This loan size is one of the largest you can get for your small business, which may mean more stringent eligibility requirements to qualify for the loan. You probably won’t be able to get a $5 million loan to finance a start-up, but if you have an established business, you can choose between several types of loans to find what’s best for your small business.
Banks are most likely to offer business loans as large as $5 million — especially large national banks, which have the funds to offer loans of this size to more businesses.
Some online lenders and credit unions can offer $5 million loans, often through the government-back Small Business Administration (SBA) 7(a) program. These are inexpensive but involve a lengthy application and have one of the lowest approval rates.
Merchant cash advance and factoring companies sometimes offer advances up to $5 million, based on your business’s revenue. These come with minimal requirements and have a high approval rate, but are often the most expensive.
Select your business revenue, time in business and your credit score range before reviewing the lenders on this table. Click More info to read our review or Check eligibility to get started on the application.
The exact process varies by lender, but these steps can help you get started:
A traditional bank and most other lenders will want to review your credit history, standard business financial ratios, several years of your income statements, balance sheets and cashflow statements…
Since $5 million loans often have strict credit requirements, these tend to come with competitive rates of around 6% to 11% APR. Especially if you’re applying for an SBA 7(a) loan, which caps interest rates at the prime rate plus 5% for loans of this size. SBA loans don’t allow many of the typical bank fees, but a bank loan may come with an origination fee, which could be as high as $250,000 — 5% of the loan amount.
But $5 million loans also typically come with the longest terms available — somewhere around 10 to 25 years, depending on the lender and loan type. A longer term can decrease your monthly cost, but makes your loan more expensive in the long run.
But even a low interest rate paired with a long term can spell high monthly repayments. A $5 million loan with a 25-year term at an interest rate of 10% would cost $45,435.04 a month. And the total interest paid would be around $8,630,511. It’s best to weigh the rates you’ll receive on this loan amount against the average business loan interest rates by loan type.
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The type of loan you need depends on how your business plans on using the funds and whether you qualify. For loans of this size, you generally need to provide collateral to back the loan, such as real estate or other business assets. Once you’ve determined the kind of loan you need, check out our picks for Best small business loans.
Term loans come in one lump sum that you repay in installments over several years — usually 10 to 25 years for a loan of this size. These are often best for one-time expenses with costs that are easy to predict. You typically need to have good to excellent credit to get this loan, in addition to a high enough revenue to afford repayments.
Not sure you’ll need exactly $5 million? Taking out a business line of credit might be a better option. This allows you to draw up to $5 million from a credit line. You either pay back each draw in fixed installments or with a minimum monthly payment. Like with a term loan, your business finances and personal credit need to be strong for such a high credit limit.
The SBA offers loans up to $5 million through its popular 7(a) program. With these loans, the government guarantees up to $3.75 million, making it easier to qualify for more competitive rates.
These loans are available to businesses that have struggled in the past to secure funding — though they’re still hard to qualify for. They also require a lot of paperwork, and the entire process can take months to complete.
This option allows you to sell your unpaid invoices from other businesses and government agencies to avoid breaks in cash flow. Typically, you can get around 80% to 95% of the value of your business’s unpaid invoices. Rather than interest, companies charge a flat fee called a factor rate. You don’t need to have excellent credit or even strong revenue to qualify, though these loans are typically more expensive than other options.
A merchant cash advance is an advance on your business’s future sales, which you repay plus a flat fee with a percentage of your daily sales. How much you can borrow typically depends on your past sales history. These have a high approval rate and can get you funding as soon as the next business day. But the fee is often high, sometimes equivalent to a 300% APR.
It’s a challenge to qualify for $5 million in business funding — many lenders don’t even offer loans this high. You and your business must be financially sound and have the collateral to back the loan to qualify. You can learn more about how business financing works by checking out our guide to business loans.
Invoice financing can help your business meet immediate cash flow needs based on your unpaid invoices.
Startups and newer businesses could qualify for up to $150,000 in financing.
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