What Is A Large Business Loan?
Typically, large business loans are for amounts greater than $500,000 with repayment terms spanning several years. Large business loans are designed to help business owners cover the costs of larger purchases like buying commercial real estate, financing expensive machinery and equipment, and acquiring existing businesses.
Most often, if you’re looking for a large business loan of $500,000 or more, you have already been in business for a few years. This is often necessary as large business loans are typically reserved for experienced entrepreneurs with proven track records.
Since large business loans are a much greater risk for lenders, often these loans come with much stricter qualification requirements.
For example, some lenders may want to see a long history of demonstrated business success, a large annual revenue of $350,000 or more, and some may even require collateral to secure the loan. Large business loans can typically be secured using assets like commercial real estate, machinery, equipment, vehicles, and large cash reserves. If your business is an LLC, some lenders may even ask you to sign a personal guarantee to secure a business loan of $500,000 or more. A personal guarantee is a document that gives the lender the right to seize the personal property and assets of the business owner and whoever else signs in the event of a loan default.
Large business loans are typically obtained through large financial institutions like banks, credit unions, and some online lenders who specialize in larger loan amounts. The largest business loans are typically obtained through the Small Business Administration which works directly with lending institutions throughout the United States who can provide business loans of up to $5,000,000.
How Do Large Business Loans Work?
Large business loans work by providing a large upfront lump sum of $500,000 or more to a business that needs it. Once the business qualifies for and receives the large business loan, it can then make monthly payments to pay back the full loan amount plus interest.
Large business loans are typically provided to a business by lending institutions like the SBA, large banks, online lenders, and some larger credit unions. Although these types of large business loans for values greater than $500,000 can be extremely profitable for lenders, there are also a lot of risks involved. That is why lending institutions will most likely have more difficult minimum requirements for qualification.
Before a business can obtain a large business loan, it most likely will need to work with a lender to determine its eligibility. The lender may look at things like personal and business credit scores, revenue and income, years of operation and business experience, and they may even ask you to identify some assets that may be used as collateral to secure the loan if needed.
Once a business has submitted all the required documents, and if they meet the lender’s requirements for qualification, the business loan can then be approved and funded. Once the business receives the funds, it can start to make the monthly payments, and continue to do so until the end of the predetermined loan term.
Loan terms vary depending on the lender, the loan amount, and the type of loan. For example, SBA loans of up to $5,000,000 can often come with a loan term between 10 and 25 years whereas a conventional loan of around $1,000,000 may only come with a loan term of up to 5 years.
How Can I Get a Large Business Loan?
Large business loans are understandably harder to come by than small ones. For a business to get a large loan, it needs to have a good track record, have been in business for many years (or have experienced explosive growth in a short time), have a good credit score, and collateral.
When borrowing smaller sums, there are opportunities for those with less-than-perfect financial histories to borrow money, but as the stakes get higher, the qualifications and requirements become tougher to meet.
What Is the Biggest Business Loan You Can Get?
If you are a large organization where turnover is measured in millions or billions of dollars, then the possibilities are endless. For those of us in small to medium-sized companies, then the SBA limit of $5 million is probably the ultimate. With figures larger than this, you need to think about talking multinationals.
How Can I Get a Loan for $1 Million?
Banks, credit unions and online lenders are often prepared to offer loans up to $1 million for thriving businesses, and that includes Small Business Administration loans. $1 million is not the ceiling, and up to $5 million is available, but not surprisingly, you have to prove that your business is robust. That means your past financial record, credit and projected figures are all convincing.
SBA loans are probably the most affordable but also require the highest qualifications. Because 75% of a $1 million loan is guaranteed by the government, SBA lenders are more comfortable with large sums of money and offer good terms, but because they are so highly prized, they can pick and choose who they lend to.
Your chances of securing a $1 million loan (or larger) are good if your business can exceed the application demands. Your business needs to be at least a year old, have achieved a million in turnover, and your credit rating will need to be excellent.
Large Business Loan Requirements
For medium-to-large business loans, you do need to prove that your business is viable and that it is growing. There should be no doubt that large business loans are only available for those with the highest financial credentials. The actual requirements will depend on the loan provider but are likely to include the following:
- A proven track record. Most lenders stipulate that you should have been in business for at least two years and are unlikely to offer large loans to those who are relatively new in the market. This goes double for the more traditional banks.
- A large annual revenue. The majority of loan providers will require you to have a yearly revenue measured in millions of dollars. For a $1 million loan, you are probably looking at a $10 million yearly revenue.
- A high credit score. Lenders are not willing to lend large sums of money to anyone who doesn’t possess a good to excellent credit rating, and that is your personal score as well as the business itself.
- Your profits must be high. A large annual revenue is not enough, your profit margin needs to be good too.
- All the above is not enough, most – if not all – lenders will want guarantees from you and any business partners you may have that the loan amount is matched by assets – your properties and possessions.
How to Qualify for a Large Business Loan
So, how to get a big business loan? To qualify for a medium-to-large business loan, you must tick the above boxes. It is up to you to satisfy the loan providers that your business is reputable, profitable, and will use the money wisely. They want to know their money is safe and will only lend large sums when the risk is low. Lending money is always something of a gamble, but as the stakes get higher, the more the lenders want to know they’re going to see the money again.
If you’ve never had a business loan, you’re unlikely to qualify for a large business loan, so borrow a smaller sum and pay it back religiously. This will set you up for success borrowing larger loans in the future.
With time, you can increase your chances by making your business bigger and better, improving both its output and profitability. You should check your credit score and aim to keep it high or improve it. We all have the right to know exactly what our credit is, and you can find out for free by going to www.annualcreditreport.com.
Large Business Loan Rates
Like all finance options, rates vary for medium to large business loans and depend on the lender, the term, and the amount you borrow.
SBA loans are almost always the lowest. Their 504 loans, purposed for real estate, large machinery and fixed assets, currently run at around 2.33% – 2.88% while the 7(a) loans, more flexible in use, are approximately 5.5% – 9.75%.
What Are The Types Of Large Business Loans?
There are five main types of large business loans that companies may consider when needing financing for an amount of up to $5,000,000. There are SBA loans, commercial real estate loans, secured conventional business loans, equipment financing, and accounts receivable financing. Here is a quick breakdown of these top five large business loan types.
- SBA loans: SBA loans, and specifically, the SBA 7(a) loans program can provide up to $ 5 million for those who qualify. Loan terms can be for up to 25 years and with interest rates of up to 11.25% for fixed-rate loans and 8% for variable-rate loans. SBA loans require a downpayment sometimes of 20% or more, and the SBA guarantees up to 75% of loans greater than $150,000.
- Commercial real estate loans: Businesses that need financing to purchase an office building, storefront, hotel, or shopping center can use commercial real estate loans. Commercial real estate loans are similar to home mortgage loans. Often, commercial real estate loans come with longer loan terms, and the property being purchased is used as collateral to secure the loan. Commercial real estate loans are typically available through banks, credit unions, online lenders, and the SBA CDC/504 loan program.
- Secured conventional business loans: Secured conventional business loans are normal business loans offered through banks, credit unions, and online lenders that are secured by a valuable asset. Some assets used to secure these types of loans include commercial real estate, machinery, equipment, vehicles, and large cash reserves.
- Equipment financing: Equipment financing gives you the money you need to purchase machinery, equipment, computers, vehicles, and anything else that is needed to operate your business. All the items purchased with this type of financing act as collateral to secure the loans.
- Accounts receivable financing: Accounts receivable financing lets businesses who have unpaid invoices use those invoices as collateral to secure financing. The invoices may have terms of 30, 60, or 90 days. For a small fee, an accounts receivable lending company can pay you the value of those invoices now, and collect once the customer pays the invoice.
SBA Loans
Probably the jewel in the crown for borrowers, SBA loans usually offer the best rates and most favorable terms of all. The 7(a) loans are available for up to $5 million with terms up to 30 years. The 504 loans are only meant for major asset acquisitions but offer significantly lower rates.
» MORE: SmartBiz SBA Loan Review
Traditional Bank Loans
Commercial banks are the go-to loan providers for most small and medium businesses looking for significant cash injections. The criteria for approval will be high, but the rates low and the terms generous, keeping the monthly repayments manageable even when we are considering large amounts borrowed.
Neither traditional bank loans nor SBA loans are easy to get, as their application requirements are strict, and decision times tend to be lengthy.
Online Lenders
While SBA and traditional bank loans are usually the best options for medium to large business loans, if your business falls short of the stringent financial requirements necessary to get approval for these, all is not lost.
A medium-term loan from an online provider may give you the money you need, though at a higher cost. The maximum figure will probably be limited to $500,000 and the term generally 5-10 years, which will make the repayments less comfortable. But, such a loan is likely to be much easier to get approval for.
Also, the time it takes between application and approval is usually much shorter. All this comes at a cost, however, with some online lenders charging up to 30% or even more for some financial products.
Three lenders to consider are:
- OnDeck
If you have had a financial hiccup in your past and your credit score is less than perfect, then OnDeck may be a good call, particularly if your business is retail or in the foodservice industry.
OnDeck is one of the largest lending platforms for small businesses, and it offers loans of up to $500,000. A credit score of more than 500 and a year in business are mandatory, but the revenue requirement is only $100,000. The current interest rate is around 24.6% for most business loans.
- Funding Circle
Funding Circle offer loans of $25,000 – $500,000, so are great if you’re looking for a relatively large loan. APR is also good, at 4.99% – 26.99%, over a term of 1-5 years. If you’re looking for a loan to help fund explosive growth, this is a good lender to look to.
- BlueVine
BlueVine offers invoice advances up to $5 million, and lines of credit and loans up to $250,000, so they offer a lot of flexibility. Rates are a lot higher, as the loan is only short term, but may be an option if you’re looking for a big sum while you wait for a client to pay their invoice.
Taking out any loan is a big step, and you must ensure that you get the right one for your business and circumstances. All lenders vary in their requirements, rates and terms. We help you compare the best loans on the market – simply click here to get started.
What Can Large Business Loans Be Used For?
Large business loans can be used to purchase commercial real estate, make a deposit on a new lease, cover operating expenses, purchase inventory, and a magnitude of other purposes. You can even use a large business loan to acquire an existing business.
Where Can I Get A Large Business Loan?
Large business loans are available through the Small Business Administration, banks, credit unions, and some online lenders. Large business loans may require higher credit scores, more revenue, and the use of assets to secure the loan. Before qualifying for a large business loan you may need to use smaller business loans to hit goals. To explore a variety of business loans with no credit impact, visit PrimeRates online today. At PrimeRates you can count on real offers that are personalized just for you. With access to a network of expert online lenders, you can take advantage of more lenient requirements without any trade off.
