$6 Million Business Loan Options in 2022

Looking for a competitive 6 million dollar business loan in 2022? Read our comprehensive guide for everything you need to know to start the process on a strong foot.

Cash flow management isn’t easy for small businesses and corporations alike. Between your operational expenses and the new challenges you face, it can be difficult to prioritize your growth, especially if you’re in an industry that deals with periods of low business activity.

When you’re faced with a growth opportunity that you can’t afford, what do you do?

Some business owners try cut their budgets to afford the chance at growth, but you can only do this so many times until you’re jeopardizing the integrity of your operation. Rather than sacrifice your business to afford growth, you can secure a business loan to take your business to the next level. 

You can access the capital you need through a business loan, even something significant, like $6 million. However, the process of securing a 6 million dollar business loan is more difficult than you think, especially if you have no prior experience in financing your business. 

But, don’t worry: We’ve got you covered with everything you need to know before starting your search for a large business loan:

What Are the Requirements for a $6 Million Business Loan?

First, you’ll need to have your financial information in order. Lenders will need to review your credit score, business bank statements, and other documents to ensure you’re capable of repaying the borrowed amount within the term. At a minimum, you’ll need to provide:

You can choose a few different routes to secure your business loan, but the most traditional options are banks and credit unions. These lenders have been around forever, and before the last few decades, they were the only institutions that would finance small businesses. 

Banks and credit unions tend to have the strictest eligibility requirements of all lending institutions. You’ll need to have a high credit score, a lengthy time in business, and substantial annual revenue to qualify for the most favorable rates and terms, but even businesses with lesser financial information can still reach approval.

However, these lenders aren’t your only option. Alternative lenders, otherwise known as online lenders, can help you secure a large  business loan. They have less restrictive eligibility criteria, more flexibility in terms of financing options, and are easier to apply for, but they also feature some of the highest interest rates. 

Higher interest rates might seem like a significant hurdle to growing your business, but you have to look at the bigger picture. Think about the capabilities of your business after you’ve used the borrowed funds to grow: Will you double/triple your revenue? If so, the higher interest rate might not play as big of a role as you thought.

$6 Million Loan Qualifications

The businesses that can display the strongest financials often receive the most favorable rates and terms. Other businesses can still secure the capital they need to grow, but it might be a bit more difficult to find a lender.

You’ll need options, so make sure to hit the ground running and do the necessary research. By doing so, you can find a lender with terms that fit your needs and, most importantly, grow your business without restriction.

Will I Need to Offer Collateral for a $6 Million Business Loan?

One way that businesses can receive better rates and terms is by offering a valuable asset as collateral. This acts as a method of “securing” the loan and gives the lender an extra guarantee that you’re committed to repaying the borrowed amount.

You can offer a variety of assets as collateral, including real estate, equipment, or vehicles. 

Many entrepreneurs try to avoid offering collateral because they don’t want to risk losing a critical asset if they end up defaulting on their payments. It’s a valid concern, but if you’re on top of your payments and running your business, you likely won’t find it difficult to pay back the borrowed amount within the term.

How Much Will a $6 Million Business Loan Cost?

The price you’ll pay on your 6 million dollar business loan will depend on various factors, including:

• Your business’s financial information
• The type of loan you secure
• The length of your repayment terms
• How long you’ve been in business
• The lender you’re doing business with
• The current FED interest rates

Interest rates generally fall between 7% and 15% APR, and repayment terms for a $6 million business loan are usually between 7 and 25 years. The specific rate you pay, however, will depend on the factors above.

You might think that opting for shorter repayment periods will save money in the long run. While it may lower the amount you pay in interest, you should be careful not to overwhelm the capabilities of your business. 

Shorter repayment periods mean higher monthly payments, and if you can’t handle them, it’s easy to lose your grip and find yourself in a situation where you’re struggling to repay your loan.

You’ll need to speak with multiple lenders to ensure you’re getting the best deal, even if you boast strong financial information. There’s always a better deal out there; You just need to find it.

Make sure you have everything in order before you speak to lenders to avoid wasting time. You’ll need all your relevant financial information, and you may need to offer a detailed plan on how you intend to use the borrowed amount in order for your lender to approve you for financing.

Even if they don’t require a detailed plan, it’s always a good idea to have. Taking the time to write out your plan will help you notice inconsistencies, issues, and challenges in your business, letting you reposition yourself to be a much stronger organization. 

Different Types of 6 Million Dollar Business Loans

There are a few formats in which you can receive your 6 million dollar business loan, with each option having unique benefits and drawbacks. Here are some of the most common types of $6 million business loans:

3.1 Term Loan

Term loans are given in one-time, lump sum payments that you must repay within the term outlined by your lender. You can use a $6 million term loan for almost any business purpose, including working capital management, expanding inventory, hiring additional staff, and purchasing a new building for your operation. 

However, you might need to offer a detailed plan on how you intend to use the borrowed funds to your lender. While this might seem unnecessary, it’s an extra security measure for the lender, and, more importantly, it’s an opportunity to plan out how you’ll use your financing in your business, which can help you streamline your growth.

3.2 Business Line of Credit

Business lines of credit are one of the most flexible financing options available to entrepreneurs. They’re a revolving line of credit that you can draw on whenever you need capital. When you repay the borrowed amount, you can draw on the same funds again, allowing you to stay one step ahead of the latest challenge. 

Unlike a business credit card, you can draw physical cash with a business line of credit. Many entrepreneurs will also use this financing option with another loan to manage their working capital as they pay back the more significant payment.

3.3 SBA Loans

SBA loans are some of the most coveted financing options because of their high borrowing amounts and competitive interest rates. The SBA 7(a) program allows you to borrow up to $5 million, and while that won’t allow you to borrow $6 million, it can get you most of the way there.

You can secure a $5 million SBA loan and a $1 million loan from an online lender to meet your $6 million needs. The options are endless, especially with SBA loans having some of the lowest interest rates on the market.

3.4 Invoice Financing

Invoice financing is an avenue to turn outstanding customer invoices into cash today. Otherwise known as accounts receivable financing, this option takes a percentage of your total outstanding payments and gives you cash in the short term, allowing you to pay expenses, increase inventory, and grow your business.

You’ll need to have at least $6 million in outstanding receivables to secure $6 million in capital through invoice financing because of the percentage you’ll pay to the lender for their assistance. But, if your business commonly deals with late customer payments, it can be a great way to finance your growth at a minimal cost to your operation.

3.5 Business Advance

Business advances are essentially a cash advance on your future sales. Your lender will review your financial information, including your annual revenue and outstanding payments, and determine if your business qualifies for this type of financing.

Once you’re approved, the lender grants a lump sum payment with your funds, which you can use to support your growth. Remember: You’ll need to generate at least $6 million in annual revenue to qualify for a $6 million business advance.