Get the funds you need to expand, support and invest in your calling.
With the rise of Internet lenders, you have many options for a $500,000 business loan than merely the branch down the block. Many of these online providers look to speed up the application and approval process, which might support your business, you have m loan isn’t always the easiest to come by, even if it sits just below the average of $663,000. We walk you through how to get one, what you need to qualify, what payments you can expect and more.
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How to get a $500,000 business loan
The typical small business loan averages $663,000 — a tad more than the $500,000 your business might need. Still, it’s a large enough amount that your small business might have difficulty qualifying.
To qualify for a business loan of this size, you and your business must typically meet criteria that includes:
- At least one year in business. You might get away with a mere six months in business for smaller amounts, but lenders tend to require stronger business experience for larger loans.
- Good personal credit. Business lenders tend to rely on personal rather than business credit scores, and it’s also common for business lenders to ask for a personal guarantee from the owner. You generally need good or excellent credit.
- Minimum annual revenue. You’ll need to prove that your business brings in enough money to comfortably repay a loan. It’s not easy to nail down the minimum annual revenue you’ll require for a high-dollar loan, but expect the number to be in the millions.
What credit score do I need?
Typically, you need a personal credit score of at least 700 or higher to qualify for $500,000 in business financing. Generally, the higher your score, the more competitive the options you’ll have to choose from.
Even lenders with low overall credit score requirements might require higher scores for large loans. For example, OnDeck requires a personal credit score of 500 or higher to qualify for a loan in general. But you’ll have a better chance of approval for its maximum $500,000 financing amount if your score is 775 to 800.
Getting a $500,000 loan from the SBA
Loans backed by the Small Business Administration are a choice for business owners who have a hard time qualifying elsewhere. But they also come with some of the highest rejection rates in the market.
The most common SBA loans for $500,000 are through the 7(a) or 504 programs, depending on the purpose of your loan. SBA 7(a) loans are designed for general business use, while 504 loans are designed to cover real estate or equipment purchases.
To qualify, you must meet the SBA’s laundry list of requirements, including complicated size standards and your personal history of repaying debt. You won’t qualify if you’re a part of the SBA’s list of ineligible industries, including insurance companies and investment banks.
It’s a long process that takes lots of paperwork and several months. But services like services like SmartBiz can help with the SBA process, handling the nitty-gritty and potentially speeding things up.
Cost to pay back a $500,000 loan
How much you’ll repay on a $500,000 business loan depends on two main factors: your loan’s APR and term. Your APR is an expression of your loan’s interest rate and fees as a percentage. The loan term is how long you have to pay it back. The shorter your loan term, the higher your monthly repayments tend to be. However, longer loan terms mean you’ll end up paying more in interest.
Let’s take a look at an example. Say your business takes out a $500,000 loan with an APR of 18% and a two-year term. Under this loan, your business can expect to pay $24,962.05 monthly for a total $99,089.22 in interest and fees.
Case study: Jim buys a fleet of vans for his business
Imagine this scenario: Jim recently moved his assisted living facility to a new location so that it could take in more residents. With the move came a need for two new vans. To buy a new fleet of wheelchair-accessible vans, Jim figured he needed a $500,000 business loan.
He usually works with Bank of America for business financing, but Jim found its turnaround time too long in this instance. Hearing more about online lenders, Jim researched his options and narrowed it down to OnDeck and Fora Financial.
He prequalified with each lender and weighed his quotes for a $500,000 loan.
|Lender||Cost||Loan term||Monthly repayment||Total cost|
|OnDeck||17% AIR||36 months||$17,826.36||$141,749.10|
|Fora Financial||20% APR||15 months||$37,949.02||$69,235.25|
Despite Fora Financial costing him less in the long run, Jim eventually decides to take advantage of OnDeck’s more affordable monthly repayment, which better matched his business’s cash flow.
Unsecured business loans for $500,000
Most $500,000 business loans require some kind of collateral — especially if it’s an equipment loan or for commercial real estate. However, it is possible to get an unsecured business loan of $500,000 from select online lenders.
Typically, you’ll need a higher credit score and stronger business financials to qualify for an unsecured business loan. You also might need to prove more business experience, requiring at least two years of experience for approval.
Don’t look only at your lender’s minimum requirements when applying for a $500,000 business loan. Typically, you’ll need good credit and at least a year in business to get approved for high amounts, even with a secured option.
To more easily compare offers and rates, consider prequalifying with multiple lenders to more easily compare rates, monthly repayments and what you’ll pay over the life of your loan.
Get started on your search our comprehensive guide to business loans, where you can compare lenders and learn more about the nuance of business financing.