Many small businesses take out loans to cover day-to-day operating expenses, hire staff, or make a big purchase. And, while there are many loans available in the $5,000 to $100,000 range, what can you do if you’re dreaming bigger?
Many banks and other lenders offer million-dollar business loans (and even much higher amounts) to help small- and medium-size businesses see their growth skyrocket.
Here’s what you need to know about large business loans, where to find the best options for your business, and how to apply.
What Is a Large Business Loan?
A large business loan is one of $500,000 or more.
Maybe you want to acquire another business, buy real estate, or get high-dollar equipment for your company. That’s where large business loans come in.
Typically, small business loans, loans backed by the Small Business Administration (SBA), and business lines of credit all max out at about $5 million. Financing for purchasing or expanding commercial real estate can offer up to $10 million.
Repayment terms for large business loans can extend many years. These types of loans are available from traditional banks, credit unions, and online lenders.
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How Do Large Business Loans Work & What Are Their Uses?
You can use a large business loan for many purposes, including:
• Purchasing commercial real estate to expand your space or open new locations
• Fulfilling large orders
• Expanding your product line
• Buying large assets or equipment
Large business loans can be harder to come by than smaller ones. For a business to get a large loan, it typically needs to have a good track record, show several years in business (or have experienced explosive growth in a short time), report a good business credit score, and be able to back the loan with collateral.
Unlike smaller loans, which often have simple online applications with an instant response on whether you’re approved, a large business loan may require a more in-depth application process that can take several weeks or months.
You may be asked for details on what you plan to use the loan for. In the case of purchasing equipment, for example, you may be asked to specify the model and age of what you’re buying, as well as what you’ll use it for.
You may also need to provide financial statements or tax returns to show that you’re fiscally responsible enough to pay back such a large loan. Some lenders, particularly traditional banks, may require you to visit a physical branch to complete the application.
Pros and Cons of Large Business Loans
Should you take out a large business loan?
| Pros | Cons |
|---|---|
| The capital can help grow your business faster | The larger the loan, the more interest you’ll pay overall |
| If you qualify for a low rate, the financing may be affordable | The application process may take months |
Pros of Large Business Loans
If you have big plans for your business, you might not have a way to fund those plans other than a large loan. Maybe you want to acquire another business that’s asking $1 million as the purchase price. You know it’s a great value, but you don’t have the capital.
The better your credit and financial history, the lower the rate you’ll pay. Also, the longer the loan term, the lower your payments will be, and most large business loans have long repayment periods.
If your business doesn’t see consistent revenue from one month to the next, having a large amount of cash can ensure you have steady access to working capital when you need it.
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Cons of Large Business Loans
Like any financing, you’ll pay interest on a large business loan. And the larger the loan, the more interest you’ll pay in total. Keep in mind, too, that longer terms mean you’ll pay more in interest over the life of the loan.
If you’re in a hurry to get financing, a large business loan may not be right for you, because it typically takes weeks or months for your application to be processed.
While having a large lump sum of cash can be appealing, you have to be able to pay it back. A large loan payment each month could strain your budget.
Where Can You Find Large Business Loans?
As you start your research on how to get a large business loan, you can look to banks, credit unions, and online lenders. The SBA has several loan programs with high caps to consider, as well.
It can be a good idea to start your quest with the bank you already have a business relationship with. However, you don’t necessarily want to stop there. Comparison shopping your different business loan options could help you find a better rate and terms.
Qualifying for Large Business Loans
The qualification requirements for a large business loan will be more stringent than for a $5,000 loan because there is much more risk to a lender. You’ll need to have:
A proven track record: To approve a large loan, lenders often want to make sure that a business has been operating for at least a couple of years. Generally, the more experience you can show, the better.
Large revenue: Companies that qualify for large business loans tend to have very strong revenue to show potential lenders.
Strong credit scores: Good scores show lenders that you have a history of paying your personal and business debts on time. This gives a lender confidence that you’ll end up paying back a large business loan fully and on time.
Sufficient collateral: Having business collateral can make it easier to qualify for a large business loan. It lets the lender know that even if you should default on your loan, they could still get their money back by seizing the assets you put up as collateral.
Types of Large Business Loans
There are many different types of business loans to explore when you’re looking to borrow high dollar amounts.
SBA Loans
SBA loans are issued by traditional bank lenders but guaranteed by the Small Business Administration. With SBA-backed loans, such as the 7(a) and 504 loan programs, you can borrow up to $5 million.
SBA loans typically offer the best rates, along with term lengths of 10 to 25 years. These loans can be used for a wide variety of business purposes — from purchasing a new business to covering working capital needs.
| Pros | Cons |
|---|---|
| The capital can help grow your business faster | The larger the loan, the more interest you’ll pay overall |
| If you qualify for a low rate, the financing may be affordable | The application process may take months |
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Commercial Real Estate Loans
Commercial real estate loans help businesses purchase commercial property, such as an office building, hotel, or retail space. They are available from private lenders, banks, and the SBA. Just like getting a mortgage to buy a home, commercial real estate loans typically come with long repayment terms and are secured by the property being purchased.
| Pros | Cons |
|---|---|
| Can be used to purchase real estate, constructing or renovating facilities, landscaping, adding parking lots, and more | Limited to commercial real estate-related expenses |
Secured Business Loans
Secured business loans are backed by collateral. This means that, should you be unable to pay off your loan, the lender has the right to seize that asset to cover your debt. Examples of collateral include real estate, equipment, and inventory. You may or may not also need to make a down payment on the loan.
| Pros | Cons |
|---|---|
| Tend to have lower interest rates than unsecured loans | If you default on the loan, you could lose valuable assets |
Accounts Receivable Financing
Another option for getting the cash you need is accounts receivable financing. This allows you to borrow against the value of your unpaid invoices.
Accounts receivable financing allows businesses to get early payment on outstanding invoices and purchase orders. If payments are delayed, the business still has the funding it needs to continue operations. When payments come through, customers pay the lender directly.
Since the loan is secured by your invoices — money your business has already made — the risk tends to be lower for both you and the lender. You can often find AR financing products from online lenders.
| Pros | Cons |
|---|---|
| Typically does not require additional collateral beyond your unpaid invoices | You need good credit and qualified invoices to get this type of financing |
Franchise Loans
If you plan to purchase a franchise or already operate one that could use an infusion of cash, franchise loans may be worth considering.
| Pros | Cons |
|---|---|
| Can be used to purchase a franchise or make renovations to an existing one | Franchisor may require you to use one particular lender, which limits your options |
Business Lines of Credit
If you don’t plan to use a large business loan all at once, a business line of credit may be a better option than a loan. Similar to a credit card, a business line of credit allows you to borrow up to a set limit and gives you access to funds as you need them. You pay interest only on the amount you borrow.
| Pros | Cons |
|---|---|
| Can be used for any purpose | Generally available in smaller amounts than business loans |
How to Get a Large Business Loan
Large business loans have more hoops to jump through in the application process. You may be required to provide tax statements, financial documents, and even a business plan. Many lenders will want particulars on how you will use the funds, and may also ask about assets you can use as collateral.
See below for a list of records you may need to submit:
Personal & Business Information
With many lenders, you can fill out an online application. To get started, you’ll likely need to provide:
• Your name, phone number, email, and social security number
• Business name, address, and EIN
• Business industry
Time in Business
Lenders will want to know how long you’ve been in business. Most lenders want to see at least six months of business history. For larger business loans, they may want to see a few years of history.
Credit Score
To qualify for a large business loan, lenders typically like to see a credit score of 680 or higher. The lender wants to make sure you’ll be able to pay back a large amount of money. The stronger your score, the better the rate you’ll receive.
Annual Revenue
Businesses seeking a large business loan need to be bringing in high annual revenues. Most lenders want to see at least $350,000 annually, with some preferring even more depending on the amount you want to borrow, your business history, and your credit score.
Intended Use of Loan
When you apply for a large business loan, lenders will want to see a detailed business plan. If you explain that you’re using the money to purchase a second location, for example, this gives the lender more security knowing that if you default, they can seize the property.
Desired Loan Amount
How much you want to borrow factors into your application. The more you hope to receive, the more stringent the lender’s requirements will be.
Collateral
Most large business lenders will want you to put up collateral before qualifying you for the loan. Collateral can include property, equipment, machinery, vehicles, accounts receivables, and investments.
Larger loans tend to take longer to process than small loans, so it may be weeks before you get a response from the lender, particularly for bank and SBA loans. Once you’re approved, you will need to review the loan agreement, which will tell you how much you have been approved for and the repayment terms.
Once you sign the agreement, the funds can often be deposited into your bank account in as little as one business day.
Alternatives to Large Business Loans
If you don’t qualify for any of the loans above, you have a few other options.
Peer-to-Peer Lending
Rather than going through a bank to be approved for a loan, you can also borrow money through peer-to-peer lending. This is a situation where private individuals, rather than banks or online lenders, loan money to businesses.
There are websites specializing in connecting private investors with companies seeking financing. Rates may be higher than with traditional loans, but you may find these loans easier to qualify for.
Venture Capital
If you run a startup and are willing to give up equity to investors in exchange for capital, venture capital is an option. Sometimes investors bring more than money to the table, as they may have useful industry contacts and advice to help your business grow.
Crowdfunding
Crowdfunding allows you to create a campaign online to raise funds for a particular purpose, such as launching a new product line. Anyone who finds your campaign interesting can donate. Typically, these funds do not have to be repaid.
Some crowdfunding sites require you to give a gift to contributors, such as your product, a T-shirt, or a personal experience with your brand.
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The Takeaway
When the time comes for your business to expand, buy new equipment, or fill an unusually large order, you might find yourself in need of a large business loan.
For a business to get a large loan, it often needs to have a good track record, have been in business for several years (or have experienced explosive growth in a short time), show a good credit score, and more than likely offer collateral to secure the loan.
If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.
FAQ
How big can a business loan be?
A business loan can range in amount, but there are loans available for as much as $10 million.
What is considered a large business loan?
A large business loan is a commercial loan of $500,000 or more.
How hard is it to get a $1 million business loan?
While criteria to qualify vary from one lender to another, many lenders want to see high credit scores, at least three years in business, and a minimum of $350,000 of annual revenue.
Can you get a large business loan with no collateral?
There are large business loans that do not require collateral. However, these tend to charge higher interest than those that do require collateral. Peer-to-peer lending is an option if you do not have collateral to put up against a loan.
Where can large business loans be found?
There are many lenders who offer large business loans, including banks, credit unions, SBA-approved lenders, and online lenders.
Photo credit: iStock/Kerkez
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