Find out eligibility requirements, potential costs, SBA options and more.
A $1 million loan can seriously help your business grow and expand, whether you need a new office or are looking to buy out another small business. You’ll probably need to be in business for a few years to qualify, however, and lenders will likely want your business to bring in at least $10 million a year to ensure you can pay back the loan.
Our top pick: National Business Capital
Multiple types of financing options available.
- Minimum Funding Amount: $10,000
- No industry restrictions
- Simple and fast online application process
- Must have been in business for at least 3 months
- Must have monthly revenue of $10,000 or more
- Startup financing available with 680+ personal credit score
How to get a $1 million business loan
It’s not easy to find a business loan this large online — especially an unsecured one. Many online business lenders only offer up to $500,000 in financing — but even that’s hard to find. Consider looking into financing options at your local bank or credit union or apply for a government-backed SBA loan.
This doesn’t mean you should rule out online lenders. They typically approve more loans than other financial institutions for businesses that make over $1 million a year, according to a 2016 survey by the Federal Reserve. But local banks come in at a close second, giving 78% of high-earning businesses the green light.
With $1 million on the line, you can count on your application being more involved than one for a smaller business loan. You might be required to submit additional documents, and it usually takes longer for lenders to verify your business’s creditworthiness. If your business needs overnight funding, consider applying for a smaller amount.
What does it take to get a $1 million business loan?
Your business needs to prove it can afford to take on such a hefty debt load to get a $1 million business loan. While requirements vary by lender, you’ll typically need to meet the following criteria to be considered:
- Have good to excellent credit. The higher your credit score, the better — otherwise your business might end up paying a lot in interest and fees, if it’s approved at all.
- Be at least two years in business. Lenders are generally wary of giving this amount to businesses that are new to the game, especially if you’re applying with a bank.
- Have around $10 million in annual revenue. The higher your loan amount, the higher your revenue requirements. It might be possible to find $1 million in financing with revenue under this amount, but it probably won’t be easy.
- Be profitable. On top of having a strong annual revenue, many lenders also want to see that your business is actually making money rather than merely breaking even.
- Make a personal guarantee. Many business loans require the owner or owners to back the amount they’re borrowing with a lien on their personal assets. This means that you and your business partners will likely need to have $1 million in equity on your homes, cars and other investments.
How hard is it to get a $1 million business loan?
It all depends on you and your business. If you both exceed the requirements, then it might not have any trouble at all. But if your business is less than a year old, not yet profitable or you have poor credit, you could have trouble qualifying for $1 million. Having an unpredictable cash flow or low revenue can also get your business rejected.
Compare providers that offer $1 million in business financing
Costs to pay back a $1 million business loan
While $1 million business loans tend to come with longer terms — typically between 10 and 25 years — monthly repayments tend to be high. Interest rates can also be lower since it’s based on a much larger sum. On average, online lenders tend to offer higher rates than local banks, so you might want to go with a bank you trust if cost is your top priority.
Say your business qualified for a business loan of $1 million with an APR of 7% and a term of 10 years. It’d have monthly repayments of $11,610.85 and pay a total of $393,301.75 in interest and fees.
$1 million SBA loans
Chances are you’ll consider applying for a Small Business Administration loan if you’re a small business owner looking for a large loan amount. Since SBA loans are partly backed by the government, they’re one of the most affordable options out there for a small business owner looking for a high-dollar loans. They’re also one of the most difficult loans to qualify for, with only 55% of SBA loan applicants getting approved in 2016.
The SBA has its own complicated set of criteria to qualify for an SBA loan, including specific business size requirements for its popular 7(a) program. SBA loans of $1 million typically require some kind of collateral. Lenders designate $1 million SBA loans for specific uses rather than working capital.
Here’s how a $1 million loan breaks down for the SBA 7(a) program:
- Percent guaranteed: 75%
- Amount guaranteed: $750,000
- Closing costs: Guaranty fee of 3.5%, or $26,250, plus any additional charges by the bank or lender
- Maximum interest rate: Prime + 2.75%
- Terms: 5–10 years for working capital and equipment; up to 25 years for real estate
Grouse & Cobalt buys a new location
Let’s say Janet has a successful coffee shop called Grouse & Cobalt. It’s so successful, in fact, that she plans to open a new location. She needs a $1 million loan to buy the storefront she has her eye on. After shopping around, she finally narrows down an SBA 7(a) real estate loan through SmartBiz, an online service that connects business owners with SBA lenders and takes care of the paperwork to cut down on the time it takes to get financing.
Her business qualifies for a loan of $1 million with a 6.25% interest rate. To keep her repayments affordable, she chooses a loan term of 25 years, which breaks down to $6,597 per month.
Since the SBA requires a personal guarantee of $250,000 from the owner, she puts her apartment up as collateral. Before her business gets the funds, it also has to pay the following closing costs to SmartBiz:
- Guarantee fee of 3.5%: $26,250
- SmartBiz referral fee of 0.5%: $5,000
- SmartBiz packaging fee of 0.5%: $5,000
- Bank closing costs, including fees and appraisals: $5,000
Total closing costs: $41,250
Overall, the loan costs Grouse & Cobalt a total of $1,020,258.
Secured business loans for $1 million
Many business loans for $1 million require some sort of collateral. If your business needs funds to cover the cost of new equipment or real estate, you’ll typically secure the loan with the new purchase. Your business can also find working capital loans for $1 million backed by the value of your business’s unpaid invoices through invoice factoring.
Even unsecured loans often require a personal guarantee or a lien on your business’s assets. They’re still considered unsecured because they don’t use a specific item as collateral. Instead, you or your business are responsible for coming up with the funds to pay off the loan balance if your business folds.
Secured business loans
- Backed by a specific asset worth the loan amount.
- Includes real estate and equipment loans.
- Easier to qualify for.
- More competitive rates.
Unsecured business loans
- Less risk for business owner.
- Might require a lien on personal or business assets.
- Tougher eligibility requirements.
- Less competitive rates.
Bottom line
Business loans of $1 million aren’t easy to qualify for if you’re a new business. But well-established enterprises making more than $10 million might not have such a difficult time getting that much funding. It might take a bit longer to get than a smaller loan, so if time is of the essence, consider applying for a smaller amount to cover your absolutely essential costs.
To find more lenders and learn about your other financing options, check out our business loans guide.
