Is your company in need of a sizable loan? We examine the best options for more significant loan amounts.
Obtaining $500,000 to $5M serves various functions for small business owners, ranging from purchasing new equipment and real estate retail space to expanding their operations.
A small business can obtain a large business loan. Find out if you qualify for a large loan and if it would benefit your business if you did.
Become familiar with four types of large business loans so that you may ensure that you have what you need to succeed. Learn about small business loans, lines of credit, and other options for financing your company’s growth or covering any unanticipated expenses.
Some firms require only minimal money to grow or maintain their operations. Short-term loans, SBA microloans, SBA express loan, shorter-term lines of credit, and so on are available to these companies.
However, a small sum of money may not be sufficient for some firms to achieve the significant differences they desire in their operations. Here are a few reasons why a company can be justified in obtaining a substantial business loan from a business bank or alternative financing companies.
Companies with a Track Record
Companies with a long history and a proven track record are more likely to get approved for a bank loan and substantial business loans.
While most traditional lenders will only engage with companies that have been in operation for at least two years, the more experience you can show, the better.
You appear to be a less risky customer if you’ve been in business for a long time and have a good business history of presenting to potential lenders. On the other hand, smaller and newer enterprises pose a more significant risk, and hence they are less likely to receive a substantial capital infusion, even from private lenders.
As a result of the significant risk of a new company failing, lenders are reluctant to provide a long-term, big business loan. More likely, they’ll never receive their money back from this.
Increased Access to New and Existing Products
Your first foray into the market to sell your goods may be a success. Expanding your product line may be your next natural step. This expansion can significantly influence, but it will be costly.
Taking out a significant company loan to fund the launch of a new product is an option for an entrepreneur who knows the idea will eventually pay off.
Filling Massive Orders
Your company may be surprised with a large order that it has never received before.
It’s a chance you don’t want to miss to fulfill a significant order. Business owners frequently have to take out big business loans to handle the additional employees, inventory, or production costs that come with considerable potential.
Major Fixed Assets Investment
Investment in commercial real estate may be the most important fixed asset a company can acquire. Your company may need to invest in other assets if it wants to expand. For example, you may need to purchase large machinery and equipment.
The cost of new and secondhand equipment might be prohibitive, from commercial trucks to a new production line.
The high cost of fixed asset purchases necessitates taking out significant business loans to pay for them for many businesses.
Suppose you’re planning on making a significant purchase or growing your company somehow, such as opening a second location by securing commercial property or introducing a new product line. In that case, you’ll probably need a substantial business loan. There is, however, a question of whether or not you’re eligible for one.
A large business loan of up to $5M may suit your company if it meets the following criteria.
The Small Business Administration (SBA) offers some of the most generous loan amounts. There are various loan options available from both traditional banks and online lenders.
For real estate, machinery, valuable assets, seasonal expenses, and other purposes, the SBA 7(a) program is popular for up to $5 million. The SBA does not directly grant loans; instead, SBA-approved banks and other financial institutions help applicants apply. In the event of default, the SBA reimburses the lender a portion of the loan amount, decreasing lender risk and increasing loan approval probability.
The SBA caps loan rates to keep costs down. The maximum fixed rate is 11.25%, and the variable rate is 8%. Repaying the loan period can be up to 25 years, depending on the loan’s purpose.
An SBA loan requires your organization to meet industry-based small business size guidelines based on average yearly annual sales or average employee count. It also requires a minimum FICO SBSS score of 155, and the SBSS looks at your credit bureau data and financials.
If you have $5 million or more in unpaid invoices, you can borrow using accounts receivable financing or “AR” financing (or invoice factoring).
The risk is reduced for both parties (you and the lender) because the unpaid invoice secures the loan. Online lenders frequently offer AR financing to borrowers.
Here is an illustration of how AR financing works.
If a restaurant orders $10,00 worth of products from a supplier and has 30 days to pay, the $10,000 increases the supplier’s receivables.
A supplier using invoice financing uses the invoice as security, allowing them to access funds minus the lender’s expenses.
Invoice finance is an excellent option for small business owners with unpaid invoices.
Lenders typically don’t need anything else but unpaid invoices as security. Because you’re borrowing against the outstanding invoice, the risk is negligible.
If the client refuses to pay, you are obligated to pay the invoice. If you fail to pay an invoice, the lender can report you to credit bureaus and other financial organizations. Your commercial connections may suffer as a result.
A company loan that uses collateral is called a secured loan. If you default on a loan, lenders might seize your collateral. Property, equipment, and inventory are examples of collateral.
SBA 7(a) loans are an excellent example of a general secured business loan, while equipment loans for industrial machinery and computers are more specific. Loan amounts might range from $500,000 to $5 million, depending on the type of loan.
With additional security, the chances of approval and access to funds for a good business are easier.
For a better likelihood of acceptance, business owners can go with a secured loan. Lenders may lend to you even if you have poor credit or no income since collateral lowers the lender’s risk.
Additional advantages include reduced interest rates and more significant loan amounts for secured company loans.
Business owners can use commercial real estate loans to buy an office building, hotel, or shopping center. These loans range from 60% to 90% of the property values from $1 million and higher.
Private lenders, banks, and the SBA will finance commercial real estate with competitive rates and repayment terms.
The SBA CDC/504 lending program offers commercial real estate financing. Up to $5.5 million in loans are available for building or remodeling structures, landscaping, parking lots, etc.
A CDC/504 loan requires a minimum net worth and net income. Create or keep one job for every $75,000 borrowed.
Merchant cash advances
Merchant cash advance programs are for businesses that sell goods or services. Alternatives lenders provide short-term loans ranging from 10,000 dollars to $500K.
The fees on a business cash advance are higher than on a secured loan. However, they do not require collateral and personal credit is usually not an issue. In fact, if you have bad credit, merchant cash advances are a good financing option, especially if you need help with cash flow.
Equipment financing provides capital for companies that purchase large items like heavy machinery, vehicles, and office furniture. The equipment loan requires a down payment.
Leasing allows companies to acquire expensive equipment without paying upfront. Companies lease equipment for one year at a time, and the monthly payments are lower than buying the item outright.
Business Lines of Credit
A business line of credit is similar to a revolving account where a business owner has access to money based on their cash flow. Borrowers must repay the balance to receive additional credit like a business credit card.
Short term loans are popular when there is a temporary need for cash. Banks, credit unions, and online lending platforms often provide these types of loans.
They can be a small business loan. The short term loan, a business financing option, provides a business loan term between six to 18 months. A business term loan, if short term, will have a low interest rate.
The application process for a loan varies from one lender to another.
Some online lenders will ask you to fill out their online form before deciding whether or not to fund your loan request.
Other lenders will contact you directly after filling out their online form to tell you what they think about your loan request.
The following 4 steps can help you get started:
With this type of financing, business funding is usually more than one business day. While bank loans may take weeks, we can fund your business in days.
To get more details about how we work, please call us at 888.456.9223.