Guide to How Big of a Business Loan You Can Get | SoFi (2024)

If you need funds to launch a new venture or expand a current business, a small business loan can be a great option. But how much of a loan can you get? Depending on the lender and the type of financing, you can typically borrow anywhere from $500 to more than $5 million.

Exactly how much a lender will offer your small business, however, will depend on your company’s financials, time in business, and credit profile. Read on to learn how big of a small business loan you may be able to get, as well as the different types of business loans and how to qualify for the best rates and terms.

How Much Do Most Business Loans Offer?

How much business loans offer depends on the type of loan you’re after, such as whether it’s a short term loan, Small Business Administration (SBA) loan, or bank loan. Here’s a breakdown of some of the most common types of small business loans.

The differences between loans don’t stop with the amount, however. You’ll also pay different interest rates for each kind of loan. To get a sense of how much different types and sizes of loans may cost, you may want to use a small business loan comparison site.

To use a loan comparison tool, you generally need to plug in an approximate loan amount, as well as some basic stats about your business, including time in business, revenue over the last 12 months, and credit score.

Amounts Offered by Types of Lenders

You can generally borrow the highest amounts with traditional lenders, but you’ll have to jump through a few hoops to qualify. Luckily, there are many small business loan options on the market, even for larger loan amounts. Here’s a look at some of the most common lending options for small businesses and how much you may be able to borrow with each.

Bank Loans

Banks typically offer the largest loan amounts, and if you have the cash flow and the credit history to qualify, you can often borrow as much as $1 million. You might even be able to borrow more, though you’ll likely need stellar credentials to do so. Some large commercial banks don’t even have a maximum borrowing limit, while smaller banks typically do.

SBA Loans

The U.S. Small Business Administration (SBA) is an independent government agency that helps small businesses by guaranteeing loans issued by banks and other private lenders. Due to reduced risk to the lender, SBA-backed loans offer large amounts (as much as $5 million), as well as low interest rates compared to typical business loan interest rates.

Online Loans

If you have thin or poor credit, an online loan may be your best option. These loans can be anywhere from $1,000 to $500,000, and the qualification process is generally easier than loans from traditional lenders. The interest rate, however, will likely be higher than an SBA or traditional bank loan.

Short-Term Loans

Typically, a short-term business loan has a term of one year or less and is structured as a lump sum loan (which can be as much as $500,000) with repayments made on a daily or weekly schedule. This type of loan is most commonly offered by online lenders, and interest rates tend to be higher than other types of loans.

Medium-Term Loans

The definitions vary, but most commonly, medium-term loans are ones with a repayment period between two and five years and loan amounts up to $500,000. Borrowers usually have to make payments every month or twice a month. You generally need a business producing revenue to qualify for a medium-term loan and a credit score of at least 700.

Lines of Credit

With a business line of credit, a lender gives you access to a specific amount of cash (ranging from $1,000 to $500,000), which you can draw from whenever you want and use to cover whatever expenses you need. You’ll only pay interest on the funds you use. Lines of credit can be a great option for small businesses facing frequent cash flow issues. They can also be a good thing to have in your back pocket in case of emergencies.

Equipment Financing

Equipment financing limits vary with each bank (or online lender) and each piece of machinery, but you can generally borrow between 80% and 100% of the value of the equipment or vehicle you are purchasing — often up to $500,000. Typically, the equipment itself acts as the loan’s collateral and the repayment period often mirrors the equipment’s expected lifespan.

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Microloans

Microloans generally run between $500 to $10,000, and can be a great option for new companies or borrowers with poor credit. Unlike short-term loans, microloans are typically available through nonprofits and come with relatively low rates. However, microlenders often have specific parameters for a business to qualify for the loan.

Invoice Factoring

Invoice factoring is a short-term financing method that allows businesses to sell unpaid customer invoices to third-party invoice factoring companies. You can often get 85% of your unpaid invoices up front. The factoring company then collects payment from your customers and gives you the remaining balance minus fees. While these fees can be hefty, knowing what invoice factoring is and how to use it may help your business get past difficult financial times.

Business Credit Cards

Small business owners who are interested in financing ongoing expenses and working capital can sometimes be drawn to business credit cards. Opening a credit line with a business card offers flexibility and carries advantages, such as rewards for spending, 0% introductory annual percentage rates (APRs), and the capacity to build business credit. The downside is a revolving line of credit may come with high interest costs (once the introductory rate ends) and other fees.

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7 Factors That Affect How Much of a Loan You Can Get

There are generally a lot more requirements for small business loans than there are for personal loans. Here are some key factors that can influence how much you can borrow.

1. Credit Scores: Personal and Business

Lenders typically only offer the highest loan amounts to business owners with good to excellent credit, since these borrowers represent a lower risk. A lender will typically want to look at both your personal and business credit scores.

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2. Collateral

Collateral is an asset (like equipment, real estate, or inventory) used to secure a loan. In the event that you cannot make loan payments, the collateral can be seized and resold to cover the remainder of the loan. While it’s possible to get a loan without collateral, you may be offered a lower amount, asked to pay more in interest, or both.

3. Debt-to-Income Ratio

Your debt-to-income ratio affects your monthly budget, which in turn can affect your ability to pay your debts each month. If the ratio is too high, a lender may either decline to work with you or offer you a lower loan amount.

4. Revenue

Generally speaking, the more money your business brings in each month and year, the more you will be able to borrow. Depending on the lender, you might need to bring in as much as 10 times the amount you want to borrow if you are applying without collateral.

5. Time in Business

The longer you’re in business, the more faith a lender will likely have in your company. Many small businesses fail each year, so if you’ve been in business for at least two years, you’ll likely have an easier time getting approved for a larger loan amount.

6. Down Payment

Making a down payment on a business loan proves you’re serious about the loan — and about paying it back. The larger a down payment you are able to make, generally the more a bank or lender will be willing to lend to your business.

7. Industry

Lenders will also often look at the type of industry your business falls under. If you’re in a field that is considered risky, associated with an unsteady cash flow, or not seen as socially acceptable, a lender may reject you or offer you a lower amount.

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Calculating How Much of a Business Loan You Need

When applying for a small business loan, you’ll want to consider not just how much of a loan they can get, but exactly how much of a loan you need. The reason: The more you borrow, generally, the more you’ll pay in interest and fees — and the higher your monthly cost will be.

Before you start applying for a small business loan, it can be a good idea to think carefully about what you would do if you could get access to extra capital, and then calculate exactly how much you would need to accomplish your goal. You may then want to add a little bit of padding to that amount to account for unexpected expenses.

You may even want to draw up a detailed plan (and budget) for how your company will use the funds and what impact you expect the money to have on your business growth. Some lenders will ask for this when you apply for the loan.

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Tips To Maximize Your Business Loan Amount

Here are some simple ways you may be able to qualify for more funds.

Make a Down Payment

Generally, the larger your down payment on the loan, the less risk you pose to a lender, and the more they will allow you to borrow.

Put up Collateral

By backing your loan with collateral, you present less risk to the lender, which means they will likely be willing to offer you a larger loan amount.

Look Into an SBA loan

If your business can meet the strict qualifications, SBA loans tend to come in larger amounts than other types of small business financing.

Reduce Your Debt

By paying off debts, you can likely improve your debt-to-income ratio and, in turn, increase the amount you can borrow.

Work on Building a Better Credit Profile

In general, the stronger your credit, the more money you will be able to borrow.

Wait a Year or So

If your business hasn’t been around for at least two years, you may want to hold off applying for a loan and put your efforts into building a good foundation for your business and increasing your revenue. In the future, this will allow you to borrow a larger amount.

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The Takeaway

How large a loan you can get for your business ranges anywhere from $500 to over $5 million. The exact amount you will get approved for will depend on the lender (traditional banks and SBA-backed lenders tend to offer the largest loan amounts), the type of loan you’re applying for, as well as your qualifications (such as your credit score, time in business, and annual revenue).

If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.

FAQ

How does the loan amount affect interest rates?

Higher loan amounts pose more risk for lenders, which can lead to higher interest rates. However, economies of scale can lower rates for substantial loans, as processing costs are spread over a larger amount, making the loan more profitable even with lower rates.

How does the loan amount affect other fees?

Many loans come with an origination fee, which is typically a percentage of the loan amount. The bigger the loan, the more you’ll pay in origination fees.

How are qualifications related to loan amounts?

Qualified borrowers are considered financially strong and good with their finances. Therefore, borrowers with strong credit profiles and solid revenue are generally able to get higher loan amounts.

How much money can you get for a business loan?

Business loans can range from as little as $500 to as much as $5 million.

Do banks give loans to start a business?

It’s uncommon for a bank to give a loan to a business that has not been producing revenue for at least a year and preferably two.

Photo credit: iStock/Edwin Tan

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