How to get a $1 million business loan
Looking to borrow $1 million for your business? Find out where and how you can qualify.
Applying for a $1 million business loan can give you access to a large amount of cash for your business. That said, these loans typically come with strict eligibility requirements and you’ll often need to make a very high revenue to apply.
Government-backed business loans
Government-backed business loans are the most popular type of $1 million business loans. They are funded by the Canadian government and come with lower interest rates and more flexible terms than private loans.
- Canada Small Business Financing Program (CSBFP) loans. CSBFP loans are backed by a 75% government guarantee and they let you borrow up to $1 million. You can use this money to purchase or improve business assets such as land, buildings, equipment and leasehold agreements. However, you won’t be able to use the loan to fund day-to-day operations like payroll, inventory or other expenses. To qualify, you’ll need to make under $10 million in revenue annually, operate a for-profit Canadian business and use the loan funds for approved purposes.
Business loans from the big banks
All of Canada’s major banks can help you apply for a CSBFP loan, though they’ll take a 2% admin fee for the trouble. Many of them also offer their own $1 million loan programs. The funds you borrow from a big bank can be used to pay for just about anything, including payroll expenses, real estate purchases and day-to-day costs.
- Scotiabank. Scotiabank offers business term loans and lines of credit worth up to $1 million.
- BMO. The maximum amount you can borrow with BMO is $500,000 for a term loan, but you may be able to qualify for $1 million with a BMO commercial mortgage.
- Other big banks. TD, CIBC and RBC market their business loans as starting at $10,000. While they don’t indicate whether they go up to $1 million, you can always call into a bank to find out the maximum loan amount it will give you.
Getting a $1 million business loan from an online lender
Getting an online $1 million business is less common, but you may be able to find some options if you look hard enough. Another idea could be to borrow two or more small business loans from several online sources (provided you qualify and have enough money to pay them back). Below are some examples of online lenders that offer small business loans.
Online lenders that offer $300,000 to $500,000
How can I qualify?
Your business will have to prove it can afford to take on a hefty debt load. You may need to meet the following requirements to be considered:
- High credit score. You’ll typically need to have a good to excellent personal credit score (at least 650 or above). The higher your credit score the better, otherwise your business might end up paying a higher interest rate, if it’s approved at all.
- Long time in business. To borrow $1 million, you’ll likely need to have been in operation for at least two years. Some lenders may approve businesses that have been operating for less time – but you’ll usually need a higher annual revenue.
- High annual revenue. Most loans will require you to meet a minimum annual revenue that is high enough to make your repayments on a $1 million business loan. This minimum can sit between $100,000 and $500,000 per year, depending on your lender.
- Decent level of profit. On top of having a strong annual revenue, your lender will want to see that your business is actually making money rather than simply covering its operations. You may need to provide proof of your profit margin to get started.
- Personal assets to put up as collateral. You could be required to put up at least $1 million in collateral to secure your business loan. This means you risk losing assets such as your home or savings account if you default on your loan.
- Able to use the loan for its intended purpose. You could be required to use your loan for specific purchases such as buying real estate or equipment. Check with your lender to find out how you can use your funds before you agree to a loan.
How hard is it to borrow $1 million for my business?
That depends on you and your business. Your best bet is to apply through the CSBFP as a starting point, since these loans are backed by the government and will come with lower interest rates. If you can’t get approved through CSBFP, you may be able to borrow from your bank.
Just be aware that it can be difficult to find a lender willing to give you $1 million for your business unless you have high revenue, an excellent credit score and a wealth of assets to use as collateral. You may also need to present a very strong business case to qualify.
6 steps to borrow a business loan
Follow these steps to find the right business loan for your needs:
- Compare lenders. Your first step should be to compare lenders to find the best interest rates. It can be difficult to find lenders offering $1 million business loans, but you can still reach out to a few providers to be sure you’re getting the best deal.
- Speak with a financial adviser. Loop a financial adviser into your plan. They may be able to help you figure out if you can afford your repayments alongside all of your other expenses.
- Prepare financial documents. Get together documents such as your business plan, annual revenue projections, bank statements, tax documents and other information that demonstrates how you intend to repay your loan.
- Meet with your lender. You’ll usually need to go into your lender in person to discuss getting a $1 million business loan. There are no online applications to get funding for this large of an amount (and you should be careful with online lenders that do offer these services).
- Apply for pre-approval. Applying for pre-approval lets you see whether you qualify and what kinds of rates and terms you might get on your $1 million business loan. This can help give you some insight into your loan options without affecting your credit score.
- Review and sign the loan contract. If approved, review your loan contract with your partners and financial adviser to ensure the terms make sense for your business.
Loan eligibility requirements
To qualify for a business loan, you may need to meet the following eligibility requirements:
- You must be at least 18 years old or the age of majority in your province or territory.
- You’ll need to be a Canadian citizen or a permanent resident with a valid Canadian address and two valid pieces of identification.
- You’ll need to supply a registered business number and be able to prove that you make a certain annual revenue.
- You may be asked to sign a personal guarantee to assume personal responsibility for your business loan if you can’t make your repayments.
Costs to pay back a $1 million business loan
The amount you’ll pay will depend on the length of your term and what interest rates you get.
- Interest rates. Your business loan interest rate will have a huge impact on how much you pay on your $1 million business loan over time. Taking an interest rate that’s 1% higher can lead you to pay thousands of dollars more in interest over the course of your loan.
- Terms. The length of your term will affect how much you pay in interest and how big your monthly payments are. With a shorter term, you pay more each month but save money on interest over time – and vice versa with a longer-term business loan.
- Fees. You may have to pay set-up or admin fees to get started with a $1 million business loan. For example, with the CSBFP loans you have to pay an administrative fee of 2% on any loan amount you borrow directly to the bank. Learn more about the costs of a business loan.
Types of business loans
There are a couple of different types of business loans you can apply for to get $1 million. The type you choose will determine which lenders you can borrow from.
- Fixed vs variable rate. Fixed rate business loans come with fixed interest rates and consistent payments over the lifetime of your loan. Variable rates fluctuate in line with the prime rate, which means your payments can go up and down each month.
- Secured vs unsecured. Secured business loans are protected by collateral such as your business equipment or personal vehicle (or you can lose your asset if you default on your payments). Unsecured business loans don’t require assets, but they rely on your credit score to get you approved. Find out how much collateral you may need to secure a business loan.
- Term vs merchant cash advance. Term loans are paid back in regular installments over a set term. Merchant cash advances are paid back with a portion of your credit card sales each month.
Compare business bank accounts
Business loan calculator
If you have multiple loan or refinancing offers on the table and aren’t sure which one to choose, it can help to calculate the total cost of each loan option.
How do I use the business loan calculator?
To determine how much your business loan will cost you, simply fill out the following fields in the calculator:
- Loan term and amount. Select how long you need to repay the loan and enter the amount you intend to borrow.
- Bank name. Enter the names of your lenders.
- Fixed rate and period. If your loan comes with a special introductory fixed rate, enter the rate and how long the intro period lasts.
- Ongoing rate. Enter the ongoing rate you’ll pay for your loan here.
- Upfront fees. If your loan has an origination or application fee, add it here.
- Fees. If the loan comes with any ongoing fees, you’ll need to add them here and select how often they’re charged.
- Prepayment penalty. If you’re charged a prepayment penalty for paying off your loan early, enter the amount here.
- Calculate. Click the Calculate button to see which lender costs less and each lender’s fixed, ongoing and total repayments.
If a section in the calculator doesn’t apply to you, leave it blank. You can adjust the loan amount, term length and any other variables to help you get an accurate idea of how much you can borrow and what sorts of terms to look for when applying with different lenders.
Business loans for $1 million are easiest to qualify for if you’re an established business with high revenue. Your best bet to get financing is to apply through the CSBFP. You can also apply through your bank or an online lender, though you may end up getting a lower amount than $1 million with these lenders.
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