Running and growing a business takes money – every entrepreneur knows it. You either get the money from sales or a cash injection via a business loan or investment. Getting a small business loan is the most obvious way to get extra cash for your business, but you must know precisely how much money you can get.
So how much money can you get from a business loan? The answer is: it varies. The actual amount of cash you get varies depending on the lender, loan type, market conditions, and borrower. Every business loan is different, and every borrower is different. There are many factors to pay attention to when getting a loan, and all can determine how much money you can get.
How Much Cash Can You Get?
Let’s take a look at some of the most common loans and see how much you can get:
Short-Term Online Loans
Many entrepreneurs want short-term online loans because they are quick and the repayment terms are short, from one to three years. They are ideal if you want to buy supplies or inventory. You can get the money in a few days, and you are good to go. They are flexible, and most businesses can qualify.
Most short-term lenders will loan your business no more than 10 to 15 percent of your annual gross sales. You also have to meet the other requirements – most lenders require that your company is active for at least one year and have a minimum of $50,000 in revenue.
So, how much money do I get? $5,000 to $50,000
Medium-Term Online Loans
Similar to short-term online loans, these loans are designed for larger businesses that need more money. They have quick turnaround times and medium repayment terms (three to five years). They are less expensive than short-term loans but more challenging to get.
Lenders will loan you no more than 20 to 30 percent of your company’s annual gross sales. Lenders will pay attention to your creditworthiness, revenue, and credit score.
So, how much money do I get? $5,000 to $500,000
Bank Term Loans
Banks offer various types of business loans. They typically deposit a lump sum of cash directly into your bank account. They work like other loans; you must pay back the initial amount, plus interest, according to a repayment schedule. Bank loans are excellent financing tools for companies who want large sums of money and have an established track record. For instance, they are ideal for big projects, renovations, or large inventory orders.
The amount of money you get varies depending on the lender and the borrower. Large banks can offer millions of dollars to borrowers at low-interest rates. These clients have excellent credit scores and years of excellent financial records. Most banks rely on a special number, DSCR (debt service coverage ratio), which is your annual net operating income divided by the annual debt payments. The minimum DSCR number is 1.1, meaning that your annual revenue exceeds the debt payments by 110 percent. Some banks may also consider your income to get even more money for your business. Similarly, some banks may want a down payment so the amount of money can go up.
So, how much money do I get? $5,000 to millions of dollars
Bank Lines of Credit
When choosing a business line of credit, you get access to a line of credit that you can use to cover your current expenses. They are excellent financial tools for businesses with cash-flow issues and constantly needing money. You get quick access to cash whenever you need it, as you see fit. Banks will consider your credit score, the DSCR number, the business revenue, and projected financial reports.
So, how much money do I get? $5,000 to $1,000,000
SBA Loans
These loans are offered by the United States Small Business Administration, which helps small businesses by guaranteeing loans. The loans are offered by partners, and interest rates are low. SBA loans require collateral, strong personal credit, and personal guarantees.
The SBA 7(a) loan is the most popular and can refinance debt, get working capital, or cover inventory expenses. Your DSCR score should be 1.15 or higher; the global DSCR must be 1.25 or above to qualify. Most SBA loans require a 10 percent down payment.
So, how much money do I get? Up to $5,000,000
Business Credit Cards
Business credit cards can work as excellent financing tools for companies. They essentially work as personal lines of credit – you pay back the minimum monthly balance. They are convenient but expensive.
Banks and credit card issuers pay attention to your credit score, credit limit, personal and business income, credit history, and the DTI (debt-to-income ratio). The DTI is similar to DSCR and is your monthly debt payments divided by your monthly gross income. Your DTI should be under 43 percent.
So, how much money do I get? Up to $100,000
How Are Loan Amounts Calculated?
Lenders always try to mitigate risks, so the most eligible borrowers get the most money. Simply put, the borrowers that can repay the debt on time and in full get the most credit. Lenders want to make sure that they get their money back, so it’s obvious that you have to be an economically viable candidate.
However, banks often ask for collateral, guaranteeing they are not left out to dry if the client doesn’t repay the loan. Collateral can be any asset – real estate, machinery, equipment, vehicles, etc. Personal guarantees can also increase the amount you can get.
