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How Much Capital Can You Get From a Small Business Loan?

How Much Capital Can You Get From a Small Business Loan?
Lauren Ward

Lauren Ward

Updated February 15, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
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 $1,000 to over $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 much funding you may be able to get with different types of business loans, as well as 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. Here’s a breakdown of some of the most common small business loan types.The differences between loans don’t just 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, it can be a good idea to do a small business loan rate comparison.  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. 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 over $1 million. You might even be able to borrow as much as $5 million, 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 $5,000 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.

Lines of Credit

With a business line of credit, a lender gives you access to a specific amount of cash (ranging from $10,000 to $1 million), 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. 

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.

What Affects How Much You Can Borrow?

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.

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 to the lender. A lender will typically want to look at both your personal and business credit scores

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. 

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. 

Revenue

The more money your business brings in each month and year, generally, 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. 

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. 

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.

Your 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.

How Much of a Loan Do 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.

How to Get a Larger Loan to Fund Your Business

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.

The Takeaway

How large a loan you can get for your business can range anywhere from $1,000 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 curious about how much of a loan you can get for your business, Lantern by SoFi can help. With our easy-to-use online tool, you can receive loan offers from multiple small business lenders without any obligation and just one application.
Photo credit: iStock/Edwin Tan
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.SOLC1221007

Frequently Asked Questions

How does the loan amount affect interest rates?
How does loan amount affect other fees?
How are qualifications related to loan amounts?

About the Author

Lauren Ward

Lauren Ward

Lauren Ward is a personal finance expert with nearly a decade of experience writing online content. Her work has appeared on websites such as MSN, Time, and Bankrate. Lauren writes on a variety of personal finance topics for SoFi, including credit and banking.
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