How to get a $1million business loan

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    Chris Godfrey

    Page written by Chris Godfrey. Last reviewed on April 11, 2024. Next review due October 1, 2025.

    Regardless of the type of industry they operate in or what they do or sell, there comes a time where almost every successful business needs money faster than cashflow can provide. Supporting big expansion plans, making key acquisitions, ramping up production, or simply clearing expensive short-term debt and restructuring finances can be tough to achieve using only working capital – which is why business loans of $1,000,000 or more are available for organizations that meet lending criteria. 

    Although $1million business loans are typically more difficult to secure than smaller financing options, thinking very big in business can bring outsize returns. Loans of $1million or more can provide the financial heft to propel your organization to the next level and beyond.

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      What business loans go up to $1million?

      $1,000,000 business loans can be obtained from banks, credit unions, SBA-backed institutions, lending marketplaces and some online lenders, however securing loans of this size 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:

      • The risks associated with what your business does
      • Your business and personal credit scores
      • The length of time you have been in business
      • Your business structure – corporation, LLC, partnership or other
      • Your business track history – especially your repayment of debts
      • Business and personal assets
      • Your business plan – especially what you intend to use the funds for
      • Any current debts or tax liabilities

      If your business satisfies this lending criteria, you may have a choice of $1million business loans. Each comes with its own pros and cons:

      Business term loan

      Commonly used for one-off investments where you know exactly how much cash you need. Commercial real estate purchases, plant and equipment investment, and debt repayment and restructuring activities work well with this kind of loan. You receive a single, lump-sum cash injection and then pay it back in regular instalments, plus interest and any fees, over a fixed period of up to 25 years. 

      • Pros: Fixed interest rates and predictable repayment instalments
      • Cons: Few options to ask for extra funding or change the terms of the loan after closing

      Business line of credit

      A line of credit is a business loan that functions like a high-value credit card but comes with lower interest rates and fees. Organizations can withdraw as much as they want when they want from a loan facility up to the limit of their borrowing. Interest rates are usually fixed, and businesses may repay on a set or flexible schedule. This kind of loan is ideal for organizations that want maximum flexibility or for investment situations where the total cash required is unknown. However, expect the lender to request regular financial updates and increased cashflow monitoring as part of the deal.

      • Pros: Only pay interest on the cash you use
      • Cons: Higher levels of reporting usually required to maintain access to the loan facility

      Invoice financing

      Also known as account receivables financing, this type of loan allows you to borrow against the value of your unpaid invoices and is best for B2B organizations. The lender will usually provide up to 95% of the invoice value within a few days or even hours of the bill being raised. You may still be responsible for collecting the cash from your clients, or the lender (also known as the ‘factor’) may collect on your behalf. If you collect, you must repay the lender on their schedule. If they collect, they will take back their advance from the client’s payment and then pass any residual sum (after charging interest and fees) back to you. 

      • Pros: Get paid in days instead of waiting weeks or months
      • Cons: Higher fees and interest rates. You may lose control of your sales ledger

      Revenue-based financing

      Functions like a merchant cash advance but with higher borrowing limits. Based on the size and regularity of their total revenues, (not just their credit card sales), businesses may receive a lump sum and pay it back over a short-term schedule, typically by small deductions from their daily sales. This type of revenue-based loan can usually be secured quickly as qualification rules are less intensive and credit scores are not so critical. The loan may also be structured as subordinated debt which can keep the pressure off your existing and future banking relationships. 

      • Pros: Fast and easier to secure than many other $1million business loans
      • Cons: Strong cashflow necessary to service the loan

      Equipment financing

      Buying big ticket machinery and equipment can put a major dent in your cashflow, but $1million equipment loans can pay for your new plant and machinery without causing financial stress. Equipment loans are ‘self-collateralizing’ – they use the asset you’re financing as security, similar to a car loan or a residential mortgage. Once the loan is approved, the lender sends the funds to the equipment vendor, who then delivers the machinery. You can use the equipment as you pay for it and the lender maintains a lien on the title to the machinery. Once you pay the loan back, the lender releases the lien, and you own the equipment outright.

      • Pros: No need to provide your own collateral
      • Cons: Can only be used for equipment purchasing, does not provide any cash 

      SBA 7a loans up to $1million

      As well as the $1,000,000 loan options shown above, organizations may also seek an SBA 7a business loan. Provided by banks, credit unions and online lenders who are part of the Small Business Administration (SBA) lender network, and partially backed by the US Government, these loans can provide up to $5million to qualifying borrowers with repayment terms as long as 25 years. 

      SBA loans usually come with much lower interest rates and fees than other commercial lending, but meeting their strict rules of eligibility can be tough for many businesses. As well as an approval process that can take several months, organizations will typically need to have been in business for at least four years and have annual revenues over $180,000. Your personal credit score must be at least 680.

      • Pros: Lower interest rates and fees
      • Cons: Strict rules on eligibility

      Alternative funding options

      Just because your business doesn’t qualify for a $1million business loan, it doesn’t mean you have to abandon your big ideas. There are other ways to secure the funds you need to make your business grow:

      External investors

      You don’t have to know any deep-pocketed individuals or businesses to secure outside investment. There are networks of venture capitalists and angel investors readily 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 organization grow even faster. 

      Note that there are some downsides to this funding option: 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. Venture capitalists and angel investors are also notoriously picky about the businesses they choose to back. You could spend many months pursuing one lead after another before you find the right match. 

      Crowdfunding

      Available via various online platforms, crowdfunding can bring in large sums if your presentation hits the right spot. Although it may be tough to raise $1million in small donations from thousands of donors, this cash is essentially free as there is no interest to pay and you do not need to repay the money 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.

      Criteria for a $1,000,000 business loan

      The actual lending criteria for $1million 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 typeMinimum credit score (Personal FICO)Time in business (Minimum – years)Annual gross revenue
      Business term loan 550+6 months+ $75,000+
      Business line of credit575+1 year+$75,000+
      Invoice financing550+1 year+$250,000+
      Revenue based financing525+4 months+$120,000+
      Equipment financing600+1 year+ $250,000+
      SBA loan680+4 years+$180,000+

      How to improve your chances of getting approved

      You can improve your chances of getting approved for a $1million business loan by preparing in advance. Key tasks to take care of include:

      • Identify your need for the loan. Why do you need the money? You must present a strong case for funding to secure a large business loan and your financial records must support this need, indicating how the loan will deliver your plan – and critically, how you will pay the loan back. 
      • Check your personal and business credit scores. It is common for mistakes to occur on credit reports. Incorrect information could have an adverse impact on your loan application. Note that business credit scores are usually graded from 1 to 100 and are different than personal FICO scores. A good business credit score is 80+. Additionally, not all organizations will have a business credit score, in which case, the lender will scrutinize your personal credit report. Ensure it is correct. If there are errors, get them fixed before applying for your loan – and be aware that fixing a credit score can take time and there are no ‘fast credit repairs’ despite the many promises from online ‘credit doctors’ who say they can perform miracles for your score.
      • Get your paperwork in order. Lenders will need to see bank statements (at least 18 months), balance sheet, profit and loss statements, cashflow projections, list of debts, list of assets, customer database, documents that reveal the structure of your business (corporation, LLC, etc.), certificates of good standing, tax statements and more. 
      • Collateral. Lenders like to know they can get their money back if things go wrong. Often this means you must provide security for the loan – collateral – usually in the form of real estate or some other hard asset that the lender can sell to recover their funds if the worst should happen. If you don’t have sufficient collateral yourself, you could ask a cosigner who has real estate or other assets to join the deal. Most lenders will want collateral to the full value of the loan and will usually consider provided assets at less than general market rates – known as the ‘distress value’ – as they may need to sell the assets quickly to recoup their funds.
      • Build a good business plan and pitch. This goes back to your need for the loan. Lenders will expect a detailed and insightful business plan that explains why you need the funds and what they will do for your business once you have them. Business plans should do more than paint a rosy picture – explain the risks involved, what the downsides could be – and how you intend to overcome them. If you cannot produce a business plan yourself, it may be worth paying an external service to do this for you.
      • Shop around for loans. Loans of $1million or more are usually custom deals, shaped to fit your business, which means no two loan offers will look alike. It therefore makes sense to shop around for different offers before settling on a lender. You can do this by approaching banks, credit unions and online lenders one by one, or you can use the services of a loan marketplace that will introduce you to a choice of loan deals from different lenders. Some marketplace platforms can also give you advice and help you with the application process. This can be especially useful for business owners who have never taken out a large business loan before.

      What can the loan be used for?

      $1million business loans can be used for almost any legitimate business purpose, although lenders typically prefer to see the funds used for growth rather than financial rescue or paying dividends to business owners. Common uses of these loans include:

      • Expansion programs 
      • New product development and introduction
      • Real estate purchases
      • Business acquisitions
      • Large equipment and machinery purchases
      • Paying off more expensive short-term debts

      Get started with Swoop

      No matter if you’re seeking your first $1million business loan or you’re a seasoned borrower, working with business finance experts can make all the difference when applying for your loan. Contact Swoop to discuss your borrowing needs, get help with your application and to compare high-quality million-dollar loans from a choice of lenders. Give your business the financial boost it deserves. Register with Swoop today.

      Written by

      Chris Godfrey

      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 Wells Fargo Bank, Visa, Experian, Ebay, Flywire, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of US consumer and business finance.

      To read our editorial policy, please click here.

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