Get a $500,000 business loan

While a $500,000 business loan in Canada isn’t easy to get approved for, there are some banks and online lenders that offer this kind of money. But you’ll need to at least meet minimum annual revenue and time in business requirements in order to be eligible.

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How to get a $500k business loan in 5 steps

Major banks may offer loans of up to $500,000 for qualifying businesses, but you can also turn to private business loan providers or the Canada Small Business Financing Program (CSBFP) to get this type financing on competitive terms. Although each lender has its own process, these steps can serve as a general guide to finding the right loan option for your business:

1. Compare lenders. Your first step should be to compare business loan lenders. Each lender has its own requirements that can make the difference between approval and rejection.
2. Prepare financial documents. Lenders want to see your business plan, annual revenue projections, bank statements, tax documents and other information that demonstrates your business’s ability to repay a loan.
3. Speak with a financial advisor. Loop a financial advisor into your plan for a $500,000 business loan to ensure your business can afford it and develop a plan to repay it.
4. Apply for preapproval. This allows you to see your loan’s potential terms before your personal or business credit is officially checked. Not all lenders offer preapproval, but if it’s available, take advantage of it.
5. Review and sign the loan contract. If approved, review your loan contract with your partners and financial advisor to ensure the terms are beneficial for your business.

Where can I get a 500k business loan in Canada?

Many Canadian financial institutions such as banks, credit unions and online lenders offer $500,000 business loans. You may even qualify for a CSBFP loan, which is primarily backed by the government and comes with favourable terms designed to support small- and medium-sized businesses.

Canada Small Business Financing Program (CSBFP)

You can apply for these loans through a chartered bank, credit union or a caisse populaire. They are at least 75% backed by the Government of Canada. Your business must make under $10 million in revenue annually to be eligible for this program. You can access up to $1,000,000 in funding, but you’ll need to be a for-profit business, use the CSBFP loan funds for specific approved purposes, earn less than $10 million in revenue annually and operate a business in Canada.

Banks and credit unions

Although all of Canada’s major banks can help you apply for a CSBFP loan, Scotiabank offers its own in-house business loans of up to $1 million and BMO offers commercial mortgages of up to $1 million to buy or refinance business real estate. You can also get financing from credit unions such as Coast Capital, which offers short-term loans of up to hundreds of thousands of dollars as well as term loans and lines of credits in varying amounts.

Online lenders

You might be able to find a $500,000 business loan from an online lender – but many don’t offer this amount. If you do find such a lender, you’ll likely need an annual revenue of at least $100,000, a good to excellent credit score and your business needs to have been operating for several years.

Crowdfunding

The perk of crowdfunding is that it’s not a loan so you don’t have to pay back any of the money you receive. Instead, you pitch your new product or idea on an online crowdfunding platform where people choose to give you money, often in exchange for rewards or equity in your business. While there are several types of crowdfunding, using equity-based crowdfunding would give you the best chance to raise $500,000 for your business.

How to qualify for a $500,000 business loan

To qualify for a business loan of this size, you and your business must typically meet criteria that includes:

• Time in business. Most lenders require that you’ve been in business for at least a year.
• Annual revenue. Your business will likely need to bring in at least $100,000 annually in revenue.
• Personal credit. Lenders tend to rely on personal credit scores rather than business credit scores. You’ll likely need a good credit score of 650 or higher to qualify. It’s also common for business lenders to ask for a personal guarantee from the owner.

Requirements for a small business loan

What credit score do I need for a $500k business loan?

Typically, you need a personal credit score of around 650 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, to qualify in general for a Lending Loop Business Loan, you’ll need a minimum credit score of 600. But you’ll have a better chance of approval and get access to more favourable loan terms for its maximum $500,000 financing amount with an excellent credit score of around 760 or higher.

Unsecured $500k business loans

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.

Calculate how much a $500k business loan will cost

How much you’ll repay on a $500,000 business loan depends on two main factors: your loan’s APR and the loan term.

• The APR is an expression of your loan’s interest rate and fees as a percentage. The lower the APR, the less you’ll pay in interest over the life of the loan.
• The loan term is how long you have to pay back the loan in full. The shorter your loan term, the higher your monthly repayments will be – but a longer loan term means 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. With this loan, your business can expect to pay $24,962.05 monthly for a total of $99,089.22 in interest and fees.

• How to use this business loan calculator

  Follow these steps to figure out how much you’ll pay each month and in total over the life of your loan:

  1. Enter the amount your business wants to borrow under Loan amount.
  2. Enter the amount of time your business needs to pay back the loan under Loan terms.
  3. Write the interest rate under Interest rate if your loan has no fees. Or, enter the APR if the lender charges an origination, closing or annual fee.
  4. Click Calculate.
  5. Review your monthly payment and total interest charge.

  Not happy with the results? Check out our list of lenders below to find one that fits your budget.

What about getting a $500,000 business line of credit?

An alternative to a standard business loan is a business line of credit for $500,000. This may be a better option for people who want ongoing access to financing up to a a set maximum credit limit. You only make repayments, with interest, on the money you borrow. A business line of credit can often be a more flexible type of business financing since it’s open ended.

Business line of credit interest rates typically fall anywhere between 8% and 40%, but it will depend on the lender and your credit history. If you opt to get a $500k business line of credit from a bank, your interest rate will likely be variable based on the Bank of Canada’s prime rate.

Bottom line

When applying for a $500,000 business loan, you’ll need to consider more than whether you meet the eligibility requirements. $500,000 is a lot of money – and you’ll need to be sure that you can afford the monthly repayments and that the loan is going to help your business in the long run.

Want to learn more? Head to our comprehensive guide to business loans, where you can compare lenders and learn more about the world of business financing.

Frequently asked questions about $500,000 business loans

• How do payments on a $500,000 business loan work?

  It depends on your loan and lender. Most $500,000 loans are term loans, which come with fixed monthly repayments over the course of five to seven years. Some business loans come with weekly, bi-weekly, monthly or even daily repayments, though your repayment schedule will likely depend on your financials, as well as the lender you choose.

  If you apply for a merchant cash advance, you'll repay it with a percentage of your business's daily sales. With invoice factoring, you won't pay back your factoring company at all — you just won't get your invoice's total value.

• Can I get a $500,000 loan to start a business?

  You could, but it's rare for a startup or new business to qualify for high-dollar loan amounts. For other options, start with our guide to startup grants.

• Can I get a business loan without collateral?

  Yes. Unsecured business loans don't require collateral. But secured loans can come with better rates – although you risk losing your collateral if you default on the loan.

  However, you don't necessarily need collateral upfront to qualify for secured business loans. For example, equipment loans and vehicle loans are secured by the equipment or vehicle that your business purchases with the loan.

• What is the maximum amount for a small business loan?

  Business loans in Canada typically range between $5,000 and up to $500,000, although some institutions may offer business financing up to $1,000,000 or more. The amount your business will be able to qualify for will depend on your credit score and how well your business is established, which includes the amount of disposable income available.