As a small-business owner, you may need a sizable loan at some point in your career, whether to start up the business, make improvements or recoup monies that were lost. If the amount you need is especially hefty -- namely, to the tune of $1 million or more -- you may balk at the prospect that any lender would offer you a loan. However, the resources are out there -- you just have to meet exacting specifications to get them.
Business Credit Factors
Creditors will be checking your business out on a number of levels before they hand over such a large amount of funding. They will want to see that your business can operate on a sound basis when the borrowed funds and the owner assets are combined. Hence, your debt-to-worth ratio, or the amount requested -- $1 million -- in relation to the assets you have invested, should show strong equity investment as an indicator of financial resiliency. Another dimension to note is working capital, or current assets minus current liabilities. Even if you make enough to pay back $1 million, lenders still want to see sufficient working capital.
Million-Dollar Loan Programs
Not all financing programs geared toward businesses offer loan amounts as large as $1 million, so identify the ones that do. One high-limit route is the Small Business Administration's general small-business loan, or 7(a) program, with a maximum amount of $5 million. Another option for a million-dollar business loan is called the CDC/504 loan program, which finances major fixed-asset purchases such as real estate or equipment. If your small business was impacted because a key employee was called to active military duty, and consequently the business could not meet its normal operating expenses, the SBA's Military Reservist Economic Injury Disaster Loan program can fund up to $2 million.
For a business to qualify for a million-dollar loan, some lenders will necessitate the funds be used in particular ways. For CDC/504 loans, the maximum amount of the loan depends on how the funds will be used. To obtain up to a maximum of $5 million for a loan, you must meet either a job creation or public policy requirement, such as revitalizing a business district. In Pennsylvania, a small-business pollution assistance program funds up to $2 million annually to businesses that use pollution-control and energy-saving technologies.
Financial, Business Type and Domicile Criteria
Businesses must meet specified financial eligibility criteria to obtain multi-million-dollar loans. For a CDC/504 loan, your tangible net worth must not exceed $15 million, and average net income must be less than $5 million after taxes, as of publication. For these loans, the project assets act as collateral. Certain types of businesses, such as speculative and rental real estate investment businesses, are not eligible for CDC/504 loans. For 7(a) loans, you must be considered "small," as determined by SBA standards for your industry, do business in the United States and its possessions, use alternate assets before seeking financial assistance, demonstrate loan need and not be delinquent on any debt obligations to the U.S. government.
To demonstrate your business actually needs the large amount requested and has the ability to repay a 7(a) loan, you must furnish numerous documents to your local SBA-backed lender. These include personal and business financial statements, business licenses, tax returns and loan history. Financial statements would include profit and loss statements, as well as one-year projected income statements. The CDC/504 loan application process requires similar documents.
- Small Business Association: 7(a) Loan Amounts, Fees & Interest Rates
- Kiplinger: 5 Ways to Fund Your Small Business
- Alpine Business Brokers: Funding a Small Business
- Lehigh Valley Economic Development:
- Small Business Administration: Fact Sheet: Military Economic Injury Loans
- Small Business Administration: How to Prepare Your Loan Application
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