new premises, or take the leap to open an entirely new location.

Whatever your reasoning, this is an exciting time, and this article will take you through how to get a business loan for $200K and what loan options are available to you.

Loans to Consider for a $200K Business Loan

There are three main types of business loans you should consider, SBA loans, Term loans, and Equipment loans.

SBA Loans

Small Business Administration (SBA) loans are one of the most common loans used by small businesses as they often have the most flexible repayment terms for $200K business loans. You can use an SBA loan for:

  • Working capital
  • Equipment purchases
  • Refinancing
  • Buying real estate

SBA loans generally require a higher credit score, starting at around 620, which means that they can be harder to qualify for than other loan types. These loans typically take a while (weeks or even months) to fund, but do generally offer the lowest interest rates.

There are two types of SBA loans available for a business loan of $200K: SBA 7(a) Loan and SBA Express Loan. We will go into these in more detail a little later.

Loan Amount: $30,000 - $350,000
APR Range: 9.7% - 11.04%
Time To Fund: Typically take several weeks to fund, but can fund as quickly as within seven days.
Loan Term: Maximum loan term is 10 years.
Origination Fee: 4.00%
How To Qualify: 675+ Personal credit score
$50,000+ Annual revenue
Great Option For: Borrowers with good credit
SBA loans
Funding real estate purchases
Refinancing debt
Credit Check? Soft credit check and hard pull
Co-Applicants Accepted? No cosigners
Direct Pay-Off To Creditors? No
Click “Check Rates” to apply to SmartBiz

» MORE: SmartBiz SBA Loan Review

Term Loans

Term Loans are another option available to you for a $200K business loan. These allow small businesses to borrow amounts from $5,000 to $2 million and, although the time of funding varies, you can get the money in as little as 24-hours. With a lower credit score requirement than SBA loans, at 550, this may be the best option for your small business. The interest rates on term loans vary, but are usually higher than SBA loans and can be substantial if you have poor credit. Generally, you need to show some proof of revenue and profit in the form of a bank statement or profit and loss statement before your application will be approved.

Equipment Loans

If you need a $200,000 business loan purely to fund new equipment purchases, consider an Equipment Loan. Equipment loans allow you to borrow anything up to $250K and enable you to pay for new equipment in installments rather than one lump sum, so the payment is more manageable. Loan terms will often depend on how long the equipment is estimated to last, but they are generally set at 2-10 years (though can be as much as 25 years), with interest rates anywhere from 2% to 20%. Equipment Loans are also a great way to build up your credit score relatively quickly, which will benefit your small business in the long term.

How large of a Business Loan can you get?

How large of a business loan you can get depends on a few factors that are all individual to your business. These factors are:

  • Annual gross sales
  • Existing debt
  • Creditworthiness (which indicates to the lender how reliable you will be when it comes to paying the money back)

You should also know that the majority of lenders will not lend more than 10-30% of the annual revenue of a business. Therefore, if your revenue is particularly low, or you already have debt, you will find that your loan options are limited.

Most online loans will require you to sign a personal guarantee that promises you will use your assets to pay back the loan if your business is unable. This guarantee is something you need to be aware of if you’re determined to avoid it, or if you don’t have significant assets to guarantee your loan.

When applying for a loan, it quickly becomes clear that it is important to have a good credit score as lenders will only give out large amounts to borrowers they can be sure will be able to pay back large debts on time and in full. If you’re looking to build up your credit score, you should think about getting a business credit card. Not only will it help you build up credit just through everyday expenses, but you can also earn rewards that can benefit your small business.

However, there are still business loan options for business owners with bad credit. Here are some of the loan options available to those with “bad” credit:

  1.   Short Term Loans: Short Term Loans usually have terms from 3-18 months, with money paid back daily or weekly straight from your business bank account. These loans have high-interest rates compared to traditional loans.
  2.   Short Term Lines of Credit: Short Term Lines of Credit have particularly low credit limits and may offer more funding than a short-term loan, but they also come with high-interest rates.
  3.   Invoice Financing: This allows you to use unpaid invoices as collateral to get advances, although for a fee. Once your client has paid the invoice, you’ll get that money back, minus the fee for the advance.
  4.   Equipment Financing: If you have bad credit, you can still get an Equipment Loan and use the new equipment you purchase as collateral for the loan. This way, if you are unable to repay the loan, the lender will just take the equipment.
  5.   Merchant Cash Advances: This should be a last resort. Merchant Cash Advances are extremely costly as they require you to repay not only the amount lent to you from your daily credit card sales but also extra fees.

How do you qualify for a $200K Loan?

There are several things you need and can do to get a business loan:

  1. Building Your Credit Score (Personal and Business)

A personal credit score evaluates how reliable you will be at repaying personal debts, such as car loans, credit cards, or a mortgage, and ranges from 300 to 850. You also have a business credit score, which typically ranges from 0 to 100. Regardless of which type of credit score we look at, you need to pay your bills on time, not have too much debt, and ideally, a low utilization score (i.e., have more credit available to you than you’ve borrowed).

If you intend to apply for an SBA loan or a loan from a bank, they are likely to look at both these scores; however, online lenders tend to focus on personal credit. They will pay more attention to the cash flow of your business and your business history. This is another reason why it’s always a good idea to keep your personal credit healthy.

  1. Have (or Create) a Solid Business Plan 

When you’re dealing with a lot of money, such as a $200,000 business loan, lenders will want to see a business plan. This business plan should give them a good understanding of how you will use the money and that you are serious about your ventures, which generally indicates good cash flow. If you do this effectively, your lender will have more confidence in you and your business, and so are more likely to approve you for a loan.

A strong business plan should include:

  • A description of the company
  • A description of what the business provides
  • Management team
  • Industry analysis
  • Plan of operations and facilities
  • Strategies for PR, marketing, and sales
  • SWOT analysis
  1. Collateral

To qualify for a small business loan, you will often need to provide some kind of collateral, such as real estate or equipment. This collateral will be taken and sold by the lender if you are unable to repay your loan for any reason. Some loans will require you to sign a personal guarantee that could jeopardize your personal assets and lead to a reduced credit score.

Are there SBA Business Loans for $200K?

Yes, there are two kinds of SBA loans to consider:

  • SBA 7(a) Advantage Loans - An SBA 7(a) Advantage Loan allows you to borrow anything up to $250K, so this is a great option for a business loan for $200K, especially if your revenue or collateral is low. You just need to meet the minimum criteria set by the SBA.
  • SBA Express Loans - If you are looking for a speedier application process, you can take advantage of an SBA Express Loan. Applications for this type of SBA loan can take as little as 36 hours, and you can borrow anything up to $350,000, so is the perfect option if you are looking to get a $200K business loan fast. You should be aware, however, that interest rates for SBA Express Loans can be high in comparison to other SBA loans.

» MORE: Compare SBA Loans

What lenders offer $200K Business Loans?

Here are 5 of the best lenders you should consider for your $200,000 business loan.

  • SBA Loans: SmartBiz - Look to SmartBiz for your SBA Loan. They offer SBA loans of $2,000 to $350,000 with terms of 1-7 years. SmartBiz prides itself on low-interest rates and will fund you fast, provided that you meet the minimum credit score requirement of 650.
  • Term Loans: Blue Vine - BlueVine offers traditional term business loans up to $250K, with terms of 2-5 years. BlueVine is great for new businesses as they will help even if they are less than a year old, providing you have a personal credit score of 600. The downside, however, is higher interest rates than other lenders.
  • Term Loans: OnDeck - Another option is OnDeck. They also offer traditional term business loans of up to $250K with terms between 2-4 years. Many of their loans require you to sign a personal guarantee or a lien on your business assets, but they have a relatively low credit score requirement of 600, need less paperwork than other lenders, and fund you quickly.
  • Equipment Loans: SmartBiz - SmartBiz loans are also an ideal option for equipment financing as they can offer up to $350K with terms as long as 10 years.
  • Equipment Loans: StreetShares - Another alternative is StreetShares. They offer business term loans up to $250K to those with solid cash flow and good credit. StreetShares loans have low-interest rates and provide higher amounts than other lenders. They even provide financing to new businesses who have only been in business for at least 12 months. You will need to have a minimum of $75,000 in annual cash flow to apply with this lender.

Calculating your $200K Business Loan cost

You can calculate the cost of your $200K business loan by using an online business loan calculator, which will take into account the loan term and the interest rate to give you the total cost of your business loan for $200K.

You can also do this manually by multiplying your loan amount by your interest rate. For example, if you borrow $200,000 and your interest rate is 10%, the total cost of your loan will be $20,000 (200,000 x 0.1 = 20,000).

How do you apply for a business loan online?

When you have chosen your ideal loan type, have a solid business plan in place, and gather together any documents you might need, such as financial statements, you are ready to move forward. It’s always a good idea to compare rates to ensure you are getting the best deal you possibly can, and we can help you do just that.

How to Use a $200k Business Loan?

A $200,000 small business loan can be a significant boost for your business. How you use the 200k loan should align with your business strategy and goals. Plan and budget carefully to ensure the loan contributes positively to your business's growth and financial health. Here are some effective ways to use this type of loan:

Expand Operations: Use the funds to open a new location, expand your current space, or increase production capacity.

Purchase Equipment: Invest in new or upgraded equipment to improve efficiency, expand your product line, or replace outdated machinery.

Increase Inventory: Buy inventory in bulk to prepare for peak seasons or new product launches, potentially reducing costs and improving supply chain efficiency.

Hire Staff: Expand your team to handle increased workload, enter new markets, or enhance customer service.

Marketing and Advertising: Invest in marketing campaigns to reach new customers, increase brand awareness, or launch new products.

Research and Development: Use the funds for research and development to innovate new products or services, keeping your business competitive.

Debt Consolidation: Pay off high-interest debts to reduce monthly payments and improve cash flow.

Working Capital: Boost your working capital to manage day-to-day expenses more effectively, ensuring smooth operations.

Technology Upgrades: Invest in new technology or software systems to improve operational efficiency, customer experience, or data security.

Real Estate: Purchase or renovate business property to accommodate growth or improve your business location.

When to Use a $200k Business Loan?

Deciding how to get a $ 200,000 business loan and when to use it depends on your business's specific needs, goals, and financial situation. An injection of $200,000 can create a pathway of new growth for your business. 

Here are suggestions of ways when using a $200K loan might be appropriate:

Growth Opportunities: If you have a chance to expand your business, like opening a new location or tapping into a new market, and you've calculated a strong return on investment (ROI).

Capitalizing on Bulk Purchase Discounts: If buying inventory in bulk offers significant cost savings and you have the storage and demand to justify it.

Equipment Upgrades: When upgrading or purchasing new equipment can significantly improve efficiency or quality of your product/service.

Scaling Operations: If your business is growing and you need to hire additional staff, increase production, or expand your facilities to meet demand.

Technological Advancements: Investing in new technology or software to streamline operations, improve customer experience, or enhance product quality.

Refinancing Debt: Consolidating high-interest debt into a lower-interest loan can improve cash flow and reduce financial strain.

Market Conditions: Entering the loan market at a time when interest rates are favorable and you have a solid plan for how the loan will be used and repaid.

Emergencies or Unforeseen Expenses: Addressing unexpected challenges or emergencies that require immediate financial resources for the business to continue operating.

Boosting Working Capital: When additional capital is needed to manage day-to-day operations more effectively, especially during slow seasons or while waiting for outstanding receivables.

Strategic Investments: Making investments that align with your long-term business strategy, such as research and development or property acquisition.

Carefully assess your business's financial health and develop a well-thought-out plan for the use of funds and a clear understanding of how the loan will contribute to your business growth.

$200k Business Loan Interest Rates & Repayment Terms

When you are considering how to get a 200k business loan,  you should know that interest rates and repayment terms can vary widely. Here are some aspects to consider:

Interest Rates:

  • Vary by Lender and Loan Type: Rates can differ between traditional banks, credit unions, online lenders, and SBA loans.
  • Dependent on Creditworthiness: Businesses with higher credit scores generally receive lower interest rates.
  • Market Conditions: Economic factors influence interest rates; they can fluctuate based on the overall lending environment.
  • Range: As a rough estimate, rates can vary from as low as 3-4% for the most qualified borrowers to upwards of 20-30% for higher-risk situations.

Repayment Terms:

  • Length of Loan: The repayment period can range from short-term loans (1-3 years) to long-term loans (up to 10-20 years), depending on the type of loan and lender.
  • Monthly Payments: The amount you pay monthly will depend on the interest rate and term length. A longer-term typically means lower monthly payments but more interest paid over time.
  • Prepayment Penalties: Some loans may have penalties for early repayment, so it's important to understand the terms before proceeding.

Loan Type:

  • SBA Loans: These often offer competitive rates and longer repayment terms but require meeting strict criteria.
  • Term Loans from Banks or Online Lenders: Usually have fixed terms and rates based on the loan amount, term length, and credit risk.
  • Lines of Credit: May have variable rates and more flexible repayment terms.

Fees and Additional Costs:

  • Origination Fees: Some lenders charge a fee for processing the loan.
  • Underwriting Fees, Closing Costs: Additional costs that can vary by lender.

Carefully compare offers from multiple lenders when thinking about how to get a loan for 200k.  Understanding your business’s financial position and how the loan fits into your broader financial strategy is important for choosing the right loan product.

How to Qualify for a $200K Business Loan

To qualify for a $200,000 small business loan with most traditional lenders, you need to meet the following criteria:

1+ Year in Business

Your business should be operational for at least one year. This demonstrates stability and a track record of business operations.

$500,000 in Annual Revenue 

Your business should have a minimum annual revenue of $500,000 to qualify for a business loan of $200K. This requirement ensures that your business has the financial capacity to manage and repay the loan.

 580+ Credit Score 

A minimum credit score of 580 is typically required for a business loan of $200,000. While this is not a high credit score threshold, meeting or exceeding it indicates a level of creditworthiness that lenders want in borrowers.

Meeting these criteria improves your chances of qualifying for a $200,000 business loan from a bank, but specific requirements can vary depending on the lender. Some may have higher or additional requirements based on the type of business, market conditions, and the specific loan product.

PrimeRates simplifies your access to tailored business loan offers for both payroll financing and business loans through our efficient,  straightforward online pre-qualification application. Once you’re prequalified, select an offer that fits your needs and you can move forward to finalize your business loan application with the chosen lender to get funded. 

How PrimeRates Works

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