How much can I borrow with a business loan?

To answer this question more fully, let’s take a closer look at business loans from different lenders or different types of loan:

Bank loans

Traditional banks and credit unions may make larger loans than many online or private lenders – ranging from $10,000 up to $5 million – but they will typically have tougher approval criteria and take much longer to fund. To get a loan from a major bank your business will usually need at least three years in business, average revenues of $250,000 or more and your personal FICO credit score should be above 680. Even then, expect to need to provide matching collateral to support the loan.

SBA loans

SBA loans are provided by banks, credit unions and online lenders who are part of the US Small Business Administration lender network. SBA 7(a) loans – where you may borrow up to $5 million – are the most common type of loan product, but there are many others in the SBA portfolio, including:

• SBA Express loan – up to $500,000 – ideal for short term working capital needs

• Export Express – up to $500,000 – used to support foreign export activities 

• SBA 504 loan – up to $5.5 million – used to promote job growth and business expansion

• CAP lines – up to $5 million – to cover seasonal increases in costs and inventory

• Community Advantage – up to $350,000 – supports businesses in underserved areas

• Microloan – up to $50,000 – for small businesses that cannot qualify for larger loans
  

Online loans

Online loans are provided by alternative lenders who operate solely online and do not have a bricks and mortar branch network. Aided by state of the art technologies and risk assessment tools, these lenders are typically much faster at approving loans and tend to be more flexible in their borrower criteria than main street banks and credit unions. They usually offer a wide range of loan products – everything from term loans and lines of credit to invoice-financing, commercial mortgages and more. Borrow up to $5 million.

Short-term loans

As the name suggests, short term loans come with a short repayment schedule, anywhere from a few weeks up to two years. These loans may be available to startups, businesses with fair or bad credit or businesses that simply want to pay off their loan quickly. Short-term loans often charge high interest rates – typically 30% or higher.

Note that some short-term loans charge a factor rate instead of an interest rate. Factor rates are decimals that get multiplied by the entire loan amount upfront, such as 1.10 or 1.50. They typically cost borrowers more than loans with APRs.

Business line of credit

Business lines of credit function like a high-value credit card but come 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. Borrow up to $1 million.

Equipment loans

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 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. Borrow 80% to 100% of the equipment value, up to a maximum of $5 million.

Invoice financing 

Also known as account receivables financing, this type of loan allows you to borrow against the value of your unpaid invoices. The lender will usually provide up to 95% of the invoice value within a few days or even hours of the bill being raised.

Merchant cash advance 

Available for businesses that accept customer payments by credit and debit card. A merchant cash advance allows you to borrow against the value of your card sales. As your card sales increase, your borrowing limit goes up. Pay the loan back with a fixed percentage of your card sales on a daily, weekly or monthly basis. Your sales act as security for the loan, so no added collateral is required. Borrowing limits are set according to the value of your card sales. 

Microloans

Microloans are designed for businesses that struggle to secure standard business loans of $100k or less. The SBA are a popular provider of these types of loans and they’re ideal funding solution for underserved communities, including women, veterans, minorities, immigrants and refugees. 

SBA Microloans are available up to $50,000 and can usually be secured with FICO scores as low as 500, or even with no credit score at all. However, they will often require collateral or a personal guarantee that makes you personally responsible for the debt, not your business.