The Surprising Steps to Get a $500K Business Loan Revealed
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Small business loans can range from around $10,000 to $1 million. But, most small businesses and startups rarely finance more than $500,000 for any business need. But, just how easy is it to get a $500,000 business loan? We’ll reveal the surprisingly easy steps to getting a $500,000 business loan.
Is getting a business loan really easy?
Well, nothing worth having is without some effort needed.
Applying for a traditional business loan ends in disappointment for many business owners. That’s because traditional lending institutions, such as banks and credit unions, have higher standards for lending, making it hard for the average small business owner to qualify for a loan.
But over the past several years, a new player in business lending has become more prominent – online and alternative lenders. Online lending marketplaces have become commonplace and have made borrowing money for your business easier.
Alternative lenders have more relaxed lending criteria and appeal to a wide variety of businesses and entrepreneurs at every stage of their business.
That said, there are always a few steps you should become familiar with before applying for your business loan.
What steps should you take before applying for a $500,000 business loan?
Whether you go with a traditional bank or an alternative lender, the steps in requesting a business loan are similar. But for the sake of this writing, the focus will be on alternative lenders.
While the basic steps needed when applying for a $500,000 business loan are the same, one lender might have a different application process from another.
Generally speaking, you’ll need to do the following:
- Come up with a plan that details how you plan to use the funds. While some types of loans don’t require you to determine beforehand what you’ll use your loan for, some do.
- Gather documentation. While each lender will have different requirements regarding what documents you’ll need to apply for your business loan, some standard items can help improve your chances of approval. These include personal tax returns, business tax returns, bank statements, and financial statements such as profit and loss sheets, and possibly others.
- Find and compare lenders. Many online lenders have a maximum loan amount of $500,000. Once you find lenders who can facilitate a $500,000 loan, compare their requirements, terms, and the amount of interest they will charge.
- Figure out whether you’re eligible for the loan. Once you know a lender’s requirements, you can determine your eligibility. The good thing about online lenders is that you don’t have to physically go from bank to bank to apply for a loan. Usually, all that’s needed is to fill out a form online.
- Apply for your loan. Fill out an application form according to the lender’s instructions. Avoid leaving missing information, as it could slow down the application process.
- Be responsive during the application process. As the lender reviews your application, they may request additional information. You’ll want to respond to requests as quickly as possible to expedite your application.
- Review your loan documents. Once you’re approved for a business loan, you want to read the loan agreement thoroughly to ensure that the terms, interest rate, and payment information are as you agreed. Then sign and submit the contract once you’ve reviewed it and validated the terms.
While it could take months for the complete application process with a traditional lender, generally speaking, an alternative lender is quicker. A reputable online lender, like Biz2Credit, can often provide a 24-hour turnaround on your loan, particularly when you’re thorough in filling out your application.
What are some of the loan requirements some lenders have regarding $500,000 business loans?
While a smaller loan amount may have fewer requirements by the lender, a $500,000 loan is substantial, and in many cases, specific criteria must be met to qualify for the loan. These include:
- A decent credit record. While traditional lenders require good personal and business credit, some alternative lenders will only evaluate your personal credit. A bank will likely require a personal credit score of at least 720, but online lenders are usually more flexible. Credit score requirements vary from one alternative lender to another as well as with each type of loan. For instance, a working capital loan through Biz2Credit will require a minimum credit score of 575, while their term loans and commercial real estate loans have a minimum credit score requirement of 660. Suffice it to say that the better your credit score, the more loan options will be available. Some lenders may also require a personal guarantee on your business loan.
- Minimum time in business. Again, this will vary by lender and loan type and amount. Depending on the loan size and other criteria, you may only need six months in business to qualify for a business loan. But many lenders would prefer to see at least 18 months in business for a larger $500,000 loan.
- Annual revenue. Commercial lenders sometimes require proof of your company’s annual revenue, and some have minimum requirements to show that you can comfortably repay your business loan. Some lenders, such as Biz2Credit, require a minimum annual revenue of $250,000, while other lenders might require significantly more than that.
Frequently Asked Questions
How do loan payments on a $500,000 business loan work?
A $500,000 business loan is more likely to be obtained through a term loan or a commercial real estate loan. With these types of loans, you get your loan funds upfront and pay a fixed or set monthly payment.
How much does a $500,000 business loan cost?
Again, this will depend on whether or not you choose a traditional lender or an alternative lender to facilitate your loan. While traditional lenders typically have lower rates, many borrowers don’t qualify for traditional loans. But if you can qualify for a $500,000 business loan with an alternative lender, chances are you can get more manageable loan terms. Interest rates for $500,000 business loans through an alternative lender are often capped at around 10%. But, depending on your credit and other factors, the rate could be higher or lower.
Is a $500,000 SBA loan an option for my business?
As with traditional bank financing, SBA loans are notoriously difficult to qualify for. Even if you manage to get qualified and approved for an SBA loan, the process is time-consuming and can take months. But, it’s a potential option you may want to explore if you don’t need fast funding.
The SBA offers several types of loan programs, including:
- 7 (a) loans for working capital or other general uses
- 504 loans for equipment financing and real estate loans
- Express loans with 36-hour turnaround times for qualified borrowers
There are other types of SBA funding, but these are the most common.
SBA loans are processed through third-party lenders who have been approved by the Small Business Administration.
Is it possible to get a $500,000 business loan with bad credit?
Commercial financing for business owners with bad credit is typically limited to certain types of funding, such as invoice financing or merchant cash advances.
But to receive a larger amount like $500,000, you will usually need to have the unpaid invoices and revenue to back up that size loan amount.
Term loans, which are usually the kind of loans you’ll see with a $500,000 business loan, are not usually an option when your credit is very poor.
However, some alternative lenders have lower credit underwriting criteria and will approve a business loan even when your credit isn’t optimal.
It’s important to remember, however, that there is a difference between bad credit and a lower credit score. That said, alternative lenders will look at other factors that traditional lenders don’t that make it easier for them to better accommodate many small business owners with bad credit.
Do I need collateral for a $500,000 business loan?
A sizable business loan of $500,000 is often used to purchase equipment, inventory, vehicles, real estate, or other types of physical property that secures the loan.
So, quite often, you don’t need upfront collateral to qualify for the loan. However, collateral is sometimes helpful, especially when your credit is poor or you don’t meet other underwriting criteria.
Can I use cryptocurrency as collateral for a business loan?
Cryptocurrency has become a major player in the finance world. While Americans, in particular, were slow to adopt cryptocurrencies, such as Bitcoin (BTC) and Ethereum, the momentum finally caught up, and crypto lending has become an option in some situations and with some lenders.
Crypto loans work by using cryptocurrency as collateral for the loan. It’s known as DeFi, or decentralized finance, and uses blockchain technology to leverage crypto assets for lending purposes.
The problem is that digital currencies, along with Wall Street and the stock market, are volatile and prone to fluctuating values, as the last year has shown. Also, the values of cryptocurrencies used across the metaverse are extremely subjective, meaning trying to nail down a real value is tricky.
While cryptocurrencies, along with NFTs, continue to be a trending interest for traders exploring novel financial services on the blockchain platform, it is probably best to keep it in its own lane.
For instance, if a small business owner has cryptocurrency and needs a loan, it may be best for them to convert their digital coins on a crypto platform into USD cash, then use it towards their business project, as a down payment, or as collateral for the loan.
It can be surprisingly easy for many small business owners to get a $500,000 business loan, particularly when applying with an online or alternative lender.
Traditional loans are another thing altogether and require a bit more jumping through hoops to get financing if you’re fortunate enough to receive approval.
Some online lenders cut to the chase and require far fewer steps to get a business loan than some of their competitors do. Still, it pays to follow a few wise steps, such as gathering the required documentation and finding the best business loan provider for your goals.
More than 225,000 small business owners have discovered that Biz2Credit was the best option for their financing needs. With a streamlined process and astute lending professionals who are vested in their clients’ futures, getting a $500,000 small business loan has never been easier.
Whether you need a commercial real estate loan, an equipment loan, cash for unpaid invoices, or a working capital loan to meet operational expenses or fill in the gap during business downturns, Biz2Credit can help.
Just ask electrical contractor Angel Cabrera. When the recession slowed down his business and made it difficult for him to meet his financial obligations, Biz2Credit helped him pay down his debt by consolidating business expenses. A loan from Biz2Credit provided him the focus he needed to get his business going again.