Page written by Chris Godfrey. Last reviewed on July 22, 2024. Next review due January 1, 2025.
Although large business loans are typically more difficult to secure than smaller financing options, thinking very big in business can bring outsize returns. Larger loans can provide the financial heft to propel your organisation to the next level and beyond.
A large business loan is typically business financing of €500,000 or more.
Large business loans work like any other business financing – you borrow a sum of cash and pay it back over time – except the numbers are much bigger. These types of loan may need to be secured by the borrower’s collateral, or they may use other assets, such as the borrower’s sales receipts as security. Large business loans can be used for almost any legitimate business purpose, including:
Large business loans can be obtained from banks, credit unions, lending marketplaces and specialist online lenders.
There are many type of large business loan:
Commercial real estate loans (also known as commercial mortgages) are used to buy properties that have a business function. This would include income-producing properties such as factories, offices, stores, restaurants, gas stations, gyms, theatres, sporting venues, etc. Although commercial real estate loans are similar to the residential mortgages used to buy homes, they differ in some key areas:
Commercial | Residential | |
---|---|---|
Primary borrower | Business entity | Private individual |
Type of property | Commercial property | Private residence |
Loan repayment period | 10 to 25 years | 15, 20 or 30 years |
Maximum loan to value (LTV) | 65% to 85% LTV | 95% LTV |
Interest rates | Higher than residential | Lower than commercial |
Fees | Higher than residential | Lower than commercial |
Pre-payment penalties | Common | Rare |
Minimum score | Usually 600+ | Can be as low as 500 |
Many large business loans will require the borrower to provide collateral – also known as security – to protect the lender from loss. Collateral typically means hard assets, such as real estate, land, or major plant and machinery, although it can also include soft assets such as inventory or even common stock.
Borrowing that uses collateral is called a ‘secured business loan’ and it can come in different varieties:
Accounts receivable finance, also known as invoice financing, this type of loan allows you to borrow against the value of your unpaid invoices and is best for B2B organisations. The lender will usually provide up to 95% of the invoice value within a few days or even hours of the bill being raised. Your invoices act as collateral, no added security is required.
Franchise loans can cover the cost of joining a successful franchise operation, plus the costs to build-out a new business location, hire staff and run a marketing campaign to fuel your launch. The loan can even pay the running costs until your new business is firmly on its feet. Typically, you borrow against the value of your provided collateral or your future sales receipts.
Securing large business loans can be more challenging than getting a quick business loan for a few thousand dollars. As a rule of thumb, the larger the sum you are trying to borrow, the harder lenders will look at your business and your application, which means they will typically review:
Usually, you will need good credit, a strong business record, sound finances and a solid business plan to secure a large business loan. If you can meet these requirements, you may be ready to apply – see below:
The actual lending criteria for large business loans will vary from lender to lender and the type of loan you are trying to obtain, however, general qualifications per loan type are:
Loan type | Minimum credit score (Personal FICO) | Time in business (Minimum – years) | Annual gross revenue |
---|---|---|---|
Business term loan | 550+ | 6 months+ | €75,000+ |
Business line of credit | 575+ | 1 year+ | €75,000+ |
Invoice financing | 550+ | 1 year+ | €250,000+ |
Revenue-based financing | 525+ | 4 months+ | €120,000+ |
Equipment financing | 600+ | 1 year+ | €250,000+ |
You can improve your chances of getting approved for a large business loan by preparing in advance. Key tasks to take care of include:
Possibly, although few lenders will lend large sums based on nothing more than a promise to repay. If you lack sufficient collateral yourself, you could ask a cosigner who has real estate or other assets to join the deal. Alternatively, you could consider a large loan that uses your sales receipts or invoices as security.
Business owners that do not qualify for a large business loan don’t have to abandon their big ideas. There may be other ways to secure the funds you need:
If you decide to seek outside investment, you can find networks of venture capitalists and angel investors available online.
Bringing in external investment can give you the cash you need, and it may also deliver a unique and extra set of skills and contacts that can help your organisation grow even faster. However, investors will usually want a piece of the action in exchange for their money. This will mean you giving up a share of your ownership and may loosen your overall control of the business. Some investors may also want higher dividends or royalty payments as well as their share of equity. Also note that venture capitalists and angel investors can be very picky about the businesses they choose to back. You could spend many months pursuing one lead after another before you find the right match.
Available via various online platforms, crowdfunding can bring in large sums if your presentation hits the right spot. Although you will need to be creative to raise big money in small donations from hundreds or even thousands of donors, you do not need to repay the cash if you spend it where you said you would. An eye-catching idea and a powerful pitch is essential to succeed with this funding option.
No matter if you’re seeking your first big loan or you’re a seasoned borrower, working with business finance experts can make all the difference when applying for funding. Contact Swoop to discuss your borrowing needs, get help with your application and to compare large business loans from a choice of lenders. Give your organisation the major financial boost it deserves. Register with Swoop today.
Written by
Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.
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